Tax consequences of liquidating ira
Here's a general example: If the plan is worth ,000, and ,000 is taxable, you would be subject to ordinary income tax (it depends on your tax bracket, but let's say 35 percent) of the ,000. However, you'd also be taxed an additional IRS penalty of 10 percent of that same ,000.
That's another 0, bringing your total taxes to 0.
The Roth IRA, on the other hand, allows qualified distributions to be free from tax and penalties.
Here we review the tax treatment of Roth IRA distributions.
The Taxpayer Relief Act of 1997 created the Roth IRA, which was made effective for tax years beginning 1998.
Prior to 1998, individuals who wanted to fund an IRA could make either a deductible or nondeductible contribution to a Traditional IRA, but distributions from Traditional IRAs are generally treated as ordinary income and may be subject to income tax as well as an additional early-distribution penalty if the withdrawal occurs while the IRA owner is under the age of 59.5.
Death/Disability - Upon death or having developed a disability. Payment Plan - Part of "substantially equal payments" over your lifetime. Medical Expenses - For payment of non-reimbursed medical expenses exceeding 7.5 percent of your adjusted gross income. Medical Insurance - For payment of your medical insurance or your spouse and dependents medical insurance.