IRA distribution question. | TigerDroppings.com
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reb13
Ole Miss Fan
Oxford, MS
Member since May 2010
10212 posts

IRA distribution question.

Say you take out loans to get through college and you begin to pay them. Can you pay them off with an IRA?


aaronb023
LSU Fan
TeamBunt CEO
Member since Feb 2005
11767 posts

re: IRA distribution question.
sure can. you will pay tax and penalties if it is a traditional ira or gains from a roth ira though


reb13
Ole Miss Fan
Oxford, MS
Member since May 2010
10212 posts

re: IRA distribution question.
Oh ok, so it isn't a qualified distribution?


krehn11
LSU Fan
IA
Member since Jul 2011
1055 posts

re: IRA distribution question.
No, it is not.

I'm sure you've heard that it may be qualified if for education expenses; well, here is a link on what qualifies for that purpose.

IRS


reb13
Ole Miss Fan
Oxford, MS
Member since May 2010
10212 posts

re: IRA distribution question.
Ok, so I have one year of grad school left. That seems to be eligible correct? (Tuition, room and board etc)
This post was edited on 4/17 at 1:06 pm


rmc
LSU Fan
Zachary, LA
Member since Sep 2004
22725 posts
Online

re: IRA distribution question.
Question, sorry to get off topic of OP.

If I contribute $15k over 3 years to a traditional IRA and I withdraw $15k, it will only be taxed at my regular tax % correct? If I withdrew $17k, the $2k would be taxed at an additional 10%. Is that correct? I've never fully understood what the additional 10% is on.


CHSBears
Texas A&M Fan
Baton Rouge
Member since Aug 2007
550 posts
Online

re: IRA distribution question.
The 10% is a penalty on the taxable amount of what you withdrew. If the withdrawal is 100% taxable, then the 10% penalty is on all 100%. Except if you qualify for one of the exceptions, which are listed on IRS site.


rmc
LSU Fan
Zachary, LA
Member since Sep 2004
22725 posts
Online

re: IRA distribution question.
Damn... so if you are in the 25% tax bracket and you withdraw early and the withdrawal is taxable you get hit for 35%. I thought it was just on any appreciation or earnings above the contributions.
This post was edited on 4/17 at 1:56 pm


Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
58378 posts
Online

re: IRA distribution question.
quote:

Damn... so if you are in the 25% tax bracket and you withdraw early and the withdrawal is taxable you get hit for 35%.


Right

quote:

I thought it was just on any appreciation or earnings above the contributions.


Why would you think that? You've paid 0 taxes on the traditional IRA. SO when you pull it out, you are taxed.


krehn11
LSU Fan
IA
Member since Jul 2011
1055 posts

re: IRA distribution question.
quote:

Ok, so I have one year of grad school left. That seems to be eligible correct? (Tuition, room and board etc)


If you use the monies for that purpose - not if you use them to pay off student loans like you stated in the OP.


rmc
LSU Fan
Zachary, LA
Member since Sep 2004
22725 posts
Online

re: IRA distribution question.
quote:

Why would you think that? You've paid 0 taxes on the traditional IRA. SO when you pull it out, you are taxed.


The 10%, not the regular tax rate. I understand its tax deferred. I always just through the 10% was on anything you take out above what you put in if its early with no exemptions.


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reb13
Ole Miss Fan
Oxford, MS
Member since May 2010
10212 posts

re: IRA distribution question.
quote:

If you use the monies for that purpose - not if you use them to pay off student loans like you stated in the OP.


Alright cool deal, thanks.


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