I have some money in some mutual funds and I need to take about 10,000 out to pay off my car?

Question

does anyone know how much I'll be penalized for this? and how will it hurt me at tax time??

Answer 1

Why don't you place a Limit Order for the price you what to get the maximum amount for your money. Oh yeah, your fund is probably like other funds and you could only get the price after the market closes. Gee aren't mutual funds great!

Depending on the fund your have, you may have hidden fees when you sell your shares. If it is a no load, you might only be taxed on a capital gain or if you have a loss.

Answer 2

You shouldn't be penalized if it's not an IRA, but there might be some fees depending on the fund.

At tax time, you'll pay income tax based on your gain in the amount you took out. For example, say you have $20,000 total in the fund that you're taking the $10,000 out of. To get your cost basis add up what you originally put into the fund, plus any distributions or dividends from the fund that you've paid taxes on since you had it. Say that comes to $16,000. Subtract that amount from the $20,000 total in the fund - that $4000 is your gain so far. Since you're taking out half, your taxable amount is $2000, half of the gain to date.

If you have a loss so far, say your total in the fund is the same $20,000 but your costs so far are $22,000, then the amount you're taking out shows a $1000 loss, which you can take on your income tax for this year.

If the mutual fund is in an IRA, there are penalties if you're under age 59 1/2, plus the entire amount taken out will be taxable unless some of what you have in the IRA is post-tax money, which isn't the usual case.

Answer 3

it will cost you about $1,000 in penalties and don't forget taxes at your marginal rate; if your marginal rate is 25%, then another $2,500.