I received injury money, enough to pay off my house. All financial advisors and accounts adivsed us to put it in Roth IRAs. We did that. I am now having second thoughts. If I were to take out only the $110,000.00, which I received tax free due to medical malpractice settlement, do I have to pay taxes on that amount upon withdrawl. It was tax free money when I received it.
2006-12-15 01:56:07 · 7 answers · asked by gail1962@sbcglobal.net 1 in Business & Finance ➔ Taxes ➔ United States
As stated above you can not put that much into IRA's at one time unless it is a rollover, which this is not. Most of the money is probably in regular taxable investment accounts.
As for paying off your house do what makes you feel comfortable/secure. By all means do not keep the mortgage for the tax break, why would you want to pay the bank $100 to avoid paying the govt $10-$35.
As for the advisors, what do they have at stake? If you invested with the financial advisor then he may be making an annual commission for managing you account so he will not want you to pay off your mortgage because less invested = less commission. If the accountant recommends keeping the mortgage for the tax break then find a new accountant because he is not worth what you are paying him.
If you withdraw the money from regular taxable accounts then there is no taxes on the withdrawal unless there is a gain/loss on the transaction.
Once again, do what makes you feel comfortable. If paying off the mortgage makes you sleep better at night then do it, if having money in the bank makes you sleep better then leave it in the bank.
2006-12-15 07:37:49 · answer #1 · answered by glibby3 2 · 1⤊ 0⤋
1) You can not put that much in to an IRA in one year. Some of it must be a taxable non-IRA accounts.
2) You can always withdraw your contributions to a Roth tax and penalty free.
3) You never want to pay interest just to get the tax deduction.
Remember, it is your money. If you would sleep better at night knowing that the mortgage is paid off, pay it off.
2006-12-15 02:06:33 · answer #2 · answered by Wayne Z 7 · 1⤊ 0⤋
Was the medical malpractice award for personal injury? If so it is not taxable- it is considered compemsatory to put you back where you were.
If it was not for personal injury it is reportable income.
If you pay off your house how much would you save over the life of the loan by not paying the interest? How much will you earn in the same period?
2006-12-15 07:40:12 · answer #3 · answered by besttaxexpert 2 · 0⤊ 0⤋
Yes you will have to pay taxes on withdrawl, however you will be taking out a lot more than $110K. Remember, that $110K will grow in an IRA. It won't grow if you pay off your house. The equity on your home will continue to grow regardless of how much you owe. And it will grow no differently than if you have a loan. Further, having a mortgage allows further tax deductions during the year, lowering your tax liability in the fiscal year. Listen to your financial advisors. They are pros for a reason.
2006-12-15 02:09:34 · answer #4 · answered by Joe L 3 · 0⤊ 1⤋
YOU ARE ALLOWED TO CHANGE YOUR INVESTMENT WITHOUT AFFECTING YOUR TAX STATUS...PAYING OFF YOUR HOUSE IS STRICTLY UP TO YOU...IF YOU FEEL THAT BY NOT DOING SO YOU MAY SQUANDER THE MONEY,THEN YOU SHOULD PAY OFF THE HOUSE...BESIDES ON AVERAGE YOU PAY 2 AND 1/2 TIMES THE VALUE OF THE HOUSE OVER THE LONG HAUL WHICH MEANS THAT IF YOU PAY OUT THE MANY YEARS BALANCE YOU WOULD PAY--110,000 TIMES 2 AND 1/2 EQUALS --275,000 DOLLARS...IF YOU PAY OFF THE HOUSE IT WILL ALWAYS BE AN ASSET,AS LONG AS YOU KEEP IT UP...SO LOANS ARE ALWAYS POSSIBLE....LETS SAY THE VALUE GOES UP,IT'S WORTH MORE....REAL ESTATE PEOPLE WOULD SAY DON'T PAY OFF YOUR HOUSE...BUY A DISTRESED HOUSE FIX IT UP AND EITHER RENT FOR INCOME OR SELL IT AT A PROFIT...DOING THIS OVER AND OVER WILL INCREASE YOUR WEALTH FASTER THEN ALMOST ANYTHING YOU DO...YOUR ROTH IRA IS LOANED OUT BY THE BANK TO DO JUST THAT BY OTHER MORE AMBITIOUS SOULS....IF YOU THINK THE DOWN TURN IN HOUSING IS GREAT IN YOUR AREA...MAYBE NOW IS THE TIME TO BUY A FIX-UP...YOU MAY BE ABLE TO BUY 2 OR 3 FIX-UPS FOR THAT MONEY...BUT GO EASY TRY JUST ONE AT FIRST...YOU CAN HIRE MUCH OF THE WORK FOR MUCH LESS SINCE MANY CARPENTERS ARE DOING LESS WORK NOW... GO EASY MAKE YOUR REFURBISHMENTS SIMPLE AND SOMEWHAT CHEAP--& YOU'LL SUCCEED...MY BROTHER STARTED WITH A PARTNER WITH ZERO AND NOW HAS 24 HOUSES THAT HE RENTS OUT 25 YRS. LATER.....AS LONG AS YOU MAKE ALL OF YOUR PAYMENTS ON TIME , BANKS WILL LOVE YOU FOR MORE FINANCING LATER...BECAUSE YOUR WEALTH WILL INCREASE AS YOU EITHER SELL THE FIX-UPS OR HOLD AND RENT---YOUR POWER TO PURCHASE WILL GREATLY INCREASE LARGER HOUSES ...READ "RICH DAD POOR DAD" IT WILL OPEN YOUR EYES...
2006-12-15 02:37:26 · answer #5 · answered by Dave F 4 · 0⤊ 0⤋
this could be fake. A own loan is for a private loan for a house. some human beings take fairness out of their abode (starting to be extra debt on the abode) and use that to purchase stuff or pay different debt consisting of credit enjoying cards or scientific costs. that may not beneficial.
2016-10-15 00:06:19 · answer #6 · answered by ? 4 · 0⤊ 0⤋
I wouldn't pay off your house. Having a house and making payments is a tax break.
2006-12-15 04:06:45 · answer #7 · answered by On Time 3 · 0⤊ 2⤋