I want to withdraw about $10,000 from my IRA. I'm not 59 yet. How much will be the tax liablity? I know it's

Question

10% tax which is $1000. But there is an additional taxable income. Does anybody know how much this amount is or how I can calculate this amount?

Sean1010, believe me I have given this a hard thought. I won't if I didn't have to. Believe me, it's not something I want to do...but it is looking like I have no choice.

Answer 1

The withdrawal is subject to tax as ordinary income. If you're in a 25% tax bracket, you'll pay $2,500. Then there's the 10% penalty on top of that for early withdrawal. In that case, your total tax bite would be $3,500. Only $2,000 of that would be withheld from the distribution so you'd have to set aside $1,500 for filing time or make an estimated payment using Form 1040-ES in that amount.

Without knowing all of your personal financial and tax information, it's not possible to make a more educated guess than that.

Contrary to what another respondent said, you can't take a loan from an IRA or pledge it as collateral for a loan. You sometimes can take a loan from a 401(k), but not an IRA.

Answer 2

The bottom line is that you will be taxed on the $10,000 as income, because you will have received it this year; so whatever your tax bracket works out to be (anywhere from 15 to 30% as the others have indicated).

Now the other piece to this puzzle is a 10% penalty tax on the amount, or $1,000. This is a given unless you meet one of the qualifying factors/exceptions that excuses the penalty tax. There are roughly 10 exceptions - see Pub 17 (Chapter 10) or a tax preparer for more info.

Answer 3

It's income tax at whatever your normal rate is, PLUS a 10% penalty. The withdrawal is treated as ordinary income to calculate your income tax before the penalty. So if you are in a 25% bracket, for example, it would be $2500 for income tax plus the $1000 penalty, or $3500.

There are a few exceptions to having to pay the penalty - see irs.gov and download publication 590. You'd still have to pay the income tax even if you qualify for not paying the penalty.

Answer 4

There is a 10% penalty when you file your tax return (for both Federal and State). If your contributions to the IRA were pre-tax, you will also have to pay income taxes at the "bonus" rate. You should expect that to be 25-30%. After taking the tax effects into account, you can expect to keep about $6,500 of the $10,000 withdrawl.

Answer 5

We cannot answer the question without knowing your other income. The total tax depends on the tax bracket you are in. You can add your marginal tax bracket to the penalty and then add you state tax percentage to get an estimate.

Answer 6

The tax will be on the amount you withdraw and the back taxes. That could be costly! Considering it's your retirement, why not use it as collateral? Make a loan to yourself. The interest rate will be lower, you get to pay it out, keep your collateral and I hope you've got compound interest working for you.

Don't pay the bank and the government alot,to use your own damn money! Keep your money and pay them a little. If you really need 10 grand, borrow it from your bank. The interest is about $214. Pay YOURSELF back and it only cost you $214, meanwhile, your IRA is still making money. If you cash it out, you'll lose at least a $1000.

Answer 7

You should never touch your IRA not unless you have to. It would be the 10% you speak of and an addititional 20% plenty so 30% total and you would have to declare it on your next tax return.
Good Luck

Answer 8

I just had to withdraw funds from my IRA and had New York Life deduct the withholding amount before they sent it to me. It worked out to be around 17%.

Answer 9

The 10% is likely a penalty from your Bank. On top of the penalty expect to pay 28% to 35% for taxes depending on your tax bracket.