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Penalty Free IRA Deductions
Old 02-06-2009, 07:19 PM   #1
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Penalty Free IRA Deductions

Did my annual meeting with my CPA today. Asked about penalty free deductions from a IRA. He proceeded to read from the tax code (55+ years young, first time home buyer ... ) most did not apply.

Then he said "HEALTH CARE COSTS". This had me thinking, why not use the IRA to cover healthcare deductibles and monthly premiums. I've never been in a lower tax bracket ... why wait?
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Old 02-06-2009, 07:42 PM   #2
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Penalty free, but you still have to pay taxes right? Then you have less value in your IRA to grow from then on. Unless you need the extra cash, that would not be a great idea.
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Old 02-06-2009, 09:07 PM   #3
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Quote:
Originally Posted by tryan View Post
Did my annual meeting with my CPA today. Asked about penalty free deductions from a IRA. He proceeded to read from the tax code (55+ years young, first time home buyer ... ) most did not apply.

Then he said "HEALTH CARE COSTS". This had me thinking, why not use the IRA to cover healthcare deductibles and monthly premiums. I've never been in a lower tax bracket ... why wait?
I agree that if you are a low tax rate now and your IRA has not taken a beating in the market decline now might be a good time to pay the taxes.

If you don't actually need the money now, do you qualify for converting some of it to a ROTH? ie low taxes now, ROTH grows tax free after that.
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Old 02-06-2009, 09:14 PM   #4
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I believe only the amount that would be penalty fee is that which equals the out of pocket medical costs that exceed 7.5% of your adjusted gross income.

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