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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
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Dear Tax Talk,
I am over 59½ and unemployed. I would like to pay off my mortgage by taking $100,000 from my standard IRA. How much taxes do I withhold? — Thecla
Dear Thecla,
Although it may seem like a good idea to pay off your mortgage, the tax cost of making the lump-sum payment is prohibitive. While you’re over 59½ years of age, you still have to pay income tax on the withdrawal. Your tax could be easily $30,000 or more, depending on state taxes. You won’t save this in mortgage interest for several years. If you’re set on this, you should consider doing it over a period of years to minimize your tax exposure.
If you’ll need to work in the future, you may want to consider using your IRA to start a business. This is a much wiser use of your funds. If structured properly, you could even use your IRA to make the business loan tax-free. You could do this by setting up a qualified retirement plan that allows you to roll over your IRA. The retirement plan can provide for participant loans, which would be tax-free up to $50,000. You’ll have to have set up the right type of plan and business structure, so I recommend you talk to a good CPA about this before taking any action.
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Ask the adviser
To ask a question on Tax Talk, go to the “Ask the Experts” page and select “Taxes” as the topic. Read more Tax Talk columns.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
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