I know I wont have to pay the 10% penalty at age 59 1/2…And I want to take it all out. I have doubled my original investment. So If I do have to pay taxes ,will it be on all of it or just the amount I made above original investment? And if I do have to pay taxes, what would the rate be in CA?
Return of your original investment is typically not taxable IF there was no tax favored treatment of the account with original invest and interest gained, etc.
If you were to remove or "cash out" 6 figures that could throw you into a high tax bracket. Example you take out 300,000 the IRS will tax you 100,000 just on the federal alone. Which leaves you with 200,000 quite a lot to hand over to the IRS plus don’t forget the state.
You need to talk the the account manager or someone at the financial institution handing the account to be sure of the tax treatment.
February 1st, 2010 at 1:35 am
You would pay ordinary taxes on the earnig portion as well as 10% penalty on your earnign portion alone. You wouldn’t pay anything for the money you invested from your post tax dollars. Good luck!
References :
February 1st, 2010 at 2:20 am
Return of your original investment is typically not taxable IF there was no tax favored treatment of the account with original invest and interest gained, etc.
If you were to remove or "cash out" 6 figures that could throw you into a high tax bracket. Example you take out 300,000 the IRS will tax you 100,000 just on the federal alone. Which leaves you with 200,000 quite a lot to hand over to the IRS plus don’t forget the state.
You need to talk the the account manager or someone at the financial institution handing the account to be sure of the tax treatment.
References :