I have an IRA with Fidelity ($13,000). I'd like to withdraw most of it and transfer to another account. I am in the 15% tax bracket.
In order NOT to be additionally taxed on the amount I'm taking out, what would be your advice in how much to take out. I am not withdrawing it too early. When i asked Fidelity, they suggested I ask support of a tax advisor or "Turbotax".
What is the maximum I can ask for now without being taxed additionally?
Thank you.
Why are you doing this? Reading between the lines, it appears you want to remove it because you are in a lower tax bracket now than you expect to be in the future.
You cannot make a withdrawal, at this time, for tax year 2017. That had to be done on or before 12-31-17. Anything you do now will count for tax year 2018. So, you may want to wait til later in the year to have a better handle on your overall tax situation.
“I am not withdrawing it too early”. I take that to mean you are over age 59-1/2. If you are under age 59-1/2, you will have to pay a 10% early withdrawal penalty, in addition to the 15% tax.
Instead of removing money and putting it into a taxable account, you could consider converting some of your traditional IRA to a Roth IRA. You pay the same amount of tax, as withdrawing the money (but no penalty for those under 59.5) but the money can be invested free of future tax.
"transfer it to another account" What kind of account are you transferring it to? And how old are you?
If you want to transfer it to another IRA account tell Fidelity to do a direct transfer. Much easier.
If you're transferring to another IRA, then there's no need for you to "touch" the money. If you touch it, then fedality is required to withhold taxes on the distribution. If you do a direct trustee to trustee transfer then no taxes are withheld, no 1099-R is issued, and you don't have to report anything concerning the transfer on your tax return.
I'm 67 (hard to believe)..but I just want to transfer most of it to a savings account of another carrier (to take care of some expenses this year). Fidelity told me I could withdraw the entire amount, but it would have an affect on my taxes but if they withhold taxes on the distribution (which I expected), then I should not be taxed additionally on the amount withdrawn. When I asked them last year, they told me to look at my tax bracket and they could determine what amount could be drawn; but this time they asked me to consult with a tax advisor to make sure what amount I should withdraw.
Isn't there some sort of equation where I can figure out how much I can withdraw w/o increasing my taxes? ie. If I have $13,000, and I only asked for 15% of $13,000 - would it be safe to withdraw $11,000 as a lump sum? They said something to the effect that I could withdraw the entire amount, but it would be taxes later on.
you will probably get pushed into the 25% bracket so ask for 25% to be withheld on $13,000 distribution.
Maybe this will help you further. I am single, currently 15% tax bracket (fixed yearly income of $37,692). I don't understand what an AGI is - or if you mean itemized deductions such as medical, etc....If so, I have itemized deductions, yes. I only pay a fraction of taxes on my Social Security Income, and with the loss of my MCC Credit this year, I will owe taxes for the first time in many year. I do them on my own since my tax preparer passed away, otherwise I would be asking him! So, having said that, I'm looking for a safe number that I can withdraw to use as liquid expenses
PS. I know that $13,000 is too much to request; If Fidelity is required to tax this amount, how do I avoid being taxed more later.
There is no way to avoid tax on what you take out. Pay now, or pay later.
The equation is (there are 2 equations):
1. Total other reportable income* – deductions – exemptions = taxable income before IRA withdrawal
2. Top of 15% bracket ($37950 for single) – taxable income from equation 1 = amount you can withdraw at 15% rate
You can use this tool to try different scenarios: <a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1">https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1</a>
Better yet, buy the download (not online) version of TurboTax. You can do an unlimited number of test returns.
Here’s an additional caveat: When you take out an IRA distribution, more of your social security becomes taxable. This is because the taxability of SS is dependent on how much other income you have. So your reportable income is not a fixed amount.
based on the new law and your low income your tax bracket will be 12% so ask for 12% or 15% to be withheld on a $13,000 distribution, and you will avoid tax bill at tax time. You will almost surely not be itemizing
There is no way to avoid tax on what you take out. Pay now, or pay later.
(I realize that; I just don't want to pay now AND later.
Usually, Hal_Al's response will give you the best result: Just enter into TurboTax and you will see the results.
Unfortunately, due to the changes in tax law for 2018, that isn't going to give you a very accurate result.
Fanfare: you will probably get pushed into the 25% bracket so ask for 25% to be withheld on $13,000 distribution.
***OK, I think this is what I was kind of getting at in an indirect way. This answer helps me. 20-25%.
Good point Bill. Unlike previous years, using this year's TT to estimate next year is going to be pretty worthless. I suspect it will be a while before taxcaster is updated too.
when I said 25% I had forgotten about the new tax brackets in 2018. There is no 25% bracket. see my other comments.
Why are you doing this? Reading between the lines, it appears you want to remove it because you are in a lower tax bracket now than you expect to be in the future.
You cannot make a withdrawal, at this time, for tax year 2017. That had to be done on or before 12-31-17. Anything you do now will count for tax year 2018. So, you may want to wait til later in the year to have a better handle on your overall tax situation.
“I am not withdrawing it too early”. I take that to mean you are over age 59-1/2. If you are under age 59-1/2, you will have to pay a 10% early withdrawal penalty, in addition to the 15% tax.
Instead of removing money and putting it into a taxable account, you could consider converting some of your traditional IRA to a Roth IRA. You pay the same amount of tax, as withdrawing the money (but no penalty for those under 59.5) but the money can be invested free of future tax.
you haven't said if you are single or married, and whether you itemize or not.
for a Single filer, to avoid the 25% bracket your AGI must stay below 37,951
Before a $13,000 distribution that means your AGI must be lower than 24,951
Your AGI will depend on your filing status and deductions.
The 25% bracket starts at $37,951 of Taxable income, for singles.
Taxable income = AGI (Adjusted Gross income) minus deductions and exemptions ($10,400 for most singles). So, you could have up to $48,350 of total income and still be in the 15% bracket.
"want to transfer most of it to a savings account" A savings account does not sound like a qualified plan transfer.
Yes, I'm looking at the chart. I really would like to use this money vs. invest it right now; I'm just trying to steer clear of being taxed additionally (that is, after Fidelity taxes the amount in the IRA).
As for deductions, I had a lot of medical deductions this year, but don't know how this all fits into the equation. I could look at last year's tax return if that helps at all.
Why are you doing this? Reading between the lines, it appears you want to remove it because you are in a lower tax bracket now than you expect to be in the future.
***No, because it's just sitting there and I have an enornous amount of veterinarian expenses and dental expenses which I'd like to be able to withdraw from this amount. I would like a liquid account.
You cannot make a withdrawal, at this time, for tax year 2017. That had to be done on or before 12-31-17. Anything you do now will count for tax year 2018. So, you may want to wait til later in the year to have a better handle on your overall tax situation.
**My tax situation will remain the same. I waited from doing it last year to this year already.
“I am not withdrawing it too early”. I take that to mean you are over age 59-1/2. If you are under age 59-1/2, you will have to pay a 10% early withdrawal penalty, in addition to the 15% tax.
I'm 67, so no penalty.
Instead of removing money and putting it into a taxable
account, you could consider converting some of your traditional IRA to a Roth
IRA. You pay the same amount of tax, as withdrawing the money (but no penalty
for those under 59.5) but the money can be invested free of future tax.
As I said, I want to use it for a lot of expenses.
Thank you all for your useful comments. As you can see, I will never understand taxes, although I've been doing them for years ! with -0- refund and -0- payments.
So, one last question, given the complexity of "taxes" and the changes ... would it be safe for me to ask for 20% of the amount of my IRA and not be taxed again later?
I do have other investments, but they are not liquid, and I'd really love to get some expenses taken care of now, not later - meanwhile, it has just been sitting there and I do need it now.
Thank you.