Solved: I want to cash out my Roth IRA. I am 64 and have the account since 2009. Does the withdrawal have any tax implications?
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lpoiesz
New Member

I want to cash out my Roth IRA. I am 64 and have the account since 2009. Does the withdrawal have any tax implications?

 
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dmertz
Level 15

I want to cash out my Roth IRA. I am 64 and have the account since 2009. Does the withdrawal have any tax implications?

While the distribution itself will not be taxable, there are several possible tax consequences:

  1.   If you cash out all of your Roth IRA accounts and the amount you receive is less than your net Roth IRA contribution basis, you can claim the unrecoverable contribution basis as a miscellaneous deduction subject to the 10% of AGI floor.
  2. If you or your spouse would otherwise qualify for the Retirement Savings Contributions Credit for contributions to retirement accounts made in the year of the distribution or the 2 years that follow, the distribution from the Roth IRA reduces the amount of those other contributions that can be considered for the credit.
  3. As SweetieJean indicated, the nontaxable income from the Roth IRA can be included in the amount used to determine the sales-tax deduction if you use that instead of the deduction for state and local income taxes paid.
  4. The future potential for tax free growth on this money is lost unless your future income is low enough that growth of this amount of money outside of a Roth IRA would not be subject to tax anyway.

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3 Replies
dmertz
Level 15

I want to cash out my Roth IRA. I am 64 and have the account since 2009. Does the withdrawal have any tax implications?

While the distribution itself will not be taxable, there are several possible tax consequences:

  1.   If you cash out all of your Roth IRA accounts and the amount you receive is less than your net Roth IRA contribution basis, you can claim the unrecoverable contribution basis as a miscellaneous deduction subject to the 10% of AGI floor.
  2. If you or your spouse would otherwise qualify for the Retirement Savings Contributions Credit for contributions to retirement accounts made in the year of the distribution or the 2 years that follow, the distribution from the Roth IRA reduces the amount of those other contributions that can be considered for the credit.
  3. As SweetieJean indicated, the nontaxable income from the Roth IRA can be included in the amount used to determine the sales-tax deduction if you use that instead of the deduction for state and local income taxes paid.
  4. The future potential for tax free growth on this money is lost unless your future income is low enough that growth of this amount of money outside of a Roth IRA would not be subject to tax anyway.

View solution in original post

Critter
Level 15

I want to cash out my Roth IRA. I am 64 and have the account since 2009. Does the withdrawal have any tax implications?

None. 

SweetieJean
Level 15

I want to cash out my Roth IRA. I am 64 and have the account since 2009. Does the withdrawal have any tax implications?

Well, you can record the distribution as non taxable income for purposes of the Sales tax deduction if you itemize (assuming Congress doesn't change this for 2017).
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