My Wife and I withdrew money from our IRA investments to buy a building for a startup yoga studio. Do I still have to pay full taxes on my IRA withdrawal? I am over 67.
Yes. Doesn't matter what you do with the money. Since you are over 59 1/2 you avoid the 10% Early Withdrawal Penalty. Or was it a ROTH IRA? Is you wife also over 59 1/2? IRA stands for Individual Retirement Account. So you don't have "our account". You have separate IRA accounts. And the withdrawals will add to your other income and may put you into a higher tax bracket.
You are past the age of 59 1/2 so you do not have an early withdrawal penalty. But the distribution from your retirement account is taxable at any age. In January you will get a 1099R that must be entered on your tax return.
To enter your retirement income, Go to Federal> Wages and Income>Retirement Plans and Social Security>IRA 401 k) Pension Plan Withdrawals to enter your 1099R.
Your state might tax the retirement money as well--depending on what state you live in.
States that may tax retirement income from IRA's, pensions, etc.:
AL, AR, AZ, CA, CO, CT, DE, DC, GA, HI, IA, ID, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, RI, SC, UT, VA, VT, WI, WV,
This is a “general” list. Some of these states have complicated laws that exclude certain types of retirement income, or provide certain income exclusions and age deductions. This list does NOT refer to Social Security benefits.
Separately from the IRA withdrawal, you have the business start up to think about. You may be able to deduct start up expenses against business income. That may reduce the tax impact of withdrawing the money from the IRA to start the business. But starting a business does not by itself change your IRA taxes. The IRA withdrawal is taxable, under its own rules, and then your business expenses may be deductible under their own rules.
Generally speaking, start up expenses less than $5000 may be deducted in the first year that you have business income. Start up expenses more than $5000 are dealt with by a combination of deductible expense and amortization over 15 years. If you bought an existing business, you may have an investment, in which case you either pay tax on the capital gains later or you have a deductible loss, depending on how the business does. I am much more interested that you get competent tax advice on preparing your business taxes and dealing with your purchase or start up costs correctly.