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IRA Tax question?
My sister got guardianship of my father and Estate. He is 86. He has 2 accounts Ford motor credit union. He is retire ford. One is a NOW account. I understand this. The other is IRA. There is 12,000 and change in it. Unlike the now with is 6 figures. My question. Am i reading correctly if we were to pull the 12 out and use it toward medical it would be taxed at 50 percent. Something about age 70. I'm confused..
This is just one financial institution he has accounts at. The other are straight forward
or don't touch IRA money it will go in will. He doesn't have very much longer to live
2 Answers
- Spock (rhp)Lv 72 years agoFavorite Answer
you are very confused. IRA account is tax free while the funds stay inside the account. your father, at age 86, is required by law to either take a minimum required distribution [RMD] each year [percentage of assets in IRA which rises with age] and pay income tax on that distribution or pay a ten percent penalty of the RMD amount.
However, at your father's age, if he withdraws the entire IRA amount, the income tax consequence is that it will ALL be taxed as ordinary income -- there will be no penalty. {Aside: this may increase the proportion of his Social Security that is subject to income tax -- the way to figure this out is to model his 2019 tax situation.}
Source(s): grampa -- had to sort this for my 89 year old father starting a few years back. I'm also a retired CPA
