Roth IRA
Assuming a taxpayer is older than 59 1/2 and has had their Roth IRA for more than 5 years, can they use the Roth as collateral for a loan? The loan would be used to pay the tax on the conversion without disrupting the investments.
Assuming a taxpayer is older than 59 1/2 and has had their Roth IRA for more than 5 years, can they use the Roth as collateral for a loan? The loan would be used to pay the tax on the conversion without disrupting the investments.
Permalink Submitted by Alan - IRA critic on Fri, 2021-12-17 22:40
No, an IRA can never be used as collateral for a loan. It would be a prohibited transaction. It’s a dangerous path to take, but a Roth distribution could be taken just before the tax payment date, and there is 60 days to come up with funds to roll the distribution back. Taxpayer would need to have a rollover available per the one rollover in 12 month limitation.
Permalink Submitted by gautam SHAH on Sat, 2021-12-18 14:04
Hello is it same taking distribution in december 2022 to pay tax for conversion of other IRA to ROTH and pay back in 60 days in 2023 from taking money. what happens to tax with held
Permalink Submitted by Alan - IRA critic on Sat, 2021-12-18 16:25
Most firms can only support a 99% withholding rate, but for purposes of your question, assume it is 100%. If the IRA distribution is in 2022, the withholding will be applied to your 2022 taxes. Then if you have a rollover available you could replace the withholding distribution up to 60 days after the distribution, and you could report a rollover on your 2022 taxes. But this only works if you have the other funds to complete the rollover.