Roth IRA Distribution – Tax Consequences prior to 5-yr. per.
A client is greater than 59 1/2 and wants to withdraw money from her Roth IRA prior to her required 5-year holding period. Currently, the clients portfolio value is less than her original contributions. What are her tax consequences if she withdraws this money, if any?
Permalink Submitted by Alan Spross on Thu, 2008-10-23 18:34
No tax is due.
If the amount remaining included regular contributions, those come out tax and penalty free anytime.
If the amount includes conversions, they come tax free anytime. And the 5 year holding period required to avoid penalty on conversions ends at age 59.5, therefore all conversions can also come out tax and penalty free.
She will need the amounts of prior regular and conversion contributions in order to report the distribution on Form 8606.
If this is her only Roth, her loss will qualify her for a misc itemized deduction subject to 2% of AGI.
Permalink Submitted by Clyde Wolf on Thu, 2008-10-23 20:44
“If this is her only Roth, her loss will qualify her for a misc itemized deduction subject to 2% of AGI.”
But only if she takes all of the money from her only ROTH IRA.