QUESTION ON THE 59 1/2 RULE and gifting
after 591/2 what are the rules governing the use the funds? if you have a information sheet on this please email to me . Will I have to pay taxes on the withdraw? Also does your taxable income decrease if using the gifting rule {the 12,000} thank you
Permalink Submitted by Alan Spross on Mon, 2008-11-03 04:40
I assume you are asking about a traditional IRA distribution. If so, that distribution will be taxable, although there is no early withdrawal penalty after age 59.5. For a Roth IRA, if you have had it 5 years, after 59.5 all distributions are tax and penalty free.
If you take a distribution from the traditional IRA, the taxes are calculated at your marginal federal and state tax rates. A gift does not reduce the tax bill unless it is made to a charity and you qualify for itemizing your deductions.
If you gift to a relative, the 12,000 limit (13,000 next year) just means that you do not have to file a gift tax return and that your lifetime limit for such gifts remains at 1,000,000 and is not reduced.