Other Tax Questions
Questions and comments on other topics covered in Fairmark.com, such as UTMA accounts, and any tax questions that don't fit our other categories.
Avoiding Tax on IRA Withdrawals - RETIRED
Posted by: oprater, September 15, 2017 05:59PM
I know IRA withdrawals are the same as "earned income". I retired in July and began systematic withdrawals from my IRA starting in August. In 2018, if we (wife and I) ONLY have So Sec income of about $40,000 and no earned income, AND I withdraw maybe 15,000 from my IRA, I'm thinking maybe there will be NO TAX DUE after the Std Deduction is applied. What am I missing? This is too good to be true!

Re: Avoiding Tax on IRA Withdrawals - RETIRED
Posted by: tomd37, September 15, 2017 08:09PM
oprater - It is my understanding that "earned income" can only be from three sources; a job (W-2), self-employment (Schedule C), and alimony received (1040). Let's see what others say.

Traditional IRA distributions are reported on line 15 of Form 1040 and as such become part of line 37/38 AGI which is then subject to reduction for personal/dependent exemptions and standard/itemized deductions.

Tom D.

Re: Avoiding Tax on IRA Withdrawals - RETIRED
Posted by: oprater, September 15, 2017 08:15PM
Perhaps it is more accurate to say "treated like ordinary income".

Re: Avoiding Tax on IRA Withdrawals - RETIRED
Posted by: tomd37, September 15, 2017 08:20PM
I would agree with your last statement.

Tom D.

Re: Avoiding Tax on IRA Withdrawals - RETIRED
Posted by: motax, September 15, 2017 09:28PM
Based on my quick calculations, your taxable ssa would be $1,500. After std ded and exemptions, you taxable income would be -0-, so no tax due.

Re: Avoiding Tax on IRA Withdrawals - RETIRED
Posted by: Les Grans, September 16, 2017 02:46PM
Motax: Would you do that same calculation for a *single* taxpayer too, please. I'm very curious about the different result that should pop up. Thank you.

Re: Avoiding Tax on IRA Withdrawals - RETIRED
Posted by: motax, September 18, 2017 05:31AM
Well, if I use $20,000 for SSA (instead of $40,000 because single), the taxable SSA would be -0-. However, using the IRA distribution of $15,000, taxable income would be approx. $4,650 using the std ded and personal exemption.
Tax would be $465.
If you also assume the IRA distribution would be 1/2
(Or $7,500) no tax would be due.




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