Trying to calculate the Penalty for an early IRA withdrawal....and I'm getting a little confused.
Here is the situation, my wife and I have always wanted to own an older home with a small farm potential....not for a real income, just cause we like it and have always wanted a place to grow blueberries, apples, pumpkins, strawberries, etc...I guess we are busy bodies (No dairy stuff, perhaps some chickens and a few goats....again, not for real income....just the life we have wanted for a while) Its about a 12 acre parcel, so I am drooling of all the firewood potential.
Anyway, we are going to look at a property this weekend, completely restored 1780's house on 12 acres.....I need to tap into an IRA early to make it work....its a little out of our price range, but we are willing to bite the bullet.
I guess here is the question, if I cash in an IRA early, say $30,000 or $50,000 am I paying taxes on the entire distribution plus 10%, or only paying the taxes and 10% penalty on the increase in value from what I bought/sold it at. (I'm thinking the entire amount as this is not a ROTH, and the original amount was not subject to taxes)
Normally, I would never cash in one early, but this is a good chance for us with the depressed housing market, and the property is in the first stages of foreclosure.
So, just thought I would check as I am sure there is a tax person ouot there.
Thanks.
Edit: We are in a pretty low tax bracket......about $80K a year in income with 3 kids all under 7...wife does not have an income but she works harder than I do
Here is the situation, my wife and I have always wanted to own an older home with a small farm potential....not for a real income, just cause we like it and have always wanted a place to grow blueberries, apples, pumpkins, strawberries, etc...I guess we are busy bodies (No dairy stuff, perhaps some chickens and a few goats....again, not for real income....just the life we have wanted for a while) Its about a 12 acre parcel, so I am drooling of all the firewood potential.
Anyway, we are going to look at a property this weekend, completely restored 1780's house on 12 acres.....I need to tap into an IRA early to make it work....its a little out of our price range, but we are willing to bite the bullet.
I guess here is the question, if I cash in an IRA early, say $30,000 or $50,000 am I paying taxes on the entire distribution plus 10%, or only paying the taxes and 10% penalty on the increase in value from what I bought/sold it at. (I'm thinking the entire amount as this is not a ROTH, and the original amount was not subject to taxes)
Normally, I would never cash in one early, but this is a good chance for us with the depressed housing market, and the property is in the first stages of foreclosure.
So, just thought I would check as I am sure there is a tax person ouot there.
Thanks.
Edit: We are in a pretty low tax bracket......about $80K a year in income with 3 kids all under 7...wife does not have an income but she works harder than I do
