If I have $85,000 in a beneficiary IRA, how much in fees and penalties would I pay if I took out $50,000 to put a down payment on a house?

Dec 07, 2018
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If I have $85,000 in a beneficiary IRA, how much in fees and penalties would I pay if I took out $50,000 to put a down payment on a house in California? 

For federal income tax purposes, someone who inherits an IRA will pay federal income tax on any withdrawals. The early withdrawal penalty of 10 percent for distributions prior to age 59 ½ does not apply to inherited IRAs. 

Pennsylvania does not tax distributions from inherited IRAs, nor does it penalize any IRA distributions if taken before 59 ½ under any circumstances.

The question, however, concerns California, and the laws there are different. California does add a 2.5 percent penalty for withdrawals before age 59 ½, and I don’t see any exceptions. California also requires state income tax to be paid on IRA distributions.

Answered by: Timothy C. Hilbert, CPA, is director of audit and accounting at Kreischer Miller in Horsham, Pa.

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