IRA Rules

Posts Tagged ‘ira’

Question: Traditinoal IRA First-time home buyer tax treatment?

Hi,

My wife and I are looking to purchase our first home in the next couple of months and want to clarify this questions before ‘game day’.

I understand the surface rules of the IRS Traditional IRA penalty waiver for First-Time home buyers. The IRS basically allows a $10,000 distribution penalty free for the purchase of your first home.

The question I have goes a little deeper and doesn’t seem to be covered on the IRS’s website:
If I am the only one (between my spouse and I) who owns a Traditional IRA, AM I ABLE TO TAKE OUT $10,000 FOR THE BOTH OF US OUT OF MY IRA?

The IRS’s website states:
“If both you and your spouse are first-time home buyers, each of you can receive distributions up to $10,000 for a first home without having to pay the 10% additional tax.”
What if she doesn’t have an IRA, and we are utilizing my IRA…would I be able to pull $20,000 for the both of us out of MY IRA?

Thank you in advance for any help.

Answer: You would each have to have IRA‘s to be able to take out $10,000 for each of you. So you would only be able to take $10,000 out of your IRA for the first-time home buyers without the 10% penalty.

Laura H – H&R Block – Senior Tax Advisor 5
**This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided.

2010 Tax Law Changes with financial retirement expert, Bill Smith!

Question: Regular 401k, Regular IRA, and my wife’s Roth IRA plus our Investment?

I’m using simple terminology to help others who may benefit from my questions.

Facts: our planned retirement age 62, won’t live in USA, we will have 5 sources of income: my 401k + IRA + military pension, her IRA , & our investments.

Unknowns: Social Security for us, & my employer’s pension; not planning on them.

1. I have a regular 401k. Would like to know what mandatory US government deductions (e.g., taxes) will I owe on each withdrawal? A simple line-item answer is fine.

2. Same question for my traditional IRA, & for my wife’s Roth IRA.

3. Our investments are made with after-tax dollars. Since I already paid taxes on that money before investing it, when I reach 62, will I have to pay taxes on my withdrawals? If so, would that be double-taxation: the money was taxed before I invested it & then the gov’t will tax it again upon withdrawal? Remember: I also paid tax on the dividends and capital gains thru the years.

4. Do RMDs apply to IRAs & 401Ks?

Answer: regular 401ks and traditional 401ks get added together and taxed as ordinary income. If you take lump sum distributions then they may withhold 30% becasue you won’t be residing in USA (that’s a MAY).

Roth IRA is different. Assuming it’s in for the right amount of time it’s a non-taxable event.

After tax dollars that have had dividends and capital gains already paid on would not be taxed at all. Treat that no differently than you are currently doing so.

RMD’s apply to 401ks and traditional IRA‘s but not to Roth IRA‘s. Roth IRA‘s also have better estate planning options than the 401k and Traditional IRA.

Question: What are the tax implications for holding ADR stock in a Roth IRA?

I own stock of BP (British Petro) , AIB (Allied Irish Banks), and looking to pick up some E (Eni) which are/will be held in a U.S. Roth IRA account.

How will any future dividends or capital gains be handled since these are foreign stocks? Will they be tax free in conjunction with the rules of a Roth IRA?
@Mike – is there a way to see where a certain stock issued from? Like your RDS example?

Can this be done from a financial site like google finance or yahoo finance, or do you have to dig through the annual report?

Answer: There aren’t any.

Fist off, ADRs — American Depository Receipts — are not foreign stocks, they are US securities issued to cover an equivalent number of foreign securities held by a registered broker. Therefore there are no US implications on holding foreign securities.

US persons and entities, other than registered securities brokers, are generally prohibited from directly holding foreign securities. An American living in Europe for example, must certify that they are not US persons or entities in order to purchase securities from a European dealer. It’s a boilerplate clause in all European securities contracts and nobody checks up on it.

In reality it’s all done with a nod and a wink — I’ve owned foreign shares while living in Europe. I reported the gains on my US returns and paid any taxes due, and took credit for the foreign taxes paid using Form 1116. Thankfully the IRS isn’t permitted to report securities irregularities as long as the taxes are paid. That’s a moot point in your case because ADRs are not foreign securities and because you are holding them in an IRA.

If there are any foreign taxes on the underlying securities those are usually withheld at the source and you receive the net. Otherwise the foreign tax would be paid by the dealer and you again receive the net. However since these are held in a tax deferred account in your case, you cannot claim any credit for the foreign taxes paid. That’s negated by the fact that you receive the net gain after the foreign taxes so it’s largely a moot point.

Since these are US securities held within your IRA there are no tax consequences any more than with any other US security.

The IRA Tax Time Bomb