Are withdrawals from traditional individual retirement accounts (IRAs) taxable?
A43: A taxpayer may withdraw funds from a traditional IRA without being subject to the 10% early distribution penalty,*2 if the taxpayer reaches 59-1/2 years of age, is disabled (as defined by the Internal Revenue Service), or in the case of annuitized payments, certain medical-related distributions (such as health insurance purchased if the IRA owner becomes unemployed), higher education expenses, certain first-time homebuyer expenses, and IRS levies. Amounts distributed from traditional IRAs are included in gross income and subject to federal and Hawaii tax. The income tax is in addition to the 10% early distribution penalty*3, if applicable. Any portion of an IRA distribution that is attributable to an employer-funded pension or retirement plan is not subject to Hawaii income tax. Please consult a tax advisor before withdrawing from an IRA. __________________________________ *2 The 10% early distribution penalty is imposed at the federal level only. Hawaii does not impose a penalty
