Is IRA taxed for elder care?
Dear Tax Talk, If a 65-year-old person withdraws a large amount of money from a taxable IRA to pay nursing home expenses, is that money taxable? — S Dear S, No matter what you do with your IRA money, when it is withdrawn from the account it is taxable income. That is, there are no tax-free uses of IRA money. When you’re over age 59½, you can withdraw IRA funds without being subject to an additional 10 percent penalty. If you’re under age 59½ when the withdrawal occurs, there are certain exceptions that avoid the 10 percent penalty, but the withdrawal is always subject to income tax. Ideally, if you need to make a withdrawal from an IRA, the objective is to withdraw as little as possible to minimize your tax consequences. Also, bear in mind that IRA withdrawals increase your adjusted gross income, or AGI, which cause increased taxation of Social Security benefits. It is a double-edged sword. For example, if you had $10,000 in IRA withdrawals and $18,000 in Social Security benefits, non
