IRA Withdrawal and Cost Segregation Question

[Joshua Myers]

Alright, I have a question that I can't find information on anywhere. What better place than BiggerPockets to find an answer. So here goes!

For 2022 my taxable income is going to be just under 240k which includes; 90k in my earnings 25k of my wife's earnings, and 125k of IRA early withdrawal. The withdrawal was taken out to purchase a Short Term Rental and we paid the 10% early withdrawal tax penalty.

I qualify as a real estate professional. A cost segregation study shows that we can take 217k of bonus depreciation for 2022. Combined with our standard deduction, that puts our taxable income at $0.

My question is - will I receive a refund for the 10% tax penalty since my taxable income is $0, or is that a hard penalty that can't be refunded?

Any help or information would be great!

[Dmitriy Fomichenko]

@Joshua Myers,

I don't believe you can avoid paying penalties on early distribution from an IRA, even if your taxable income is zero. But I'm not a CPA and I strongly recommend you use a qualified and experienced tax professional not only for tax preparation, but most importantly for tax planning.