Alcoa, TN · Member since 2017 · 25 posts · 5 votes
So I bought a property using money from an old IRA. I didn't do the self directed since it was only $20K. The setup cost along with the yearly fee would be more than the 2k penalty for using the money. Here's my question: Could my expenses to fix up the house (it needs a lot) be used to offset the Penalty and tax I will generate from using this IRA?
No. The penalty and tax will remain, but there may be other offsetting tax benefits in other areas that will help lower your overall tax bill.
Your expenses to fix up the house can either be an immediate expense or a depreciating asset, depending on the facts and circumstances surrounding your "in use" date. This issue has been discussed in various other posts, which you can research here as it has been discussed many, many times.
Your other earned income outside of the rental will also have an impact as to whether or not any losses in your rental will be deductible.