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Depreciation offsetting tax penalties for IRA withdrawal
I'm looking to invest in MF through some crowdfunding platforms. I want to take some dollars out of my IRA to do so (not doing this in a SDIRA, I have a debt investment through that). I was wondering if the tax benefits of depreciation would meaningfully offset the withdrawal penalties from the IRA. I'm fairly new at this, so hope I'm not asking a dumb question (bit if I am, what the heck, I'll learn something). Thanks for the insight.
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#1 Tax, SDIRAs & Cost Segregation Contributor
- Tax Accountant / Enrolled Agent
- Houston, TX
You will have income tax on the withdrawal plus, if you're under 60, a 10% penalty. Possibly the state income tax, too, depending on your state.
Income tax (both IRS and state) might be partially offset by depreciation, depending on your overall situation: total income, the amount of your IRA withdrawal and rental cash flow. The 10% penalty is not offset by anything.