If you have a traditional Arizona IRA there are withdrawal rules that you should be aware of, and there are many differences between a traditional Arizona IRA and a Roth Arizona IRA. If you withdraw money from a traditional Arizona IRA before the age of 59 ½ the amount will be subjected to a 10% IRS tax penalty in addition to standard federal and state income taxes.

There are some exceptions to this penalty – if you become disabled permanently you will not be subjected to a withdrawal penalty, but there are qualifications as to what the IRS considers to be “permanently disabled.” You must not be able to take part in any gainful activity and your disability must be expected to last for a long period of time.

If you pass away and your Arizona IRA is distributed there are no tax penalties, no matter which age you are or the age of your beneficiaries. If you have medical bills that are more than 7.5% of your AGI you can use funds from your Arizona IRA to pay those bills without tax penalty. You can also be exempted from a withdrawal penalty if you are unemployed for 12 weeks in a row, or if you are self-employed with a defunct business.

There are a number of other circumstances where a withdrawal from an Arizona IRA can avoid the 10% penalty including paying health insurance, expenses related to a first time home purchase, for certain educational expenses, and in a few other scenarios. At age 59 ½ money can be taken out of an Arizona IRA account without any penalty, but the amount will always be subjected to federal and state income taxes. The amount that can be withdrawn at this age is unlimited, but the income tax could be up to 39.6% depending on person’s income tax bracket.

After a person reaches the age of 70 ½ they must begin withdrawing the minimum required distribution from their Arizona IRA accounts, or the IRS will assess a 50% penalty on the minimum required distribution amount. Roth IRAs have different rules and amounts directly contributed to a Roth IRA can be withdrawn without any tax penalty, but contributions to a Roth IRA are not tax deductible.

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