Early IRA Distribution Penalty

Yes, you may be able to avoid the 10% penalty on an IRA distribution if it is for unreimbursed medical expenses that exceed 7.5% of your Adjusted Gross Income (AGI) for the year. Here's a breakdown of how it works: Medical Expense Exception: If your qualified unreimbursed medical expenses are more than 7.5% of your AGI in a given year, you can withdraw funds from your IRA to cover these expenses penalty-free. Disabled Status: If you are deemed to be "totally and permanently disabled," you may be able to withdraw IRA funds without the 10% penalty. This typically means you are unable to engage in any gainful activity because of a physical or mental condition expected to be of long-continued or indefinite duration or result in death. Qualifying Medical Expenses: This exception generally applies to most medical, dental, and vision treatments that diagnose, prevent, or treat disease. Timing: The IRA distribution must be made in the same year that the medical expenses were paid. No Itemization Required: You don't need to itemize deductions on your tax return to take advantage of this exception. Income Tax Still Applies: Even with the penalty waiver, the distributions from a Traditional IRA will still be subject to ordinary income tax. There are other ways to avoid the penalty! Give us a call at 813-657-4137 to discuss.

Step Up in basis, well, maybe??

A step-up in basis is a tax provision that raises an asset's cost basis to its fair market value on the date of the owner's death. This adjustment means that the inheritor does not have to pay capital gains taxes on the appreciation of the asset that occurred during the decedent's lifetime until the asset is sold. This rule helps to eliminate double taxation on a deceased person's assets, benefiting heirs, particularly in wealthy households. It applies to various inherited assets, including investments, stocks, bonds, and real estate. IRAs do not receive a step-up in cost basis upon death, unlike most other assets owned by an individual. A step-up in basis resets the cost basis of an appreciated inherited asset for tax purposes. The cost basis for heirs is raised to the asset's market value on the prior owner's date of death, reducing future capital gains taxes. The beneficiary of your IRA will pay ordinary income tax on any distributions at his or her rate.