Bryan, who is 45 years old, had some surprise medical expenses during the year. To pay for these expenses (which were above the 7.5% of AGI threshold and claimed as itemized deductions on his tax return), he received a $20,000 distribution from his traditional IRA (he has only made deductible contributions to the IRA). Assuming his marginal ordinary income tax rate is 15 percent, what amount of taxes and/or early distribution penalties will Bryan be required to pay on this distribution?

Question

Quizplus · Accepted Answer

Bryan will owe income tax on the $20,000 distribution at a marginal rate of 15%, which amounts to $3,000. However, since he is over 59.5 years old, he does not have to pay the early distribution penalty of 10%, so his total tax and penalty owed is $3,000 income tax and $0 early distribution penalty.

Bryan, Who Is 45 Years Old, Had Some Surprise Medical