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This is a great site. Everyone, so far, has been great at discussing my new hobby which I really know nothing about. I thought I'd share a little information from my side of the aisle, which might help someone out.
Some retirees or pre-retirees over 59 1/2 have qualified plan balances that they don't use for everyday living expenses. Wouldn't it be nice if you could use that money to buy a gun? But you can't use IRA money to buy personal stuff without paying tax on it, right? Maybe, maybe not.
You have to be in the following position: you have to be itemizing deductions, or have itemized deductions equal to about what the standard deduction is. You have to be making less than the amount that will cause you to start losing itemized deductions. You know who you are. You have to not be in Alt Min tax, you'll also know. You have to have equity in your house and an equity line or the ability to set up one. There's also a narrow tax bracket where you will create additional social security taxable income, and not break even, but that's a difficult calculation.
Since it's tax time, I thought it'd be a good time to bring all this up.
This is an extreme example. Your mileage may vary. Assume your IRA is earning 6% for purposes here.
You use your equity line, with a 6% interest only rate, to buy a $10,000 gun. It costs $50.00 per month in interest. You take an additional $50.00 per month out of your IRA. The IRA distribution is taxable, the mortgage interest is deductible. You have no tax on the IRA distribution.
(This is the extreme part.) If you sell the gun for $10,000, you pay off the equity line. You basically used the $10,000 IRA money to use the gun for whatever period of time. You used the 6% earned on $10,000 of your IRA to pay the 6% interest expense.
If you could have bought the gun inside your IRA, you would have lost the 6% earnings on $10,000 that you paid for the gun. This is the exact same result as above.
If you lose money on the gun, the result is about the same as buying the gun outside the IRA. Say you sell it for $8,000, and lose $2,000. You owe $2,000 on your equity line. Pay it off, the loss is the same as using non-IRA money.
finger, or other advisors, you might want to weigh in on this. I can't help with investments, so this is my gift back to the members of this site. If there are points I missed, let's discuss and we'll adjust as needed.
Danny
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Some retirees or pre-retirees over 59 1/2 have qualified plan balances that they don't use for everyday living expenses. Wouldn't it be nice if you could use that money to buy a gun? But you can't use IRA money to buy personal stuff without paying tax on it, right? Maybe, maybe not.
You have to be in the following position: you have to be itemizing deductions, or have itemized deductions equal to about what the standard deduction is. You have to be making less than the amount that will cause you to start losing itemized deductions. You know who you are. You have to not be in Alt Min tax, you'll also know. You have to have equity in your house and an equity line or the ability to set up one. There's also a narrow tax bracket where you will create additional social security taxable income, and not break even, but that's a difficult calculation.
Since it's tax time, I thought it'd be a good time to bring all this up.
This is an extreme example. Your mileage may vary. Assume your IRA is earning 6% for purposes here.
You use your equity line, with a 6% interest only rate, to buy a $10,000 gun. It costs $50.00 per month in interest. You take an additional $50.00 per month out of your IRA. The IRA distribution is taxable, the mortgage interest is deductible. You have no tax on the IRA distribution.
(This is the extreme part.) If you sell the gun for $10,000, you pay off the equity line. You basically used the $10,000 IRA money to use the gun for whatever period of time. You used the 6% earned on $10,000 of your IRA to pay the 6% interest expense.
If you could have bought the gun inside your IRA, you would have lost the 6% earnings on $10,000 that you paid for the gun. This is the exact same result as above.
If you lose money on the gun, the result is about the same as buying the gun outside the IRA. Say you sell it for $8,000, and lose $2,000. You owe $2,000 on your equity line. Pay it off, the loss is the same as using non-IRA money.
finger, or other advisors, you might want to weigh in on this. I can't help with investments, so this is my gift back to the members of this site. If there are points I missed, let's discuss and we'll adjust as needed.
Danny
Compare this to