Question

Sherry, who is 52 years of age, opened a Roth IRA three years ago. She has contributed a total of $12,000 to the Roth IRA ($4,000 a year). The current value of the Roth IRA is $16,300. In the current year, Sherry withdraws $14,000 of the account balance to purchase a car. Assuming Sherry’s marginal tax rate is 24 percent, how much of the $14,000 withdrawal will she retain after taxes to fund her car purchase?

amount of withdrawal
non-taxable amount
amount subject to tax
tax rate %
penalty rate %
tax
penalty
after tax withdrawal retained

Answer 1

Answer
Particulars	Amount
Amount of withdrawal	$           14,000
Non-Taxable Amount	$           12,000
Amount subject to tax	$             2,000
Tax Rate	24%
Penalty Rate	10%
Tax ($2,000*24%)	$                480
Penalty ($2,000*10%)	$                200
After tax withdrawal retained ($14,000-$480-$200)	$           13,320
Explanation:
Non qualified distributions are non taxable to the extent they are attributable to contributions. Any earnings made on such contributions are taxed as ordinary income and subject to a 10% penalty
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