Are traditional IRA withdrawals taxable for mortgage payments?


Q. Are withdrawals from a traditional IRA taxable when used to pay off a mortgage?
— Retired

A. The short answer is yes.

How much tax you will pay depends upon your tax bracket.

Every dollar you take as a distribution from your IRA is 100 percent taxable at your tax rate, said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield.

He said if you wanted to pay off your mortgage with IRA money, you would have to calculate the amount you need to withdraw to cover the mortgage and the tax bill.

You didn’t say your age, but beware of the 10 percent early withdrawal penalty if you are not 59½, he said.

Once you know what your tax liability is, you can do the analysis as to whether or not it’s worth it.

“The factors to consider are the amount owed, your mortgage interest rate, your tax bracket, the amount of taxes to be paid and cash flow consequence,” Gobo said.

This is a fairly simple analysis, but you may want to consult your tax advisor.

Plus, he said, it’s not just about the economics. You should consider the emotional value of how important it is for you to be mortgage-free.

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This story was originally published on Nov. 19, 2019. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.