Canadian TN planning to withdrawing 100k in IRA best strategy

[jk561w]

Hi there, i've searched through the 129 results for "ira withdraw" on this fourm and didn't quite find what i'm looking for so here's my situation:

I'm 35yr old Canadian citizen working under TN for the past 10 years in the US has over $130k in IRA and another $30k in 401k with current employer that i'm looking for the withdraw strategy that pays the least amount of tax.

I understand the 10% penalty is not avoidable, the marginal tax rate on the withdrawal is what i'm concerned with, and more specifically, i'd like to stay in the 12% bracket for married filing jointly with less than $23,201 to $94,300 revenue. My current salary is higher than the $94,300 but i was wondering if i quit and go back to Canada and in that year my total US income is say only $20k does that mean i can withdraw my IRAs out paying 10% penalty + 12% tax? And if i do the withdraw in 2 years the following year with $0 US income as long as i withdraw less than $94,300 i'm in the 12% bracket?

Thanks

[nelsona]

Where will you be living when you withdraw this money?
If you are living in Canada, your US taxrate will not matter, as you will be paying more than that in Canada.

Withdrawing these funds now, at your age, defeats the purpose of having set the money aside in the first place: to withdraw it when you income (or your income tax rate) is lower than when you put it in.

[nelsona]

But, yes, if you quit your job, and take out an amount from your IRA that keeps your total income under the threshold BEFORE leaving for Canada, and you make no other money for that year in Canada (because you would still have to file a full year 1040 to get the joint tax rate) it will be taxed at the low rate plus 10% penalty.

Particular reason you need to get at this money?

[jk561w]

nelsona wrote:
> But, yes, if you quit your job, and take out an amount from your IRA that
> keeps your total income under the threshold BEFORE leaving for Canada, and
> you make no other money for that year in Canada (because you would still
> have to file a full year 1040 to get the joint tax rate) it will be taxed
> at the low rate plus 10% penalty.
>
> Particular reason you need to get at this money?

Hi Nelsona, thanks for the reply. I'm planning to use the money for a downpayment for property in Vancouver, BC.

Just to clarify, if i make under the threshold before leaving to Canada say $50k US income and withdraw all of the IRA they will be taxed at the 12% rate?

And if i make $50k US income but also make another say $50k Canadian income then my IRA will have to be taxed at the $100k income level correct?

Thanks again

[nelsona]

No, your IRA withdrawal will be ADDED to your other income, pushing you into a higher tax bracket. So, in the first case you would be taxed as if you made $150K for the year (plus $10K of penalty). In the second instance, you will pay US tax on $200K (plus $10K penalty), reduced by the CDn tax you pay on your Cdn wages.

You will be paying an astronomical amount of tax on this money, much more than the interest you would pay on your mortgage for that $100K.

[brianbbc]

Leave the money in the ira and let it grow. You’ll likely be glad you did when you hit retirement age. It seems you’re young enough right now to take on real estate debt instead of depleting the retirement account. You may not want a higher mortgage in the present but is it worth not compounding the ira savings for your future?