Did you know there are several ways to take money out of your IRA tax-free? Remember, just because you CAN, doesn’t mean you SHOULD.
The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you!
Option 6: Income tax credits.
There are some investments that might generate a tax credit. If you give $3,000 away to a charity, this is a deduction and would save some taxpayers about $1,000 in taxes. On the other hand, the tax credit reduces your taxes dollar for dollar.
In the event that you can make $3,000 in tax credits, you would reduce your income taxes by $3,000. Therefore, tax credits are usually much more valuable than a tax deduction. Many investments can generate a tax credit. Have your advisor review the alternatives, as well as make sure that the overall investment return from the tax credit generator is a good one. Don’t just invest based on tax credit benefits. It is important that you always review the overall investment return with your advisor carefully.
Everyone’s situation is different! Make sure to consult your trusted advisors to determine what is appropriate for you!
Information gathered from MD Producer article for professionals