Tax Impact

Taking an early distribution from retirement plans—such as 401(k)s or IRAs—can significantly impact your tax situation. Here’s what you need to know about the potential tax implications:

Early Distribution Defined
An early distribution typically refers to withdrawing funds from a retirement account before reaching the age of 59½. The tax implications vary depending on the type of retirement account.

Potential Tax Implications

1. Income Tax

• Early distributions are generally subject to ordinary income tax. This means that the amount withdrawn is added to your taxable income for the year.
• Depending on your total income, this could push you into a higher tax bracket.

2. Early Withdrawal Penalty

• Most early distributions incur a 10% penalty tax on the amount withdrawn.

Donate to Fire Relief

LAFCU will support ongoing LA fire recovery efforts from 2/1/25 to 2/28/25 by fundraising then donating 100% to the Emergency Network Los Angeles (ENLA).

ENLA is a charity that provides assistance to individuals, communities, and organizations following emergencies and disasters and is currently directly involved in helping those impacted by the LA Wildfires. ENLA is a collaboration of over 50 local, state, and national non-profits and government agencies who provide crucial resources and information to those impacted by emergencies.

Some of the resources ENLA provides include:

• Non-perishable food
• Financial assistance
• Air purifiers
• Free childcare
• Wildfire recovery information

Tax Advantages

Owning a home is often considered a significant milestone in American life, representing both financial security and personal achievement. Beyond the emotional benefits of home ownership, there may be compelling tax advantages that homeowners can leverage to enhance their financial well-being.

Homeowners who choose to itemize their tax deductions can take advantage of various credits and deductions that can significantly reduce their taxable income.

• Mortgage Interest Deduction: The interest paid on mortgage loans can be deducted, providing substantial savings on tax bills.
• Property Tax Deduction: Homeowners can deduct the property taxes they pay, further decreasing their taxable income.
• Mortgage Insurance Premium Deduction: Homeowners paying private mortgage insurance may be able to deduct those premiums, adding to their potential savings.