SEP IRA Tax Question
I own part of a partnership. So, I can put 25% of my profit into an SEP IRA. The penalty for early withdraw for an IRA is 10%. So shouldn't I always contribute the maximum to the IRA to avoid it being taxed at 15-50% or whatever my bracket is? Even if I withdraw from the IRA early, it's only taxed 10%. Is there something I'm missing?
Ok, I think I found it. When you take money out of an IRA, it is also taxed as income. So this might be a smart thing to do if you intend to be in a lower tax bracket later, but not a higher one. I dunno, the 10% penalty is not too bad considering all of the nontaxable intrest you can make. I wonder what the breakeven point is.
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