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Taking a loan out of my ira account used for my 72t  


bramble87
Posts: 1
(@bramble87)
Active Member
Joined: 2 months ago

I feel like I've heard conflicting answers on this topic.  I have a 72t SEPP on my one and only IRA account.  I am on my third year of annual distributions which I take each January.  I want to take a loan out of this ira account (roughly $25,000) and pay it back over a couple years.  Is this possible without busting the 72t or paying any penalty on the loan (besides the interest I will need to pay back to the ira)?  I have seen the "risky" warning messages.  I have seen a post about paying the loan back within two months as sort of a rollover ... this is not an option for me.   I am just trying to find out if my scenario is even possible.  Thanks to all.

1 Reply
Tracy
Posts: 5
Admin
(@tracy)
Trusted Member
Joined: 3 months ago

Hi Bramble87, the short answer is loans are not permitted from IRAs (see Knowledge Base article here https://72tnet.com/knowledge-base/ira-loan/  ). Your $25,000 withdrawal will be considered a distribution and will be penalized unless you can claim you are using the money for one of the 16 exceptions (disability, medical payments, education, etc.) Here is the entire list of exceptions:  https://72tnet.com/list-of-72t-exceptions-to-10-tax/  . For more background on why repaying the loan will not be allowed by the IRS, do a search for "contribution" in the Q&A section of the website. There are multiple questions and answers about how contributing funds to an IRA with a SEPP will "bust" the plan. 

Does that help?

Tracy

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