Wednesday, June 28, 2006

Another topic: real estate tax relief

Some communities offer persons over a certain age (65) or persons with disabilities real estate tax relief. It is common in these cases for the income and assets of all relatives living in the dwelling to be counted in determing eligibility and amount of relief (which is often a sliding scale).

In these cases, it is common that "income" from taking an IRA distribution to be counted against this total, since it is IRS taxable income, even though it would not be counted by Social Security (for someone 62 to full retirement) as "income". The rules for what counts, then, very much depend on the situation and the kind of benefit or relief offered. This can be another tricky consideration in deciding whether to start taking disribution from an IRA or 401K. Another consideration is that many 401K's have specific limits on timetables and amounts of distribution, but these can be overcome often by converting to pension IRA's.