California Penalizes Reservists on Early Withdrawals
One of the aspects of the Hero's Act is that reservists who are called into
active duty can make withdrawals from qualified tax-deferred accounts such as an
IRA and not owe the 10% tax penalty for early
withdrawal.
However, as in many tax situations, California does not conform.
This means that reservists taxpayers who make withdrawals from such accounts
to help cover their financial needs while serving our country get hit by
California for the 2.5% penalty for early withdrawal. Most people are not
aware of these tax penalties.
This is in addition to the regular income tax that is due anyway on the
"income" (at both federal and state levels).
As is often the case, regular conversations with your tax professional can
save you on taxes, or at least prepare you for the impact of your actions.
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