Can IRA funds be used to purchase collector cars?

“Can IRA funds be used to purchase collector cars?”--->Yes. You can buy whatever you want; however, when you take money out of your IRA before you reach age 59 1/2, then the IRS considers these premature distributions UNLESS you take money out of either a traditional or Roth IRA for higher education expenses or for medical expenses exceeding 7.5 percent of your adjusted gross income or etc, the 10 percent penalty is waived. However, all of the distribution from a traditional IRA and the earnings taken out of a Roth IRA are still taxable. In addition to owing any tax that might be due on the money, you'll face a 10 percent penalty charge on the amount and you ‘ll be also subject to both federal and state income taxes on the money withdrawn from your IRA account. Your IRA withdrawal will be taxed as ordinary income, meaning it’s subject to the progressively higher income tax rates. For instance, assume that you take out $20,000 out of your IRA , then the federal penalty is 10% of the taxable amount withdrawn, and you should pay $2,000 when withdrawing the money out of your account. In addition to the 10 percent penalty, the amounts withdrawn would be subject to federal and state income taxes unless the withdrawal includes after-tax or non-deductible contribution. If you are in the 15 percent bracket for federal taxes and the 5 percent bracket for state taxes, your income tax burden would total approximately $4,000 ($3,000 dollars for federal taxes and $1,000 dollars state taxes).So, you actually can get only $16,000;$20,000-$6,000=$14,000. When you do an early withdraw from your IRA, you pay the taxes and penelties.Also you MAY need to make quarterly estimated taxes like a self-employed; it is actually both when you do your taxes and immediately like a paycheck. In general, IRA distributions are subject to federal income tax withholding at 20%. With the 10% penalty for early withdrawal included the tax bill is often MORE than the 20% that was withheld. If you're in a 15% bracket, it will be shy by 5%. If you're in a 25% bracket, it will fall short by 15%. Many folks are shocked at tax time to learn that they will be writing a pretty substantial check instead of getting their usual refund. For this reason it's necessary to run the numbers in advance and make an estimated payment using Form 1040-ES to cover the added tax liability and avoid penalties for underpayment of tax. Taxes are due when the income is earned, NOT on April 15th. This is why you have taxes withheld from your paychecks or need to make quarterly estimated tax payments.