Of course I have will have pay the 10% penalty and the proceeds are taxed as ordinary income, but I can take depreciation with properties to offset it.Hope this helps and wish you best of luck in whichever decision you decide on.

@Brit Fosheethat is fantastic!

@Joe Wood - You can deduct expenses in any business form, even a sole prop without an entity, as long as its ordinary and necessary.  

For the sake of the majority of investors- I hope you're correct and it ends up being a no questions asked deduction for the ordinary rental owner with a few single family properties.

So, does that mean that rental income will be classified as ordinary income too (vs investment income which is taxed at a lower rate)?

An attorney licensed in this state who negotiates mortgage banking loans or mortgage loans in the ordinary course of business, unless the business of negotiating mortgage banking loans or mortgage loans constitutes substantially all of the attorney’s professional activity.

Typically within the three wealth buckets: Portfolio (stocks), Passive (passive real estate, private equity, etc), Ordinary (W2, commission, etc.) 

The Tenant can "want it back" until the cows come home but she is ultimately responsible for returning it in the same condition, minus ordinary wear-and-tear.I suspect you are letting your feelings get in the way instead of running it like a business.

They will hit you with a unrelated business income tax (ubit).Furthermore, you will never pay capital gains said proceeds, since all your money will be taxes as ordinary income when you take it out.

There is no distinction between some of the $ that is pretax and some that is after tax.2: If you leave your job or get fired, you have 60 days to pay it all back otherwise IRS views it as a taxable event as slaps you with ordinary income tax on all of it plus a 10% penalty for early withdrawal.