Because the original owner of the IRA never paid tax on the money, you must pay tax when you withdraw it. If you withdraw the entire $300,000 all at once, that will put you into the 32% federal tax bracket plus the 9% New York State tax bracket. And I think you might also pay 3.8% net investment tax thanks to Obamacare.
You have 10 years to withdraw the money and pay tax on it. You may be able to reduce the tax you owe by taking smaller amounts out each year. For example, if you are married filing jointly and your base income is about $100,000 per year, you should be able to withdraw about $80,000 per year from the IRA and pay 22% income tax instead of 32% income tax and you would not have to pay the 3.8% net investment tax.
If you use the after-tax portion to pay down your other debts, or you invest it to earn interest, you will be improving your financial situation in the long term even though you have to pay income tax on the amount that you withdraw.
