Retirement tax questions

You will pay ordinary income tax on it, based on the tax bracket you are in. 

"if the taxpayer receives distributions directly from the inherited IRA, the distributions are taxed, but the 10% penalty tax on premature withdrawals does not apply, even if the beneficiary is under the age of 59 1/2 ."

The purchase of a home in your case does not matter, as the 10% penalty will not apply to you anyway. 

Enter the 1099R for 2016.  It should have a Code of 4 in Box 7.  You will see the total tax impact.

To enter 1099R in TurboTax: 

1099R

To enter pension and annuity Payments (1099-R)

  • Click on Federal Taxes (Personal using Home and Business)
  • Click on Wages and Income (Personal Income using Home and Business)
  • Click on I'll choose what I work on (if shown)
  • Scroll down to Retirement Plans and Social Security
  • On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button

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