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dschaeffer218
New Member

In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

As a retiree I need to have a low 6 figure 401K pre-tax distribution in December to close on a house.  In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

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Accepted Solutions
Opus 17
Level 15

In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

There is no income averaging. You can check with the plan and see if they will let you borrow money. But if you take a large distribution it will be taxable.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

6 Replies
DoninGA
Level 15

In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

Withdrawals from a tax deferred retirement account are reported only in the year of withdrawal, no portion of the withdrawal can be reported in future tax years.
dmertz
Level 15

In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

If you have sufficient funds in the 401(k) or in an IRA, you could take an additional distribution from the 401(k) or IRA in January 2018 and use that money to fund a partial rollover to an IRA of the December 2017 401(k) distribution, effectively transferring some of the income to 2018.  The rollover would have to be completed by the 60th day following the 2017 distribution from the 401(k).  Doing so might drop some of the income to a lower tax bracket.
dschaeffer218
New Member

In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

Thanks
Opus 17
Level 15

In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

There is no income averaging. You can check with the plan and see if they will let you borrow money. But if you take a large distribution it will be taxable.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

SweetieJean
Level 15

In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

Cashing in a retirement plan is an expensive way to buy a house.
SweetieJean
Level 15

In order to avoid a higher tax bracket as much as possible, can this distribution be spread over multiple years as income?

See similar discussion here:
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4135098-does-it-make-sense-to-pay-off-our-mortgage-with-retirement...>
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