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New Member
posted Dec 18, 2023 4:32:12 AM

Is 401k inheritance considered income? Will my MGI increase because I took a lump sum distribution of my 401k inheritance?

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1 Best answer
Level 15
Dec 18, 2023 4:37:13 AM

Yes it is and Yes it will.   In January you will get a 1099-R for any distributions you took the prior tax year and this must be entered on your personal income tax return.  There will be a code 4 in box 7 which will indicate that this is a distribution due to the death so you will pay regular income tax on it but not pay the 10% penalty for an early withdrawal.  

1 Replies
Level 15
Dec 18, 2023 4:37:13 AM

Yes it is and Yes it will.   In January you will get a 1099-R for any distributions you took the prior tax year and this must be entered on your personal income tax return.  There will be a code 4 in box 7 which will indicate that this is a distribution due to the death so you will pay regular income tax on it but not pay the 10% penalty for an early withdrawal.