Is there any way to lower my tax obligation due to the death of my husband and utlizing his 401k to pay off our house?

    If your husband died in 2012, you can continue to file a joint return with him for 2012 using the Married Filing Jointly filing status.  You will need the approval of his Personal Representative to do this if that is not you.

    The 401(k) distribution will be subject to the regular income tax but should not be subject to any early withdrawal penalty.  Just be sure the code in Box 7 of the Form 1099-R is "4".  The fact that you used the distribution to pay off your home has no tax benefit or detriment.
      There is no 10% penalty upon the plan owner's death,  but the distirbution is still taxable.
        Contribute an answer

        People come to TurboTax AnswerXchange for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

        1. Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
        2. Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
        3. Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
        4. Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
        5. Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.