Accepted Answer

Hello,

Thanks for your question. Yes, your 401k distribution will increase your taxable income from about $60k to about $260k if you take a lump sum distributon. You could end up in the 33% tax bracket. Depending on your filing status (single, married), you could end up with a tax bill of about $70,000. See caluclator at http://www.maxi-pedia.com/tax+rates+2009+schedule+table

It may be better to take out a short-term mortgage and take out a series of smaller payments so that you only get put into the 25% tax bracket. You could take out $66,000 for 3 years or so. Or if you want to stay in the 15% tax bracket, take smaller distributions so you do not go over the 15% cut off of $67,900 taxable income for married filing joint.

Hope this helps. Let me know if you have any questions.
Sincerely,



Edited by JK_CPA on 10/29/2009 at 8:14 PM

Expert:	JK_CPA
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Accepts:
Answered:	10/29/2009

Certified Public Accountant (CPA)

with 5 years accounting experience and 18 years tax experience.