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Mark D
Mark D, Enrolled Agent
Category: Tax
Satisfied Customers: 1249
Experience:  MBA, EA, Specializing in Business and Individual Tax Returns and Issues
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If I wanted to pay off my home loan with ira funds, is there

Resolved Question:

If I wanted to pay off my home loan with ira funds, is there away I could "income average" to avoid a big tax hit from being in an abnormally high tax bracket?
Submitted: 7 years ago.
Category: Tax
Expert:  Mark D replied 7 years ago.
Customer

IRA funds withdrawn would be taxed in the year received. There is no way around this. You may annualize your income if you wish to reduce or eliminate an underpayment penalty, however it will not reduce your taxable income for the year. Please let me know if you have further questions.

Regards,

Mark D
Customer: replied 7 years ago.

What do mean annulalize income? Will I have to pay the higher tax rate?
Expert:  Mark D replied 7 years ago.
Customer

An example of annualizing income is when you make $100K in a year, but your received $90K of it in December. In that case, you would annualize your income to show that you did not have an estimated tax payment due for the first three quarters of the year.

More taxable income can lead to higher brackets. You will want to tax project in case you need to split up your distributions over more than one year. Please let me know if you have further questions.

Regards,

Mark D
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