If I receive a lump sum from my pension plan and direct the money to pay off my mortgage, am I obligated for taxes on the whole amount or the difference?
State/Country relating to question: North Carolina
IRS - no answer
Susie Orman - no answer
Yes, unfortunately you will have to pay income taxes on the entire lump sum. There is no exemption for avoiding income taxes on distributions that are used to pay off a mortgage.
EA, CEBS - 32 years experience providing financial advice