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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3179
Experience:  IRS licensed Enrolled Agent and tax instructor
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Customer Question

I HAVE A BALANCE ON MY HOUSE OF $135,000 AND HAVE ENOUGH IN MY IRA TO PAY MY HOUSE OFF. I WILL BE RETIRING SOON AND WANT TO BE OUT OF DEBT. IS THERE ANY IRS RULES like 10 year averaging that will allow me to minimize my tax obligation when I pay them in 2017?
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

The income averaging was eliminated in 1986 for most taxpayers. Unless you are farmer or fisherman or born before 1936, you cannot use income averaging. And it only applies to distributions from 401ks, not IRAs.

If you are at least 59 1/2 you will avoid the early distribution penalty but the distribution will be added to your taxable income and most likely increase your tax bracket.

If your really want to use your IRA to pay off your mortgage divide the distribution between few years to minimize tax burden.

Expert:  emc011075 replied 1 year ago.

any questions?

Expert:  emc011075 replied 1 year ago.

The funds in you IRA are pre-tax so there's no way you can get it out tax free. The only way to reduce tax liability is to avoid large lump sum distributions.

Expert:  emc011075 replied 1 year ago.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

Expert:  emc011075 replied 1 year ago.

I see you offline now. So if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.