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Asked 2/7/2010
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How much will i owe in taxes for receipt of 401k money I received my father's 401k after his recent death. i needed the money for payment for a house so withdrew 75000 for purchase towards the house. how will this affect my federal and stae taxes? our combined income for 2 people and one dep child was 40000. we reside it md. |
Answer 1/1 - Submitted 2/7/2010
Distributions from a decedent's 401(k) are taxed to you as they would have been taxed to him -- as retirement. You add it to the rest of your taxable income. There shouldn't be a penalty on it, but regular income taxes on this amount will be high.
If you qualify for the first-time homebuyer credit, that would ease the pain somewhat.
I can't claim any expertise with Maryland state taxes, but a quick look suggests that your pension distribution will be taxable to the state, too, unless you are over 65. It might be worth your effort to consult a tax professional.
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