Submitted By: someone
Answered: March 24, 2017 8:38 am

I took a large distribution from my retirement plan. Can I income average to lower my tax bill?

Usually, a distribution from a qualified retirement plan is treated as ordinary income in the year in which it is received. However, for someone born before 1936, there is a special 10-year averaging rule. It only applies, however, to a lump-sum distribution. This is a distribution payable within a single tax year of a plan participant’s entire balance from all of the employer’s qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans).

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Tax Glossary

Qualified plan

A retirement plan that meets tax law tests and allows for tax deferment and tax-free accumulation of income until benefits are withdrawn. Pension, profit-sharing, stock bonus, employee stock ownership, and Keogh plans and IRAs may be qualified plans.

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