• Question
  • Using a Lump Sum Retirement Benefit to Purchase a Home

    Asked by a 68 year old woman from Cedarburg, WI on 5/29/2012

    I was thinking about purchasing a home with a lump sum retirement benefit. This would be approximately $170k home. I still can work full time somewhere. Just feel that purchase of a home is better than renting. My credit is poor so the transaction would be in cash. Need to know what kind of hit I would take i.e. taxes or how can I shelter this. thanks in advance.

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  • Categories: Best Places to Retire, Housing

Answers

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  • You'll have to pay considerable taxes on the lump-sum distribution. Suggest visiting irs.gov, particularly Form 4972 and its instructions. The following is a short excerpt from the Instr.

    Use Form 4972 to figure the tax on a qualified lump-sum distribution you received in 2014 using the 20% capital gain election, the 10-year tax option, or both. These are special formulas used to figure a separate tax on the distribution that may result in a smaller tax than if you reported the taxable amount of the distribution as ordinary income.

  • Login to rate this answer:   Answered on 3/2/2015
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.