10-Year Averaging
If you choose the 10-year option to figure the tax on a lump-sum distribution from a qualified retirement plan, you'll basically figure your tax on 10 percent of the amount using a special chart based on the 1986 tax rates for a single person, as shown below. Then multiply this amount by 10 to find your total tax on the lump sum.
| 10-Year Averaging Rate Table |
| Amount Subject to Averaging: |
The Tax Is |
Of The Amount Over |
| Over |
But Not Over |
|
| $ 0 |
$1,190 |
11% |
$ 0 |
| 1,190 |
2,270 |
$ 130.90 + 12% |
1,190 |
| 2,270 |
4,530 |
260.50 + 14% |
2,270 |
| 4,530 |
6,690 |
576.90 + 15% |
4,530 |
| 6,690 |
9,170 |
900.90 + 16% |
6,690 |
| 9,170 |
11,440 |
1,297.70 + 18% |
9,170 |
| 11,440 |
13,710 |
1,706.30 + 20% |
11,440 |
| 13,710 |
17,160 |
2,160.30 + 23% |
13,710 |
| 17,160 |
22,880 |
2,953.80 + 26% |
17,160 |
| 22,880 |
28,600 |
4,441.00 + 30% |
22,880 |
| 28,600 |
34,320 |
6,157.00 + 34% |
28,600 |
| 34,320 |
42,300 |
8,101.80 + 38% |
34,320 |
| 42,300 |
57,190 |
11,134.20 + 42% |
42,300 |
| 57,190 |
85,790 |
17,388.00 + 48% |
57,190 |
| 85,790 |
|
31,116.00 + 50% |
85,790 |
If you are eligible to do so and think you want to use any of the special tax methods, Part III of Form 4972, Tax on Lum-Sum Distributions, will walk you through the computations, and help you choose the method that will result in the lowest total tax bill.
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