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 think you want to use any of the special tax methods, Part III of Form 4972 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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