Hi,

Hope someone can help me.

I am divorced, will be receiving 1/2 of my ex-husbands 401K. It is valued at $117,000.

I earned $30,000 last year. I have sole/physical custody of my 3 children. I am 46 years old.

I am in school full time. I need the funds from the 401K to pay off attorney fees, tuition, etc. In fact once all is said and done, I will have nothing left to live on. Is there anything that I can do to ease the tax pentalties.

i.e: Give each child $10,000, or pay for college both for myself and daughter etc... the pentalites are unbelievable and I need all the money I can get to pay off divorce debts etc..

Thank you for your time.

KatherineS

There is no inheritance tax, but the withdrawal will be treated as income on which you must pay federal and state income taxes.

KatherineS: Not sure what you mean by "receiving" half of the 401(k) - do you mean that your ex will be making a withdrawal from his 401(k) and directing it to you? Under the rules a distribution to an "alternate payee" (that's you) under a qualified domestic relations order is NOT subject to the 10% early withdrawal penalty - so that's the good news - but IS subject to regular income tax. What penalties are you referring to (other than income tax)?

KatherineS:

Agreed; the QDRO distribution is NOT subject to the 10% Early Withdrawal Penalty, but IS subject to normal income taxes, which will be about $25,500 after exemptions and the standard deduction. Your income level precludes you from claiming the $1,000 Child Tax Credit or any tuition credits.

That means your gross income is $147,000. Your income tax liability on this, based on HoH with three dependents