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Level 1

Can I estimate my effective tax rate on 2019 taxes if I withdraw a large sum from my traditional IRA and is there a calculator I can use?

I'm 68 and want to start withdrawing money from my traditional  IRA and am trying to determine how much to pull out and what my effective tax rate would be. Would I have to pay taxes at the time of the withdrawal or can I pay when filing my 2019 tax return without incurring an under-withholding penalty? 

3 Replies
Level 20

Can I estimate my effective tax rate on 2019 taxes if I withdraw a large sum from my traditional IRA and is there a calculator I can use?

What you really want to know is your marginal tax rate, the ratio of change in tax liability to the change in income.  (Effective tax rate is calculated from your total tax liability and total income, obscuring the effect of incremental income.)

TurboTax does not have the ability to automatically calculate marginal tax rate, but you can use the What-If Worksheet in forms mode to try different combinations of income.  You can start with your 2018 tax return details by copying column 1 of this worksheet to column 2, marking the Use 2019 Tax Tables, box, then adding various amounts of taxable retirement income in column 2 of line 15b of this worksheet.  For example, record your tax liability from line 63 of column 2, add $1,000 of retirement in come on line 15b column 2, then see how much the amount on line 63 column 2 changed.  Divide that change by the $1,000 (or whatever amount) you added on line 15b to get your marginal tax rate for that increment in income.

Level 1

Can I estimate my effective tax rate on 2019 taxes if I withdraw a large sum from my traditional IRA and is there a calculator I can use?

Yes - The easiest way to review the effect of an IRA withdrawal on your taxes is to go into Forms Mode and look at the Estimated Taxes and Form W-4 Worksheet.  You can make entries manually on the form and review the calculations.  It won't calculate your effective tax rate, but it will show you how your tax bill will be affected by the withdrawal.

The plan administrator will withhold federal taxes (usually 20%) and sometimes state taxes on the withdrawal, unless you have a form on file instructing them to not withhold.

To review the Estimated Taxes and Form W-4 Worksheet, please follow these steps:

  1. Go into Forms Mode by clicking on the Forms icon in the top right of the blue bar
  2. In the Forms in My Return list on the left, click on ES & W4 Wks
  3. The form will open and you can review the calculations.
  4. If you want to print a copy, click the Print box at the bottom of the screen.
  5. To return to the interview, click on the Step-By-Step icon in the top right of the blue bar.  




Level 1

Can I estimate my effective tax rate on 2019 taxes if I withdraw a large sum from my traditional IRA and is there a calculator I can use?

I followed above instructions but did not see selection for form ES & W4 WKS. Using Premier