Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
hman0494
New Member

I am making a withdrawal from my IRA. How much more should I take out to cover taxes?

If I want to withdrawal $25,000, hoiw much more should i get to cover taxes?
3 Replies
DoninGA
Level 15

I am making a withdrawal from my IRA. How much more should I take out to cover taxes?

General rule of thumb is 20% for federal and 5% for state, if your state has a personal income tax.  If your total tax payments are greater than your total tax liabilities when you file your tax return next year you will get a tax refund for the overpayment.

VolvoGirl
Level 15

I am making a withdrawal from my IRA. How much more should I take out to cover taxes?

I did some quick calculations for you based on the other answer of 20% and 5%.   Take out about 34,000 to cover 6250 federal tax and 1315 state tax plus I added a little more to account for tax on the new increased amount.   And be aware the increase in income may push you into a higher tax bracket so you may owe more.  Are you under 59 1/2?  Then there is also a 10% Early Withdrawal Penalty on it.

rjs
Level 15
Level 15

I am making a withdrawal from my IRA. How much more should I take out to cover taxes?

The 20% "rule of thumb" is a very rough guess. An IRA withdrawal is not taxed at a fixed rate. It's taxed as ordinary income, the same as pay from a job. The tax rate on the IRA withdrawal will depend on your other income, your filing status, and other factors. And if it happens to not all fall in the same tax bracket, it will not all be taxed at the same rate. You can use TaxCaster to get a somewhat better estimate of how much your tax will increase because of the IRA withdrawal. And don't forget that 10% penalty if it applies to you.

 

There is an additional complication if you are going to take more money out of the IRA "to cover taxes." That additional amount that you take out is also added to your taxable income. You have to pay tax on the additional amount that you take out to cover taxes. So it increases your tax even more.

 

Dynamic AdsDynamic Ads
Privacy Settings
v