I cashed out my 401k that has 25,000. I’m in the 15%. If this pushes me into 25% will I only be taxed for the distribution at 25% or the whole income for the year?

phillywest41 · ‎June 4, 2019

I’m aware of the 10% penalty. Also I defaulted in two loans (3,000)which includes the 25,000. So really I had 22,000 excluding the loans

Opus 17 · ‎June 4, 2019

The distribution is taxed as ordinary income. If the distribution pushes you into the 25% bracket, only the amount actually in the bracket is taxed at 25%, the rest of your income is still taxed at 10% or 15%.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

DoninGA · ‎June 4, 2019

Your taxes are based on your total taxable income after deductions and exemptions.
See this website for the 2016/2017 tax brackets - <a rel="nofollow" target="_blank" href="http://www.bankrate.com/finance/taxes/tax-brackets.aspx">http://www.bankrate.com/finance/taxes/tax-b...>

Opus 17 · ‎June 4, 2019

The distribution is taxed as ordinary income. If the distribution pushes you into the 25% bracket, only the amount actually in the bracket is taxed at 25%, the rest of your income is still taxed at 10% or 15%.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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I cashed out my 401k that has 25,000. I’m in the 15%. If this pushes me into 25% will I only be taxed for the distribution at 25% or the whole income for the year?