Traditional IRA withdrawls are subject to tax.
Use this calculator to determine how much can be withdrawl and there be no FEDERAL tax. Certainly the answer is 'at least $15,700 (the standard deduction for filing Single and over 65)
$15,700 standard deduction may already be used up by your other income, in which case you would not be able to withdraw anything without additional tax.
Recall that when you withdraw from tax-deferred account, your SS benefits will probably become taxable.
You have not mentioned what other income -- if any-- you will be receiving. The tax you owe will depend on your total income and your filing status, among other things. As mentioned above, if you are receiving Social Security benefits, then additional income from your retirement account may cause your SS to become taxable.
You will receive a 1099R from the retirement account---they send them out in January/early February, and you will need to enter it on your tax return.
To enter your retirement income, Go to Federal> Wages and Income>Retirement Plans and Social Security>IRA 401 k) Pension Plan Withdrawals to enter your 1099R.
Up to 85% of your Social Security benefits can be taxable on your federal tax return. There is no age limit for having to pay taxes on Social Security benefits if you have other sources of income along with the SS benefits. When you have other income such as earnings from continuing to work, investment income, pensions, etc. up to 85% of your SS can be taxable.
What confuses people about this is that before you reach full retirement age, if you continue working while drawing SS, your benefits can be reduced if you earn over a certain limit. (For 2019 it was $17,640— for 2020 it was $18,240; for 2021 it was $18,960. For 2022 it was $19,560 — for 2023 $21,240)
After full retirement age, no matter how much you continue to earn, your benefits are not reduced by your earnings; your employer will still have to withhold for Social Security and Medicare. If you work as an independent contractor then you will pay self-employment tax for Social Security and Medicare.
To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2022 Form 1040
You need to file a federal return if half your Social Security plus your other income is $25,000 when filing single or head of household, or $32,000 when filing married filing jointly, $0 if you are filing married filing separately.
Some additional information: There are 11 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont These states offer varying degrees of income exemptions, but two mirror the federal tax schedule: MN and VT.
It's complicated, and you may want to use a tax calculator web site. You can also make a new test account on Turbotax Online, and try various scenarios.
Briefly, for a single person over 65, the standard deduction for 2023 is $15,700. That means that as long as your taxable income is less than that, you won't actually pay tax. Social security is taxable if half your social security plus all your other income is more than $25,000. Let's assume your SS benefit is $1000 per month, or $24,000 per year.
With these three facts, we can test some examples.
- Suppose you withdraw $10,000. Half your SS plus your IRA is $22,000, so your SS is not taxable and your IRA is less than the standard deduction, so all your income is non-taxable.
- Suppose you withdraw $15,000. Half your SS plus your IRA is $27,000, so $1000 of your SS benefit will be taxable. When you add that taxable amount to the $15,000 IRA, you will be over $15,700 by $300. You will pay 10% tax on $300, or $30 in income tax.
- The more you withdraw from the IRA over $15,000, the more tax you will pay on the IRA withdrawal AND on your SS benefit.
The calculation is similar if you are married filing jointly. If you are married filing separately, 85% of your SS benefit is automatically taxable, plus the IRA withdrawal, so any amount totaling more than $15,700 will be taxable.
After a months and countless hours searching the web, I'm so thankful this website exists to assist me in calculating my taxes on an IRA withdrawal.😀. BIG Thanks
Still have questions?Make a post