topic I will be receiving a payout from an inherited 401k. I understand I will have to withhold 20% for federal taxes. How do I calculate how much to withhold for my state? in State tax filing

I will be receiving a payout from an inherited 401k. I understand I will have to withhold 20% for federal taxes. How do I calculate how much to withhold for my state?

lukeydavis — Fri, 11 Dec 2020 16:22:12 GMT

I live in SC and my brother (who will also receive a distribution) lives in MD. Do we have to pay state taxes on inherited 401k distributions, and if so, how do we look up what percent we should specify on the withholding form?

Re: I will be receiving a payout from an inherited 401k. I understand I will have to withhold 20% for federal taxes. How do I calculate how much to withhold for my state?

fanfare — Sat, 12 Dec 2020 04:20:53 GMT

What is the state income tax rate for your current income?

That's how much tax you're going to pay.

Unless it is a big payout and kicks you into the next tax bracket.

Re: I will be receiving a payout from an inherited 401k. I understand I will have to withhold 20% for federal taxes. How do I calculate how much to withhold for my state?

Hal_Al — Sun, 13 Dec 2020 13:12:38 GMT

Simple answer: 7%.

South Carolina Taxable Income	Rate
$0 - $3,030	0%
$3,030 - $6,060	3%
$6,060 - $9,090	4%
$9,090 - $12,120	5%
$12,120 - $15,160	6%
$15,160+	7%

Re: I will be receiving a payout from an inherited 401k. I understand I will have to withhold 20% for federal taxes. How do I calculate how much to withhold for my state?

Opus 17 — Mon, 14 Dec 2020 17:42:58 GMT

Also remember that the 20% federal withholding is simply the mandatory amount, it is not the amount of tax you will owe. Your income tax is only calculated 1 time on your tax return. Your tax rate might be 15%, in which case too much federal tax was withheld and you will get a refund, or your federal tax might be 22%, 24% or higher, in which case you will owe an additional payment.

Likewise with your SC tax, if you have 7% withheld and the tax turns out to be less, the extra will included in your tax refund.