If I cash out my 401K worth $37,000. What will I need to pay in penalties and taxes?
State/Country relating to question: Hawaii
I was told by the broker that they would take out 10% and we would get taxed y the government. I need to know how much money to put aside to pay these penalties.
Hello JA Customer,
The 10% withholding is required by the IRS, but the actual amount you will owe really depends on your filing status (single or married) and your entire income for the year, including this withdrawal, as that will be what determines the actual Tax Bracket you are in.
If you are a single Taxpayer and your total income for the year, including this withdrawal, will be $43,000 or less, then you will owe federal taxes of around 15%. If your income will be above this amount, your Tax Liability will be around 20%. If you are under the age of 59-1/2 at the time you make this withdrawal, you will owe an additional 10% to cover the early withdrawal penalty.
If Hawaii is your resident state, you will also owe HI state taxes ranging between 7.5% to 8%.
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Thank you JA Customer
25+ years tax consulting. Specializing in returns for US citizens living abroad