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    mnicaw's Avatar
    mnicaw Posts: 1, Reputation: 1
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    #1

    Apr 19, 2007, 12:31 PM
    401K Maryland tax
    Can anyone tell me how much the state of Maryland will tax me for early withdrawl? I know the Federal Gov't will tax 20% and then there will be a 10% penalty.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #2

    Apr 19, 2007, 12:37 PM
    The 10% penalty is Federal only. However, you are incorrect about the 20%. You are taxed on 401K distributions according to your tax bracket. The amount of the withdrawal is added to your income for the year to determine your total tax liability. If you are in a 25% bracket, then you will be taxed at 25%. Its also possible the withdrawal will cause you to go up a bracket, resulting in a higher overall tax rate.

    The total tax liability is then transferred to your state return and used to calculate the amount you owe.

    The 20% figure is a WITHHOLDING. Just like the amounts taken from your salary each pay period.

    If you haven't taken a withdrawl I strongly suggest rethinking it.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
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    #3

    Apr 19, 2007, 01:14 PM
    I'm sorry, I do not answer questions via E-mail or PM. Please post any follow-up using the Quick Reply box.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #4

    Apr 24, 2007, 10:11 AM
    Agree with Scott. Taking an early distribution from either a 401K or an IRA is something that should be done ONLY AS A LAST RESORT!
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