The California state tax rate for 401(k) withdrawals varies depending on the amount of income you have. If your total taxable income, including the amount of your 401(k) withdrawal, is less than $9,525, you will not owe any state income tax on the withdrawal. If your taxable income is between $9,525 and $40,561, you will pay 1% in state income tax on the amount of your withdrawal. If your taxable income is between $40,561 and $81,073, you will pay 2% in state income tax on the amount of your withdrawal. If your taxable income is between $81,073 and $121,598, you will pay 4% in state income tax on the amount of your withdrawal. If your taxable income is between $121,598 and $253,519, you will pay 6% in state income tax on the amount of your withdrawal. And if your taxable income is over $253,519, you will pay 7.25% in state income tax on the amount of your withdrawal.
## How is California State Tax on 401(k) Withdrawal
Withdrawing funds from your 401(k) account in California can have tax implications. Here’s how the state handles taxes on 401(k) withdrawals:
1. **Ordinary Income Tax:** Withdrawals from a traditional 401(k) are taxed as ordinary income in California. This means you’ll pay state income tax on the amount you withdraw, at your regular income tax rate.
2. **Early Withdrawal Penalty:** If you withdraw funds from your 401(k) before reaching age 59½, you may be subject to a 10% early withdrawal penalty from the federal government. California does not impose an additional penalty on early withdrawals.
3. **Reporting Withdrawals:** You must report all 401(k) withdrawals on your California income tax return using Form 540. The withdrawal amount is reported on line 15a of the form.
**Taxation of 401(k) Withdrawals in California**
| Type of Withdrawal | California Taxation |
|—|—|
| Traditional 401(k) Withdrawal | Taxed as ordinary income |
| Roth 401(k) Withdrawal | Tax-free if certain requirements are met |
| 401(k) Loan | Not taxable if repaid according to the loan terms |
| Early Withdrawal (before age 59½) | Subject to 10% federal penalty; no additional California penalty |
**Roth 401(k) Withdrawals**
Withdrawals from a Roth 401(k) are generally tax-free in California, provided the following requirements are met:
* You are at least 59½ years old.
* The withdrawal is made after the account has been open for at least 5 years.
* The funds are used for qualified expenses, such as first-time home purchases, education expenses, or medical expenses.
California State Income Tax Brackets
The amount of California state tax you pay on a 401(k) withdrawal depends on your taxable income and filing status. The following table shows the California state income tax brackets for 2023:
| Filing Status | Taxable Income | Tax Rate |
|---|---|---|
| Single | Up to $10,741 | 1% |
| Single | $10,741 – $21,482 | 2% |
| Single | $21,482 – $32,223 | 4% |
| Single | $32,223 – $43,294 | 6% |
| Single | $43,294 – $54,365 | 8% |
| Single | $54,365 – $65,436 | 9.3% |
| Single | $65,436 – $86,587 | 10.3% |
| Single | $86,587 – $107,738 | 11.3% |
| Single | $107,738 – $128,889 | 12.3% |
| Single | $128,889 – $150,040 | 13.3% |
| Single | $150,040 and up | 13.3% |
If you are married filing jointly, the income brackets are:
- Up to $21,482: 1%
- $21,482 – $42,964: 2%
- $42,964 – $64,446: 4%
- $64,446 – $85,928: 6%
- $85,928 – $107,410: 8%
- $107,410 – $128,892: 9.3%
- $128,892 – $151,374: 10.3%
- $151,374 – $173,856: 11.3%
- $173,856 – $196,338: 12.3%
- $196,338 – $218,820: 13.3%
- $218,820 and up: 13.3%
If you are married filing separately, the income brackets are:
- Up to $10,741: 1%
- $10,741 – $21,482: 2%
- $21,482 – $32,223: 4%
- $32,223 – $43,294: 6%
- $43,294 – $54,365: 8%
- $54,365 – $65,436: 9.3%
- $65,436 – $75,687: 10.3%
- $75,687 – $86,928: 11.3%
- $86,928 – $98,169: 12.3%
- $98,169 – $109,410: 13.3%
- $109,410 and up: 13.3%
California State Tax on 401(k) Withdrawal
When you withdraw money from your 401(k) in California, you must pay state taxes on the amount withdrawn. The tax rate depends on your income and filing status.
Tax on Early Withdrawals
- Withdrawals before age 59½ are subject to a 10% federal income tax penalty in addition to state taxes.
- California does not impose an additional penalty for early withdrawals.
Tax Rates by Filing Status
| Filing Status | Tax Rate |
|---|---|
| Single | 7.25% |
| Married Filing Jointly | 6.25% |
| Married Filing Separately | 7.25% |
| Head of Household | 6.80% |
Estimated California State Tax Calculator
Calculating the California state tax on 401k withdrawals can be confusing. To simplify the process, we’ve provided an estimated California state tax calculator below:
| Withdrawal Amount | Estimated California State Tax |
|---|---|
| $10,000 | $1,000 |
| $20,000 | $2,000 |
| $50,000 | $5,000 |
| $100,000 | $10,000 |
| $200,000 | $20,000 |
Note: These are only estimates. Your actual tax liability may vary depending on your individual circumstances, such as your income and tax bracket.
To use the calculator:
- Enter the amount you plan to withdraw from your 401k
- Find the corresponding estimated California state tax
Example:
If you plan to withdraw $20,000 from your 401k, the estimated California state tax would be $2,000.
Well folks, that’s all she wrote on California’s 401k withdrawal tax scoop. I hope this little adventure has helped shed some light on the topic and eased any worries you may have had. Remember, knowledge is power, so keep your head in the game when it comes to your finances. A big thanks for sticking with me until the end, and don’t be a stranger. Swing back by anytime for more need-to-know info on your money matters. Have a great day, and stay financially savvy!