When making distributions from your pre-tax solo 401k it is important to understand the impact on your personal income tax side. Distributions from retirement plans including solo 401(k) plans are taxed at earned income tax rates not capital gain tax rates. Therefore, the solo 401k distribution may bump you into a higher tax bracket. With additional planning, retirees can potentially manage the tax consequences by reducing withdrawals from their solo 401(k) pans and even their IRAs.
For taxable years beginning in 2024, see the following tax rate tables to help you plan for making solo 401k distributions in 2024.
Tax brackets 2024 (Source: https://www.irs.gov/pub/irs-drop/rp-23-34.pdf)
| Tax Rate | Single | Married filing jointly | Married filing separately | Head of household |
|---|---|---|---|---|
| 10% | $0 to $11,600. | $0 to $23,200. | $0 to $11,600. | $0 to $16,550. |
| 12% | $11,601 to $47,150. | $23,201 to $94,300. | $11,601 to $47,150. | $16,551 to $63,100. |
| 22% | $47,151 to $100,525. | $94,301 to $201,050. | $47,151 to $100,525. | $63,101 to $100,500. |
| 24% | $100,526 to $191,950. | $201,051 to $383,900. | $100,526 to $191,950. | $100,501 to $191,950. |
| 32% | $191,951 to $243,725. | $383,901 to $487,450. | $191,951 to $243,725. | $191,951 to $243,700. |
| 35% | $243,726 to $609,350. | $487,451 to $731,200. | $243,726 to $365,600. | $243,701 to $609,350. |
| 37% | $609,351 or more. | $731,201 or more. | $365,601 or more. | $609,350 or more. |
