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 2025, see the following tax rate tables to help you plan for making solo 401k distributions in 2025.
Tax brackets 2025 (Source: https://www.irs.gov/pub/irs-drop/rp-24-40.pdf)
| Tax Rate | Single | Married filing jointly | Married filing separately | Head of household |
|---|---|---|---|---|
| 10% | $0 to $11,925. | $0 to $23,850. | $0 to $11,925. | $0 to $17,000. |
| 12% | $11,925 to $48,475. | $23,850 to $96,950. | $11,925 to $48,475. | $17,000 to $64,850. |
| 22% | $48,475 to $103,350. | $96,950 to $206,700. | $48,475 to $103,350. | $64,850 to $103,350. |
| 24% | $103,350 to $197,300. | $206,700 to $394,600. | $103,350 to $197,300. | $103,350 to $197,300. |
| 32% | $197,300 to $250,525. | $394,600 to $501,050. | $197,300 to $250,525. | $197,300 to $250,500. |
| 35% | $250,525 to $626,350. | $501,050 to $751,600. | $250,525 to $626,350. | $250,500 to $626,350. |
| 37% | $626,350 or more. | $751,600 or more. | $626,350 or more. | $626,350 or more. |
