If I cash in my profit sharing early, how much tax would I pay on $50,000 ?
Answers:
I it would be taxable at your marginal rate. However, there may be an additional 10% for early withdrawal before the age of 59 1/2. You can avoid this penalty under certain circumstances (i.e., disability, higher education expenses, etc.)
I always use the rule of thumb 25%
tax required you for 47%.
Depends on what other income you have - it would be taxed at your marginal rate, then part of it could go into the next bracket.
If you are doing this on top of your normal income and distribution is early with no exceptions then the total bite is usually 40 to 46 % of it will go bye-bye in taxes; or, 20,000 to 23,000 dollars. Why be stupid? Roll it into an IRA as a direct rollover and avoid any taxes. If you need money for something borrow against it; 7% interest on a loan is a damn sight better than kissing off up to 46% of your hard earned dollars for the politicians to piss off for the benefit of some foreign country where we are hated and despised, wouldn't you say?
The precise answer depends on where you live, how much other income you have, and your age.
Just for fun I made a few assumptions
1. NY resident
2. Other income of $50,000 (wages)
3. Under the age of 59.5 (there is a 10% penalty tax)
4. Single, with no dependents.
5. $7,000 federal withheld from wages
6. $3,000 NY withheld from wages
7. No prepayments made for the $50,000 distribution
8. By profit sharing, you mean a retirement account funded by your employer.
Yahoo doesn't support columns, but if you copy this chart and paste it into Word, then use a font like Courier, the columns will line up.
no distribution $50K distrib difference
Adjusted
Gross Income $50,000 $100,000 $50,000
taxable income 41,250 91,250 50,000
federal tax 6,736 19,661 12,925
Sec 72 tax 0 5,000 5,000
NY tax 2,514 5,939 3,425
total taxes $9,250 30,600 21,350
This means that 42.7% of the $50,000 goes to pay taxes, leaving you with only $28,650 of the $50,000.
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