How Much will I owe in taxes on an inherited 401K plan?
Dava S asked:
I inherited my daddy’s 401k plan. He dies last month he was young so its not alot. It is 24,000. How much taxes will I have to pay on that?
This entry was posted
on Sunday, May 3rd, 2009 at 12:00 am and is filed under United States.
You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.
I inherited my daddy’s 401k plan. He dies last month he was young so its not alot. It is 24,000. How much taxes will I have to pay on that?
May 4th, 2009 at 4:06 am
depending on which state you live in, it will probably be tax exempt since you are his daughter, unless the total estate value is over $1,000,000.00, for example.
May 6th, 2009 at 11:52 pm
the inheritance has to be over a hunded thousand for it to be taxable
May 7th, 2009 at 10:04 am
OK, now for the correct answer.
401(k) plans are deferred income plans, meaning the tax is deferred until it is taken out. For federal purposes, you will have to include in your income whatever you take from the plan that year. If you take the whole $24,000, you will have to add $24,000 to your taxable income on your 1040 (line 16b). The amount of tax this will trigger depends completely on many, many other things such as your other taxable income, whether you are married, the number of dependents you have, etc. It could be as high as 35% or as low as 0%. Neither are likely, but I wanted to give you the extreems.
If you are not working, single, dependent on someone else (live with your mother), and have no income or deductions, then your federal income tax on the $24,000 will be around $2,750.
You may owe state income tax too. If you do, chances are it will be substantially less than the $2,750. Some states don’t tax this type of income.
As far as inheritance tax, the IRS has none. Instead, they have estate tax which your father’s estate will have to pay. It is extremely unlikely that his estate is large enough to trigger an estate tax.
Some states have inheritance taxes. Most don’t tax IRA or 401(k) inheritance. Even if they did, it probably wouldn’t be much.
Good luck!
May 10th, 2009 at 9:01 am
“Taxman” is correct!
May 13th, 2009 at 8:54 am
Taxman is correct, the first two answers are wrong, the ones that say you won’t owe anything.