As a 62-year-old on Social Security, how much can I take out of my 401(k) before I have to file and pay taxes on it?

by Thomas N. Alvaré, CPA | Dec 27, 2018

I'm 62 and on Social Security. How much can I take out of my 401(k) before I have to file income tax and pay tax on it? I don't make enough to file now.

Assuming you file as single, you get a standard deduction of $12,000 and the first $9,525 of income is taxed at a zero rate in 2018. Adding them together, that means the first $21,525 of income is not taxed. Social Security benefits are not taxed at all until total income exceeds $25,000.  

So, to answer the question precisely, assuming Social Security income exceeds $3,475 for the year and taxable 401(k) withdrawals are the only other source of income, you can take out of the 401(k) the difference between $25,000 and the actual 2018 Social Security income before triggering federal tax. State taxes may apply to the 401(k) withdrawal, depending on the state. Pennsylvania does not tax retirement income or retirement account withdrawals.

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Answered by: Thomas N. Alvaré, CPA, is managing principal with JFS Wealth Advisors in Doylestown, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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