How Much Do You Get Taxed on 401(k) Withdrawals?

Withdrawals from a traditional 401(k) are taxed as ordinary income at your federal rate, which runs from 10% to 37% in 2026 depending on your total taxable income for the year. Take the money out before age 59½ and the IRS adds a 10% penalty on top. Roth 401(k) withdrawals can come out entirely tax-free once you meet two qualifying conditions. So the honest answer to how much you get taxed on 401(k) withdrawals is: it depends on the account type, your age, and how much other income you report that year.

Traditional 401(k): The Whole Withdrawal Counts as Income

Traditional 401(k) contributions go in before tax, and your money grows without being taxed along the way. The bill arrives at the other end. When you withdraw funds, the entire amount, contributions and decades of investment growth alike, lands on your Form 1040 as ordinary income for that year. Your plan administrator reports the distribution to the IRS on Form 1099-R.

Because the full withdrawal is taxable, a big distribution can push you higher up the brackets than you expect. Someone who pulls $80,000 from a traditional 401(k) while also collecting $30,000 in Social Security will owe federal tax on a much larger combined income than either source produces on its own.

Roth 401(k): Tax-Free If You Meet Two Conditions

Roth 401(k) contributions work the opposite way. You pay tax on the money the year you earn it, and in return your investments grow tax-free and qualified withdrawals owe nothing.

A withdrawal qualifies for tax-free treatment when both of these are true. You are at least 59½ (or the distribution is due to disability or death). And at least five tax years have passed since January 1 of the first year you made any Roth contribution to that employer’s plan.¹

Take money out before meeting both conditions and the distribution is non-qualified. The contribution portion still comes out tax-free, because you already paid tax on it, but the earnings portion is taxable as ordinary income and may also be hit with the 10% early withdrawal penalty. The IRS uses a pro-rata formula to split each non-qualified distribution between contributions and earnings, so you cannot cherry-pick only your contributions the way you can from a Roth IRA.¹

Applying the 2026 Federal Tax Brackets

Traditional 401(k) withdrawals are taxed at your marginal rate. Only the portion of income falling within each bracket is taxed at that bracket’s rate. The 2026 brackets:²

10%: Up to $12,400 single / $24,800 married filing jointly
12%: $12,401 to $50,400 single / $24,801 to $100,800 jointly
22%: $50,401 to $105,700 single / $100,801 to $211,400 jointly
24%: $105,701 to $256,225 single / $211,401 to $512,450 jointly
35%: up to $640,600 single / up to $768,700 jointly
37%: Over $640,600 single / over $768,700 jointly

A worked example. A single retiree with $25,000 of taxable Social Security income and a $50,000 traditional 401(k) withdrawal reports roughly $75,000 in gross income before deductions. After the 2026 standard deduction, part of the withdrawal lands in the 12% bracket and the rest in the 22% bracket. The effective rate on the $50,000 withdrawal itself ends up well below 22%, because only the dollars above the 12% threshold get taxed at the higher rate.

One helpful boundary: 401(k) distributions are not subject to the 3.8% Net Investment Income Tax that applies to certain investment income for high earners. The IRS specifically excludes qualified plan distributions from that calculation.³

Why the Check Is 20% Smaller

When your plan sends a distribution directly to you rather than rolling the money to another retirement account, federal law requires 20% to be withheld for income taxes. That withholding kicks in even if your actual tax rate turns out lower, and even if you intend to roll the money over yourself within 60 days.⁴

The 20% is not the final tax. It is a prepayment against what you actually owe when you file. If your effective rate is 15%, you get the difference back as a refund. If you owe more than 20%, you have a balance due at tax time. The withholding does not apply to a direct rollover, where the plan sends the money straight to another 401(k) or IRA.⁵

The 10% Early Withdrawal Penalty

Withdraw from a traditional 401(k) before age 59½ and the IRS adds a 10% additional tax on top of ordinary income tax. It applies to the entire taxable portion of the distribution.⁶

The math gets ugly fast. A 45-year-old in the 22% bracket who pulls $30,000 owes $6,600 in ordinary income tax plus a $3,000 penalty. That is $9,600 of the $30,000 gone in federal tax alone, before any state tax.

For an early Roth 401(k) withdrawal, the 10% penalty applies only to the taxable earnings portion, not to your already-taxed contributions.

Exceptions That Waive the Penalty

The tax code lists situations where you can take money out before 59½ without the 10% penalty. In most of these, ordinary income tax still applies to a traditional 401(k) distribution; only the extra 10% goes away.⁷

Separation from service in or after the year you turn 55 (age 50 for public safety employees), for the plan at the employer you left.⁸
Substantially equal periodic payments (SEPP), taken on an IRS-approved schedule for at least five years or until 59½, whichever is later. Breaking the schedule triggers retroactive penalties on prior payments.⁹
Total and permanent disability.
A qualified domestic relations order dividing the account in a divorce, with the distribution going to the alternate payee.
Unreimbursed medical expenses above 7.5% of adjusted gross income, up to the excess amount.
An IRS levy on the account.
Terminal illness certified by a physician as reasonably expected to result in death within 84 months.

SECURE 2.0 added more penalty exceptions for distributions after December 31, 2023: one emergency personal expense withdrawal per year up to $1,000; up to the lesser of $10,000 (indexed) or 50% of the vested balance for domestic abuse victims; and up to $5,000 within a year of a child’s birth or legal adoption.⁷

Hardship Withdrawals Are Still Fully Taxed

Some plans allow hardship withdrawals for immediate and heavy financial needs such as preventing eviction, paying medical bills, or covering funeral expenses. These are fully taxable as ordinary income, and if you are under 59½, the 10% penalty applies unless you separately qualify for an exception above. Hardship distributions generally cannot be rolled into another retirement account, and your plan may pause your ability to make new contributions for a period afterward.¹⁰

When a 401(k) Loan Turns Into a Taxable Withdrawal

A loan against your 401(k) balance is normally not a taxable event, because you are expected to pay it back. If you leave your job or stop making payments, though, the outstanding balance is treated as a deemed distribution: taxed as ordinary income, and hit with the 10% penalty if you are under 59½.¹¹

This catches people out. Borrow $20,000, change jobs a year later with $15,000 still outstanding, and you face a tax bill on $15,000 of income you never actually received as cash. At age 40 in the 22% bracket, that is $3,300 in income tax plus $1,500 in penalties.

Required Minimum Distributions

The IRS does not let you defer tax on a traditional 401(k) forever. Once you reach a set age, you must start taking required minimum distributions each year, and every dollar is taxed as ordinary income. Under current law, RMDs begin the year you turn 73. Starting in 2033, the required age rises to 75.¹²

Your first RMD can be delayed until April 1 of the year after you turn 73, but that means taking two distributions in the second year, which can push you into a higher bracket. After the first year, each RMD must be taken by December 31. If you are still working past 73 and do not own 5% or more of the business, you can delay 401(k) RMDs from your current employer’s plan until the year you actually retire. That exception does not apply to IRAs or to 401(k) accounts left with former employers.¹²

Each year’s RMD equals your December 31 balance from the prior year divided by a life expectancy factor from the IRS Uniform Lifetime Table. As you age, the factor shrinks and the required percentage grows.¹³

Miss the deadline or withdraw less than required, and the IRS charges a 25% excise tax on the shortfall. That drops to 10% if you fix the mistake within two years. You can also request a waiver on Form 5329 by showing the shortfall was due to reasonable error.¹⁴

One boundary worth knowing: Roth 401(k) accounts were subject to lifetime RMDs until 2024. SECURE 2.0 eliminated that requirement, so a Roth 401(k) now works like a Roth IRA on that front and can keep growing tax-free for the rest of your life.¹²

State Income Tax on Top of Federal

Federal tax is only part of the picture. Most states with an income tax also tax traditional 401(k) distributions as ordinary income. A handful of states have no income tax at all, and others offer partial or full exemptions for retirement income, sometimes with age restrictions. State rates on retirement distributions range from 0% to over 13%. If you are planning a large withdrawal or weighing where to retire, checking your state’s rules can save thousands.

Employer Stock: A Special Rate Break

If your 401(k) holds shares of your employer’s stock, a rule called net unrealized appreciation can cut your tax bill. On a lump-sum distribution that includes employer stock, you pay ordinary income tax only on the plan’s original cost basis for the shares. The appreciation that built up while the stock was inside the plan is not taxed until you sell, and when you do sell, it is taxed at long-term capital gains rates rather than ordinary income rates.

Long-term capital gains top out at 20%, against 37% at the top ordinary bracket. For someone with heavily appreciated employer stock, the savings can be large. The strategy requires a lump-sum distribution of the entire account and careful reporting, so it is worth working with a tax advisor before you pull the trigger.

1
Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts
2
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
3
Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
4
Office of the Law Revision Counsel. 26 U.S. Code 3405
5
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
6
Office of the Law Revision Counsel. 26 USC 72
7
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
8
Internal Revenue Service. 401(k) Resource Guide – General Distribution Rules
9
Internal Revenue Service. Substantially Equal Periodic Payments
10
Internal Revenue Service. 401(k) Plan Hardship Distributions – Consider the Consequences
11
Internal Revenue Service. Fixing Common Plan Mistakes – Plan Loan Failures and Deemed Distributions
12
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
13
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
14
Internal Revenue Service. Instructions for Form 5329 (2025)