When you withdraw money from your IRA or employer-sponsored retirement plan, your state may require you to have income tax withheld from your distribution.
Your withholding is a pre-payment of your state income tax that serves as a credit toward your current-year state income tax liability.
Your state withholding may be affected by the following criteria:
- Type of retirement plan (IRA or qualified retirement plan)
- State of residence for tax purposes
- Eligibility to roll over a distribution
- Distribution amount (a minimum amount may apply)
- Type of distribution (single sum or periodic payments)
Each state’s requirements are different. You should consult your tax advisor or financial professional to understand your state’s withholding requirements.
