2/15/12 7:47 AM
I know that federal taxes will be withheld when a 401K distribution is made. Although TN doesn't have an earned income tax, will there be a state income tax due on these distributions? On pension income?
2/20/12 11:54 AM
As you know the State of Tennessee does not have an income tax. Income from a 401k or any other retirement plan is taxed on the Federal level as income earned in the year of distribution. Tennessee does not tax this income. So you will only pay Federal Income Tax on you 401k distribution.
Because we are not practicing acountants and therefore can not give official tax advice, any decisions that you make regarding your income taxes should have the blessing of a CPA. Thank you for asking us this question and please feel free to contact us further if we can help you with any other financial advice.
RICHARD M. IMBREY, CFP,CLU,ChFC