Traditional IRA Withdrawals and Tax Withholding

Traditional IRA Distributions

If you're requesting a partial withdrawal from your Traditional Individual Retirement Account (IRA) or planning to close it entirely, you'll need to input the reason for the withdrawal, and your tax withholding preferences. There is an option to elect both state and federal tax withholding. Each state has specific requirements for tax withholding that must be met before the withdrawal can be processed. If this information is inputted incorrectly, it may lead to additional delays or rejection of your withdrawal.

Electing to withhold taxes may help offset taxes owed on the distribution as withdrawals from Traditional IRAs are considered taxable income at the time of distribution. It is important to consult your tax advisor to see how a distribution may affect your circumstances and whether taxes should be withheld.

Federal Tax Withholding- The Federal default for tax withholding will be 10% but can be adjusted by the investor according to their circumstances. Depending on your state of residence there are different requirements for state withholding.

State Tax Withholding- State tax withholding requirements on Traditional IRAs differ based on your state of residence. Some states do not allow tax withholding, some require it (known as mandatory withholding) and some states leave it up to the investor to decide (known as voluntary withholding). Some states will require an investor to sign an opt-out form if electing not to withhold any state taxes. Please reach out to our member support team to help you with the next steps of the opt-out process. If you choose to withhold the required minimum amount, you do not need to complete any additional forms.

Here are the requirements for each state:

Alabama

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Alaska

You cannot withhold state taxes and must elect 0% for state tax withholding.

Arizona

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 3.5%.

Arkansas

State tax withholding is mandatory unless you provide a signed opt-out form. A minimum state tax withholding of 3% must be elected unless opting out. Reach out to us via chat or email at support@public.com if you want to proceed with opting out of state tax withholding.

California

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you choose to whithhold state taxes, it must be at least 10% of the amount you elected for federal tax withholding inputted as a dollar amount rounded up to two decimals. If you choose to waive federal withholding, you may still choose state withholding with no minimum requirement.

Colorado

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 4.40%.

Connecticut

State tax withholding is mandatory unless you provide a signed opt-out form. A minimum state tax withholding of 6.99% must be elected unless opting out. Reach out to us via chat or email at support@public.com if you want to proceed with opting out of state tax withholding.

Delaware

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Florida

You cannot withhold state taxes and must elect 0% for state tax withholding.

Georgia

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 5.39%.

Hawai'i

You cannot withhold state taxes and must elect 0% for state tax withholding.

Idaho

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 5.7%.

Illinois

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 4.95%.

Indiana

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Iowa

State tax withholding is mandatory unless you provide a signed opt-out form. A minimum state tax withholding of 5% must be elected unless opting out. Reach out to us via chat or email at support@public.com if you want to proceed with opting out of state tax withholding.

*If you are 55 years of age by 12/31 in the year the distribution was taken, the state withholding rate can be waived without providing the IA W-4P (opt-out form). The minimum state withholding remains 5% if elected.

Kansas

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Kentucky

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 4%.

Louisiana

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Maine

State tax withholding is mandatory. Minimum state tax withholding of 5% is required. No option to opt-out.

Maryland

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Massachusetts

State tax withholding is mandatory. Minimum state tax withholding of 5% is required. No option to opt-out.

Michigan

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 4.25%.

Minnesota

State tax withholding is mandatory unless you provide a signed opt-out form. A minimum state tax withholding of 6.25% must be elected unless opting out. Reach out to us via chat or email at support@public.com if you want to proceed with opting out of state tax withholding.

Mississippi

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Missouri

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 4.80%.

Montana

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Nebraska

State tax withholding is mandatory. Minimum state tax withholding of 5% is required. No option to opt-out.

Nevada

You cannot withhold state taxes and must elect 0% for state tax withholding.

New Hampshire

You cannot withhold state taxes and must elect 0% for state tax withholding.

New Jersey

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

New Mexico

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

New York

You cannot withhold state taxes and must elect 0% for state tax withholding.

North Carolina

State tax withholding is mandatory unless you provide a signed opt-out form. A minimum state tax withholding of 4% must be elected unless opting out. Reach out to us via chat or email at support@public.com if you want to proceed with opting out of state tax withholding.

North Dakota

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Ohio

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Oklahoma

State tax withholding is mandatory unless you provide a signed opt-out form. A minimum state tax withholding of 4.75% must be elected unless opting out. Reach out to us via chat or email at support@public.com if you want to proceed with opting out of state tax withholding.

Oregon

State tax withholding is mandatory unless you provide a signed opt-out form. A minimum state tax withholding of 8% must be elected unless opting out. Reach out to us via chat or email at support@public.com if you want to proceed with opting out of state tax withholding.

Pennsylvania

You cannot withhold state taxes and must elect 0% for state tax withholding.

Rhode Island

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

South Carolina

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

South Dakota

You cannot withhold state taxes and must elect 0% for state tax withholding.

Tennessee

You cannot withhold state taxes and must elect 0% for state tax withholding.

Texas

You cannot withhold state taxes and must elect 0% for state tax withholding.

Utah

Withholding is voluntary so you are not required to withhold any funds for state taxes. However, if you elect state tax withholding, it must be at least 4.55%.

Vermont

You do not need to withhold any funds for state taxes. However, if you wish to, it must be at least 30% of federal withholdings.

*If federal withholding is required by the IRS, then state withholding is mandatory. If you choose to waive federal withholding, you may still elect state withholding with no minimum requirement.

Virginia

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Washington

You cannot withhold state taxes and must elect 0% for state tax withholding.

Washington D.C.

There is no required minimum withholding on partial distributions. You may elect no tax withholding or any percentage of the withdrawal for a partial distribution.

*If you are fully closing your IRA account you must withhold at least 10.75 % for state tax withholding.

West Virginia

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Wisconsin

There is no required minimum state tax withholding. You can choose to not withhold state taxes or input the desired percentage to withhold.

Wyoming

You cannot withhold state taxes and must elect 0% for state tax withholding.

If you have more questions or need further assistance, feel free to reach out to us via chat, or email us at support@public.com.

This information is for educational purposes only and is not tax or investment advice. Consult your tax advisor for individual considerations. All investing involves risk. Visit the IRS website for more information.

What is a consolidated 1099?

Are my treasury bills taxed?

What is the difference between a Traditional IRA and Roth IRA?

Roth IRA Withdrawals and Tax Withholding

What Tax forms will I get for my IRA? When is a tax form sent?