Tax Treatment of Solo 401k Distributions
Tax Treatment of Distributions Distributions from a Solo 401k plan minus a prorated part of any cost basis are subject to income tax in the year they are distributed. Since most recipients have no cost basis, a distribution is generally fully taxable. An exception is a distribution that is properly rolled over.
The tax treatment of Solo 401k distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution.
Please Note A recipient of a distribution from a designated Roth Solo 401k account will have a cost basis since designated Roth Solo 401k contributions are made on an after-tax basis. Also, a distribution from a designated Roth Solo 401k account is tax-free if certain conditions are met.
Visit Solo 401k Rollover to learn more.
The tax treatment of Solo 401k distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution.
Please Note A recipient of a distribution from a designated Roth Solo 401k account will have a cost basis since designated Roth Solo 401k contributions are made on an after-tax basis. Also, a distribution from a designated Roth Solo 401k account is tax-free if certain conditions are met.
Visit Solo 401k Rollover to learn more.