I am from Europe and a US tax resident living in MN. In 2024, I withdrew $70,000 from my European 401k. My income was around $60,000. How much will I pay in taxes?

Forum|Forum|1 year ago
October 31, 2024
1 reply
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I already paid taxes on my $60,000 salary, so I only need to know about the 401k withdrawal.

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Opus 17

Employee

You don't have a 401k from Europe. You might have a similar type of arrangement, but it will be set up under the laws of your home country, and the taxes will be determined by exactly what kind of account it is, what country it is. Please give us those details.

@pk12_2

At worst, it will be fully taxed in the US just like withdrawals from a US 401k. However, there may be other possible outcomes, depending on the facts.

hafblikAuthor

Thanks for the quick reply. It's "sereignasparnadur" in Icelandic, which means personal retirement savings. In Iceland, it's taxable like any income when you withdraw it after age 60. Since I'm a US tax resident, I didn't pay any taxes there. I assume it will then be taxed like a 401k in the US, which is around 25%. Is that correct?

Opus 17

Employee

If this is the Icelandic equivalent of US Social Security, and if there is a tax treaty between the US and Iceland, then you may have the option of either,

1. paying tax to Iceland as if this was Icelandic social security, and not paying tax in the US, or

2. ignoring Iceland and paying tax on the US as if it was income from a private trust (that means as ordinary income, at 12%, 22%, 24%, or higher, depending on your income and tax bracket). It is likely also taxable in your state, too, since states don't usually have tax treaties with foreign governments.

But I want to wait for the real expert on foreign tax issues to comment, I left him or her a note.