Calculating RMD Estimated Tax for California

Forum|Forum|2 years ago
November 10, 2023
3 replies
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In attempting to calculate a California estimated tax payment to cover this year's Fidelity 401K RMD (for which no state tax will be withheld), I referred to the IRA RMD check I just received from Morgan Stanley. MS withheld 686.61 for federal and 103.00 for state. I calculate that the amount MS withheld for state is approx. 15% of the federal amount withheld. (I read on a financial website chart that CA state RMD tax is 10% of the federal tax.) I believe MS withholds 15% to be safe. Can it be that simple? Should my CA estimated tax payment be approximately 10 to 15% of the federal tax owed on any RMD distribution? Thanks.

Not A Product Question

Best answer by Hal_Al

Q. Should my CA estimated tax payment be approximately 10 to 15% of the federal tax owed on any RMD distribution?

A. No. The state tax is a percentage of the income (the RMD amount), not the federal tax. The percentage would be your marginal (top) tax rate. To find that rate, see:

https://www.nerdwallet.com/article/taxes/california-state-tax

Since the top CA rate is 12.3%, 12.3% (of the RMD amount) would be the absolute "safe" amount.

Bsch4477

Employee

There are income tax calculators online for both federal and California income tax which would give you a good idea of your tax liability.

cocoanutsAuthor

I searched for an hour on Google and only found RMD distribution calculators. I know the amount of my RMD. That gets calculated by the RMD holders. Thanks.

VolvoGirl

Employee

Did you already get the RMD? Why aren't they taking out state withholding?

cocoanutsAuthor

Hi Volvo Girl: No, that 401K RMD check will be sent toward the end of November. Fidelity's new "policy" is to withhold fed taxes only but only after submitting the W-4P form for periodic distributions which I did. Morgan Stanley, on the other hand, withheld state taxes, too, and I have that check. Thanks.

Hal_AlAnswer

Employee

Q. Should my CA estimated tax payment be approximately 10 to 15% of the federal tax owed on any RMD distribution?

A. No. The state tax is a percentage of the income (the RMD amount), not the federal tax. The percentage would be your marginal (top) tax rate. To find that rate, see:

https://www.nerdwallet.com/article/taxes/california-state-tax

Since the top CA rate is 12.3%, 12.3% (of the RMD amount) would be the absolute "safe" amount.

cocoanutsAuthor

I searched online to learn where I saw the chart that said the financial institution withheld 10% of the federal tax withheld (in California). I misunderstood it. It was saying that by DEFAULT the IRA holder will usually withhold that 10% amount if NO other direction is given by the client. I was thinking that was all I owed. So, looks like I will need to make an estimated tax payment to the state on both RMDs. Thanks for the help.