How to Calculate Tax Withholding on IRA Distributions

To calculate tax withholding on IRA distributions, multiply the gross withdrawal by the percentage you elect on Form W-4R. The federal default is 10%, but the right number for you is the marginal tax bracket the withdrawal will land in, plus another 10 percentage points if you’re under 59½ and the early-withdrawal penalty applies. Getting that percentage right at the time of the distribution keeps you from owing at filing time and from triggering an underpayment penalty.

Start With the Default, Then Decide Whether to Override It

Federal law sets a 10% default withholding rate on IRA distributions classified as nonperiodic payments, which covers most one-time or on-demand withdrawals.¹ Your custodian applies that rate automatically unless you file Form W-4R telling them otherwise.

On Form W-4R you can request any whole percentage from 0% to 100% for a standard IRA withdrawal.² You can zero it out and cover the tax through estimated payments, or push it well above 10% to cover income tax and the early-withdrawal penalty in a single step. One restriction: if the payment is delivered outside the United States, you generally cannot go below 10%.

A different rule governs eligible rollover distributions from employer plans paid to you rather than transferred directly. Those carry mandatory 20% withholding, and you cannot elect out.¹ That rule doesn’t reach an IRA-to-IRA transfer, where the standard 10% default and W-4R election apply.

What You Need Before You Pick a Percentage

The 10% default is a rough guess, not a personalized figure. Before you file the W-4R, gather four things.

Your total income for the year. Add wages, Social Security, pension income, investment earnings, and any other IRA withdrawals you plan to take. The distribution stacks on top of that income, and its tax rate depends on where it lands in the brackets.

Your filing status and standard deduction. For 2026, the standard deduction is $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for head of household. Subtract it from total income to find taxable income, the number you compare to the brackets.³

The type of IRA. Traditional IRA withdrawals are taxed as ordinary income. Qualified Roth distributions are tax-free, meaning no withholding is needed. A Roth withdrawal counts as qualified only if the account has been open at least five tax years and you are at least 59½, disabled, or using up to $10,000 for a first home purchase. If those conditions aren’t met, the earnings portion is taxable and may be hit with the early-withdrawal penalty.⁴

Your age. Under 59½, a traditional IRA withdrawal generally carries an additional 10% penalty tax unless an exception applies. Either build that into your withholding or plan to pay it separately.

2026 Federal Tax Brackets

Your traditional IRA distribution is taxed as ordinary income at your marginal rate. For 2026, the brackets for single filers are:³

10% up to $12,400
12% from $12,401 to $50,400
22% from $50,401 to $105,700
24% from $105,701 to $201,775
32% from $201,776 to $256,225
35% from $256,226 to $640,600
37% over $640,600

For married couples filing jointly, each threshold roughly doubles. The 22% bracket starts at $100,801 and the 24% bracket starts at $211,401.³ Brackets are marginal, so only income within a given range is taxed at that rate.

A Worked Example

Say you’re a single filer, age 63, planning a $15,000 traditional IRA withdrawal in 2026, with $45,000 of other income from a pension and Social Security.

Step 1. Find taxable income before the withdrawal. $45,000 minus the $16,100 standard deduction leaves $28,900, which sits in the 12% bracket.

Step 2. Add the distribution. The $15,000 pushes taxable income to $43,900, still under the $50,400 top of the 12% bracket. The whole withdrawal is taxed at 12%.

Step 3. Calculate the federal tax on the withdrawal. $15,000 × 12% = $1,800. Requesting 12% on Form W-4R covers that exactly. At the default 10%, only $1,500 gets withheld, leaving a $300 balance at filing.

Step 4. Add state tax if it applies. Multiply the withdrawal by your state rate. A 5% state rate adds $750, bringing combined withholding to $2,550. State withholding rules vary. Some states follow the federal election, others use a separate form, and several don’t tax retirement income at all.

Now change one variable. If your other income were $55,000, taxable income before the withdrawal would be $38,900. The $15,000 distribution would push you to $53,900, crossing into the 22% bracket. The portion above $50,400 gets taxed at 22%, and a flat 12% withholding would come up short. When a distribution straddles two brackets, pick the higher rate for your withholding.

If You’re Under 59½, Add the Penalty

A traditional IRA withdrawal before age 59½ generally triggers a 10% additional tax on top of ordinary income tax.⁵ It’s a separate tax, not a withholding requirement, so nothing forces it out of the distribution automatically. Ignore it and you’ll be underpaid at filing.

The clean fix is to raise your W-4R percentage by 10 points. Take the earlier example but assume you’re 55 instead of 63. Your 12% income tax plus the 10% penalty means real federal liability of 22% of the $15,000, or $3,300. Set W-4R withholding to 22% and both obligations are covered in a single step.

Several exceptions eliminate the penalty, including distributions after disability, substantially equal periodic payments, unreimbursed medical expenses over a percentage of income, and qualified first-time homebuyer expenses up to $10,000.⁵ If one applies, leave the 10 points out of your withholding and claim the exception on Form 5329 when you file.

The 20% Trap on Indirect Rollovers

This one catches people off guard, and it’s worth knowing about even if you’re only handling an IRA withdrawal. If you receive an eligible rollover distribution from an employer retirement plan paid to you rather than sent directly to another plan, the payer must withhold 20%.⁶ Even if you intend to deposit the money into an IRA within 60 days, you only receive 80% up front.

To roll over the full amount and owe zero tax, you have to replace the withheld 20% from other funds. If a $10,000 distribution has $2,000 withheld, you receive $8,000, but you need to deposit $10,000 into the IRA within 60 days to complete the rollover. The $2,000 comes back as a credit on your return.⁶ Deposit only the $8,000 and the missing $2,000 becomes a taxable distribution.

IRA-to-IRA transfers don’t trigger the mandatory 20%. The standard 10% default applies, and you can elect out of it entirely on the W-4R.

Filing Form W-4R and Checking the 1099-R

Form W-4R is where your withholding election lives.⁷ Line 1 takes your name, address, and Social Security number. Line 2 takes the percentage. It has to be entered as a percentage, not a dollar amount. For a standard IRA withdrawal the range is 0% to 100%; for an eligible rollover distribution, 20% is the floor.² The 2026 version includes a marginal rate table on page 2 if you want a shortcut to the bracket estimate.

Sign the form and submit it to your custodian. Most accept electronic submission; paper still works. Your election typically applies only to the specific distribution unless the custodian allows a standing election, so confirm whether the W-4R covers future withdrawals if you’re taking more than one during the year.

By January 31 of the following year, your custodian will send Form 1099-R reporting the distribution. Box 1 shows the gross amount, Box 2a the taxable portion, and Box 4 the federal tax withheld.⁸ State withholding, if any, appears in Boxes 14 through 19. Check those figures against the custodian’s distribution confirmation before you file. A wrong withholding amount or distribution code can take months to correct through the IRS.

Estimated Payments as an Alternative

Withholding isn’t the only route. You can receive the full distribution and pay the tax through quarterly estimated payments on Form 1040-ES.⁹ You get more control over cash flow, but miss a quarterly deadline and you may owe an underpayment penalty.

Combining the two also works: withhold part from the distribution and cover the rest through estimated payments. To sidestep the underpayment penalty, total payments must hit one of two safe harbors: at least 90% of current-year tax, or 100% of last year’s total tax. If your prior-year AGI topped $150,000 ($75,000 if married filing separately), that second threshold rises to 110%.¹⁰

Withholding has one advantage estimated payments don’t. Tax withheld from an IRA distribution is treated as paid evenly across all four quarterly deadlines, no matter when the distribution actually happens.¹¹ Take a large distribution in December with generous withholding, and the IRS treats that withholding as spread across the year, which can cure earlier-quarter shortfalls that a late estimated payment cannot.

1
Office of the Law Revision Counsel. 26 USC 3405 – Special Rules for Pensions, Annuities, and Certain Other Deferred Income
2
Internal Revenue Service. Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. Traditional and Roth IRAs
5
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
6
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
7
Internal Revenue Service. About Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions
8
Internal Revenue Service. Instructions for Forms 1099-R and 5498
9
Internal Revenue Service. Publication 505 – Tax Withholding and Estimated Tax
10
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
11
Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax