Accredited Financial Counselor (AFC) 2025 – 400 Free Practice Questions to Pass the Exam

To determine the tax Jax will pay on his 401(k) withdrawal of $30,000, it is important to understand how distributions from a traditional 401(k) are taxed. Withdrawals from a traditional 401(k) are typically subject to federal income tax because the contributions were made pre-tax.

The tax rate applied to Jax’s withdrawal will depend on his income bracket and how the $30,000 addition impacts his overall taxable income for the year. Given the information provided, the amount of tax he would owe can be estimated by applying an average tax rate. A common tax rate for someone withdrawing a sum in that range could be around 35%, depending on specific income levels and deductions.

Calculating 35% of $30,000 results in approximately $10,500. Therefore, this aligns with the answer given, indicating that Jax will pay $10,500 in taxes on his 401(k) withdrawal.

This understanding integrates the broader tax implications of retirement account withdrawals while highlighting the importance of considering one’s total taxable income for the year to gauge the appropriate tax rate.