How can an H-1B holder withdraw 401(k) balance before returning to home country? Taxes?

Asked by: Joe Henry

Can I cash out my 401k if I move to another country?

Cash Out Your 401(k)

However, you are allowed to withdraw your 401(k) funds when you leave the country. The funds you withdraw will be considered taxable income, and if you are under the age of 59 1/2, you will also pay a 10% early withdrawal penalty.

What happens to my 401k if I leave the country?

As far as the US is concerned, once you have moved to your home country, you will only pay US taxes on US-Situs assets if you are a non-resident. Thus, if distributions are small, you could fall into the lowest US bracket and essentially pay 0%.

Are 401k withdrawals taxed for expats?

Regular IRA and 401(k) withdrawals for expats

Under most circumstances, approved overseas withdrawals from a 401(k) or U.S. pensions are still taxed as income, albeit they’re treated as unearned income—meaning you won’t be able to claim them under the Foreign Earned Income Exclusion.

What happens to my 401k if I move back to India?

What happens to my 401k if I move back to India? On moving back to India, you can let your 401k be as it is till you turn 59 and a half (59½). Post that, you can withdraw the funds from your 401k in India either as a lump sum amount or monthly pension.

How can I withdraw my 401k from H1B?

401k Withdrawal Rules for H1B Visa Holders

Before you can be qualified to make a withdrawal from your 401k account, you must be retired and just have been contributing to the account for at least the last 5 years and also be at least 59.5 years old.

What happens to my US investments if I move abroad?

Depending on the law of the other country you live in and the tax treaty between the US and said country, your investment income or capital gain may be taxable in that country if you are considered a resident. Do your research before you may cross the threshold from a visitor to a resident.

How are taxes calculated on 401k withdrawals?

There isn’t a separate 401(k) withdrawal tax. Any money you withdraw from your 401(k) is considered income and will be taxed as such, alongside other sources of taxable income you may receive. As with any taxable income, the rate you pay depends on the amount of total taxable income you receive that year.