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What are the taxes and penalties for withdrawing money? |
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Distributions from your MNDCP account are includible in
gross income for both federal and state income tax purposes and are taxed as ordinary
income in the year the distribution is made. MNDCP is required by law to withhold 20
percent federal income tax. State income tax is only withheld if your resident state
mandates income tax withholding (Minnesota does not) or if you indicate your preferred
withholding on the distribution form.
The 10 percent IRS early withdrawal penalty tax does not apply to MNDCP withdrawals.
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