I see a lot of people miscalculate their gross distribution from their IRAs when they have a specific net /after tax amount they need.

For example, you want to take a net/after tax distribution of \$5,000 from your IRA, and you are in the 28% tax bracket. You want to calculate how much your gross distribution should be so that you end up with a net/after tax distribution of \$5,000.

A 28% tax would be represented in decimals as 0.28.

First subtract 1 -(minus) 0.28 on your calculator and you get = 0.72

Take the net distribution you would like so in this case \$5,000 and divide it by 0.72 = \$6,944.44

So if you take a distribution from your IRA for \$6,944 and have 28% or \$1,944.32 withheld for taxes, you would net \$5,000 after tax from your IRA.

\$6,944 was the gross distribution-\$1,944.32 was the 28% tax withholding =\$5,000 Net IRA distribution after tax.

Here is the formula for this scenario:
1-0.28 = 0.72

\$5,000/0.72 = \$6,944.441 – tax bracket converted to a decimal = X

Net distribution/X = gross distribution.

A lot of people start with the net distribution (\$5,000 in this example) and multiply it by the tax rate (28% in the example). If you do this you get \$1,400.

They then add the \$1,400 plus the \$5,000 to come up with \$6,400.

The problem is if you request a gross distribution of \$6,400 multiplied by 28% it equals \$1,792, and you end up with a net distribution of \$4,608 which was not the desired outcome.

You might also be interested in reading Is Your IRA a Tax Time Bomb?