I took a 401k withdrawal for a down payment for a home. I know the amount is taxable (I'm under 59). But a portion should be exempt from penalty. How do I log that?

Forum|Forum|4 years ago
January 20, 2022
2 replies
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xmasbaby0

Level 15

Oh no. You misunderstood. There is no exemption from the early withdrawal penalty for money you took out of a 401k for a down payment. That exception is only for a withdrawal from a traditional IRA for a down payment. You are going to be subject to the 10% penalty and the ordinary tax. Enter your 1099R on your tax return:

To enter your retirement income, Go to Federal> Wages and Income>Retirement Plans and Social Security>IRA 401 k) Pension Plan Withdrawals to enter your 1099R.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

Opus 17

Level 15

Sorry. IRAs and 401(k)s are controlled by different sections of the tax law and have different rules, even though they have broadly similar purposes. The exception to the 10% penalty for a first time home buyer applies to an IRA but not a 401(k). If you are within 60 days of the withdrawal, you could re-deposit the money into the 401(k), then do a partial rollover of the 401(k) money to an IRA and withdraw it from the IRA. But taking the money directly from the 401(k) is not exempt from the 10% early withdrawal penalty.

tabbott14

Level 2

In 2022, can I do a partial rollover from my 401k into a IRA and then withdraw those funds for a first time home downpayment without incurring the 10% early withdrawal penalty?

Opus 17

Level 15

@tabbott14

Yes. That’s the way you can use 401(k) funds for a “first time” home purchase and avoid the penalty, you have to do a rollover first. Note the withdrawal from the IRA will still be subject to regular income tax, and the penalty exemption only applies to the first $10,000.