I need to withdraw from my 401k for a primary residence purchase. I need assistance in understanding what I need to pay in taxes.

Forum|Forum|6 months ago
December 12, 2025
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Best answer by xmasbaby0

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If you are younger than 59 1/2, you will pay a 10% early withdrawal penalty plus your ordinary income tax on the money you take out of a 401k. There is no exclusion from the penalty for using money from a 401k to purchase a home. That exclusion of the early withdrawal penalty is allowed if you have a traditional IRA.

You will get a 1099R from the custodian of the account, which you will enter on your tax return. The software will use all of your income and all of the tax withheld to reconcile whether you get a refund or owe tax due.

xmasbaby0

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Level 15

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**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

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You can withdraw up to $10,000 from an IRA if you are a qualified first-time home buyer, and be exempted from the 10% early withdrawal penalty. You would still have to pay regular income tax. This means that you need to move up to $10,000 from the 401k to an IRA, this is called a rollover. (Open a new IRA, rollover the money, then withdraw it.). If you withdraw directly from the 401k, you do not qualify for the penalty exception. If you withdraw more than $10,000 from an IRA, you will still pay the 10% penalty on everything over $10,000, plus regular income tax on the entire amount.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-exceptions-to-tax-on-early-distributions

"First time" home buyer for this rule means that you, and your spouse if married, did not own any home you lived in as your main residence for at least 2 years prior to closing on the present home. (Amusingly, this means you could own other property or a vacation home, you just can't have owned your main residence.)