Yes, you will need to pay taxes on the 401(k) withdrawal for home improvements.
Tax Implications
- Ordinary Income Tax: Withdrawals from a 401(k) are subject to ordinary income tax. The amount you withdraw will be added to your taxable income for the year.
- No Early Withdrawal Penalty: Since you are over 59½, you will not incur the 10% early withdrawal penalty.
- Another alternative is to take a 401(k) Loan: Some plans allow you to take a loan from your 401(k) without immediate tax implications, but you must repay it within a specified period. Employees who lose their job must also pay back the entirety of the loan within 30 to 60 days of termination or risk additional penalties.
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