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I was under the impression that if I took money out from my 401k to pay for my down payment it wouldn’t be taxed, is that true?
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Retirement tax questions
No, you will be assessed income tax (the amount of the distribution is added to your income...but you won't have to pay the 10% early distribution penalty if you are under 59 1/2 and satisfy the conditions.
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Retirement tax questions
There's NO housing related exemption for 401k distributions.
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Retirement tax questions
When you take money from a traditional IRA there is not a 10% early withdrawal penalty if you are a first time home buyer under the age of 59 1/2. There is no such exception to the early withdrawal penalty for a 401k. You are subject to a 10% early withdrawal penalty and ordinary income tax on the distribution from your 401k--making it an expensive way to make your down payment. Sorry.
You should have a 1099R for this.
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.