401k Home Loan Withdrawl

[Anonymous]

I'm curious if I want to withdraw the maximum $10,000 from a 401k that allows a loan to be taken, can I do this from 2 separate accounts? Meaning, if I have 2 separate 401k accounts, can each count as 2 different withdraws of $10,000 so I actually get $20K?

Is the rule otherwise $10,000 max no matter how many separate accounts you use?

Thanks in advance!

[VolvoGirl]

Are you referring to the exemption from the 10% Early Withdrawal Penalty for bring a new home buyer?   It is 10,000 max per spouse BUT it is only from IRA accounts, not 401K.

[Anonymous]

Yes, a 401k but my personal 401k is not company sponsored. So the is no 'loan' option just simply a withdraw. Not a hardship, just simply a withdraw.

I do have a company-sponsored 401k but I believe that is also not an IRA.

[VolvoGirl]

 401K plans are not IRA.   Totally different things.   Are you sure it's a 401K?  If it's not in a company plan?

[Anonymous]

I have 2 accounts, a Roth IRA and a Rollover IRA. So when I say 401K I'm speaking of my personal Rollover IRA.

My apologies.

That Rollover IRA is where most of all of the money is held, it was set up long ago.

[VolvoGirl]

Oh ok.   So it's not a 401K.   Yes you can avoid the penalty on up to 10,000 max.   

see about IRA distributions

https://www.irs.gov/pub/irs-pdf/p590b.pdf 

[Anonymous]

Perfect. 

So for my actual work 401K to avoid the penalties I just need to make sure I do a loan correct?

[VolvoGirl · Accepted solution]

Yes if you can take a loan.   A loan is not a distribution and is not taxable.   You don't get a 1099R for loans and don't report loans on your tax return.

[Anonymous]

Thanks for all of your assistance, great help!!

[Anonymous]

One last question hopefully : )

Since I'm using this for a home purchase, when asked about taking out taxes is that something I should still do or is that not needed since I will qualify for the exemption?

[VolvoGirl]

Yes if you take a withdrawal and not a loan it will still be taxable income so you should have taxes taken out.   The exemption is only for the 10% Early Withdrawal Penalty.   And be careful, it will add to your income and may push you into a higher tax bracket.   You can lose up to 50% for taxes (federal & state) and penalties.