can both spouses use 401k withdrawals for a down payment penalty (10%) free

[coyle04]

I know one person can withdrawal up to 10k without a 10% penalty from 401k for a house downpayment.  Can both people in a marriage do that if they have separate 401ks?  20k in total, without 10% penalties? 

[DoninGA · Accepted solution]

No.  There is no exception to the 10% early withdrawal penalty for a first time homebuyer if the withdrawal is from a 401(k). 

Only a withdrawal from an IRA is eligible for the early withdrawal exception and then only the first $10,000 withdrawn is eligible.  If both you and your spouse are first-time homebuyers, each of you can receive distributions up to $10,000 for a first home without having to pay the 10% additional tax

See IRS Publication 590-B Distributions from Individual Retirement Arrangements (IRAs) -  https://www.irs.gov/pub/irs-pdf/p590b.pdf

IRS Tax Topic - Additional Tax on Early Distributions from Traditional and Roth IRAs - https://www.irs.gov/taxtopics/tc557

IRS Tax Topic - Additional Tax on Early Distributions from Retirement Plans Other than IRAs - https://www.irs.gov/taxtopics/tc558