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Level 1

Question

I took a hardship withdrawal from my 401k and was taxed at 10%. Now it says I owe another 2,000. Could anyone explain why, when turbo tax says it qualifies as tax free?

Forum|Forum|1 year ago
February 8, 2025
2 replies
12 views

It was used for medical expenses and our bathroom plumbing had a leak.

Level 15

A distribution from a 401(k) account is never tax free. The distribution amount is entered on your tax return as ordinary income and taxed at your current tax rate.

Only $1,000 of a hardship withdrawal is exempt from the 10% early distribution penalty. The balance of the distribution would have a 10% early withdrawal penalty assessed and entered on your tax return as a tax liability if you were under the age of 59 1/2 at the time of the distribution.

Level 15

Here's more info on Hardship Withdrawal from 401K.

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