401k hardship withdrawal tax exemptions

[Hoochfisher]

When taking a 401k hardship withdrawal for first time home purchase, theres a 10% penalty tax, with an exemption for up to $10k withdrawed. Is that exemption for up to $10k for every every person in the household? Or just up to the $10k? Also, if I withdraw more than the exempted $10k, is the entire amount subject to the 10% penalty? Or is it just the amount over the $10k that is subject to the penalty? 

[VolvoGirl]

SORRY The house purchase exemptions is only from IRA accounts not 401K.  So see answers below.

It's 10,000 per person and 401K.   So you can exempt 10,000 from your 401K withdrawal.

And if you are married your spouse can exempt 10,000 from their early 401K withdrawal too.   But that's all.

Only the amount over the $10,000 has the penalty.  And you will still taxes on the full amount including the 10,000.

[SteamTrain]

Careful here.....unless they changed the rules for 2019 and beyond, the early-withdrawal 10% penalty exception only applies to buying the home using IRA $$, not 401k $$.  (I haven't found a reference that indicates that has changed....yet)   

So you'd be better off taking a 401k loan.  (you do have to pay your 401k back though, so make sure you talk to your 401k administrator to see how that is arranged and how much each pay-back amount will be).

Or an I mistaken?
@dmertz 

@VolvoGirl 

[Critter]

Correct ... the exemption is ONLY for an IRA .   The first time home buyer may have been the excuse the 401K needed to release the funds but it will not do anything for you on an income tax return. 

[VolvoGirl]

Oh right!  I missed the 401K part.  Yes it is ONLY for IRA withdrawals.  Unless it has changed this was the rule before.

It would be an exception to the IRA 10% early withdrawal PENALTY if you are under 59 1/2. You can exclude up to 10,000 of the withdrawal from the penalty. You still have to pay regular income taxes on the whole amount.

Each spouse can take 10,000 from their own IRA so you can exclude up to 20,000 from the early withdrawal penalty. That is a lifetime max from all IRA & ROTH IRA accounts for each person.

[macuser_22]

There are no fist home exceptions for a 401(k) - only IRAs.

Also a hardship withdrawal only allows the distribution at all prior to retirement age and has nothing to to with the tax or penalty for early distribution.

Here are the allowable exceptions to the early distribution penalty.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...

[SteamTrain]

...  here it is . This IRS table still shows there is no exception from the 10% penalty for an early 401k distribution for buying a first home:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...

[Hoochfisher]

Dang. I see the 10% exemption isnt covered for the 401k hardship withdrawal. After trying to research the hardship withdrawal all day, i misread the chart. My fault. Thanks for the help guys.