Are retirement account distributions always taxable?

[reskanda1]

Are there circumstances where distributions from a 401K or traditional IRA are not taxable, for example buying a home? Im 68 years old.

[Bsch4477]

The income is always taxed unless the IRA contributions were made after tax. But there are exemptions for early withdrawal which are moot at your age. 

First-time home buyers: Qualified first-time buyers can withdraw up to $10,000 from their IRA penalty free to buy, build or rebuild a first home. You must close on the transaction within 120 days of receiving the funds.J

[VolvoGirl]

Yes Taxable.  There are some exceptions like if you buy a home using your IRA you can avoid the 10% Early Withdrawal Penalty if you are under 59 1/2 but that doesn't apply to you since you are older.  When you turn 70 1/2 you can make a direct distribution to a charity from an IRA and avoid the tax.  

See IRS Publication 590B on Distributions

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

[dmertz · Accepted solution]

If the traditional IRA or the traditional 401(k) contain after-tax funds, some portion of the distribution from either of these will be nontaxable.  Except for a Qualified Charitable Distribution paid from a traditional IRA, what you do with the distribution (absent a roll over) has no bearing on determining the taxable amount of the distribution, regardless of your age.

[NCperson]

@reskanda1  I wouldn't confuse 'the tax" from the '10% tax penalty'.

The tax penalty is waived for a number of reasons.  Once you are 59.5 years old, the penalty is waived under ALL circumstances.

Otherwise, the 'tax' itself is effectively always due (QCDs is an exception or where there is after tax money sitting in a TRAD IRA would be an exception)  

[Opus 17]

Assuming the contributions were all pre-tax, your withdrawals are always taxable.  You paid no tax going in, so you pay it coming out.  That's the deal.

If your contributions were mixed (this is rare) or after tax (made to a Roth-designated 401k account), then we need more information.