Hello, please advise what the tax break is called for withdrawing retirement funds for buying a primary residence. Is that emergency?

[jacquelinelopez21]

I know my plan allows to withdraw money for a primary residence, which I did for a new build home. I had to put a deposit down immediately to have the contract valid so I took the money out of the account. I’m having trouble finding where to put that amount in the tax break section because it’s not giving me hardship as an option only qualified disaster, which it’s not, or emergency. Please help

[VolvoGirl]

What account did you withdraw it from?  A 401K or IRA?   The home exception is only from a IRA not a 401K.    You can exempt up 10,000 for the 10% Early Withdrawal Penalty  for a new home purchase.  And that is for each spouse's withdrawal.

I can’t find where or how to enter it in my notes but after you enter the 1099R keep going and one of the follow up questions should ask if you have an exception.   Or it is covered under Deductions & Credits.  It’s form 5329.

[MindyB]

No, withdrawing money for a primary residence is not considered an emergency.

Although your plan may have allowed you to remove the money, it is a taxable event. In addition to tax, if you are under 59 1/2, there is also a 10% early withdrawal penalty. As @VolvoGirl mentioned, IRAs, (not 401(k)s) allow you to withdraw up to $10,000 for a first time home purchase, without the 10% penalty.

If you only took a loan, then this is not taxable, and does not need to be reported.