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Your question really makes no sense. You will owe federal income tax plus a 10% penalty on the 401K withdrawal.
Any deduction will reduce your income tax, but that requires putting more money someplace you can't touch it than you get as a benefit. For example, if you donate $1000 to charity, you will save $250 in taxes, but that means that another $750 has gone out of your pocket never to be seen again.
If you have (let's say) up to $5000 that you could put in your spouse's IRA, it would be far smarter to put that $5000 directly toward the house and withdraw less from your 401(k) -- or put it back in the 401(k) if it is within 60 days.
Your question really makes no sense. You will owe federal income tax plus a 10% penalty on the 401K withdrawal.
Any deduction will reduce your income tax, but that requires putting more money someplace you can't touch it than you get as a benefit. For example, if you donate $1000 to charity, you will save $250 in taxes, but that means that another $750 has gone out of your pocket never to be seen again.
If you have (let's say) up to $5000 that you could put in your spouse's IRA, it would be far smarter to put that $5000 directly toward the house and withdraw less from your 401(k) -- or put it back in the 401(k) if it is within 60 days.
This is like robbing Peter to pay Paul.
If you have sufficient earned income to contribute to a Traditional IRA then use that money towards the home and take less out of the 401(k) and possibly an additional 10% penalty if under age 59 1/2. They are both tax deferred accounts so there is no advantage to pay tax on one and deduct the other.
Using an early distribution from a 401k (before you are 59 1/2) to make a down payment on a house is not an exception to the 10% early withdrawal penalty. You will owe that penalty plus ordinary income tax on the money you took out of your 401k. You can take money from a traditional IRA without the 10% penalty to purchase a first home but that is not the case for a 401k. If it has not been more than 60 days since you did this you could still pay it back to the 401k. Taking that money from a 401k is an expensive source of money to buy a house.
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