I took a 401k withdrawal for a down payment for a home. I know the amount is taxable (I'm under 59). But a portion should be exempt from penalty. How do I log that?

[xmasbaby0]

Oh no.   You misunderstood.   There is no exemption from the early withdrawal penalty for money you took out of a 401k for a down payment.   That exception is only for a withdrawal from a traditional IRA for a down payment.   You are going to be subject to the 10% penalty and the ordinary tax.   Enter your 1099R on your tax return:

To enter your retirement income, Go to  Federal> Wages and Income>Retirement Plans and Social Security>IRA  401 k) Pension Plan Withdrawals to enter your 1099R.

[Opus 17]

Sorry. IRAs and 401(k)s are controlled by different sections of the tax law and have different rules, even though they have broadly similar purposes.  The exception to the 10% penalty for a first time home buyer applies to an IRA but not a 401(k). If you are within 60 days of the withdrawal, you could re-deposit the money into the 401(k), then do a partial rollover of the 401(k) money to an IRA and withdraw it from the IRA. But taking the money directly from the 401(k) is not exempt from the 10% early withdrawal penalty.

[tabbott14]

In 2022, can I do a partial rollover from my 401k into a IRA and then withdraw those funds for a first time home downpayment without incurring the 10% early withdrawal penalty?

[Opus 17]

@tabbott14 

Yes.  That’s the way you can use 401(k) funds for a “first time” home purchase and avoid the penalty, you have to do a rollover first.  Note the withdrawal from the IRA will still be subject to regular income tax, and the penalty exemption only applies to the first $10,000.   

[DawnC]

Yes!  You can avoid the 10% early withdrawal penalty if the funds come from an IRA, but not from a 401K. 

Exception to 10% Additional Tax   You will see a YES in the IRA column for ''qualified first-time homebuyers, up to $10,000''    @tabbott14

[tabbott14]

Thank you!

[dmertz]

If you are still working for the company providing the 401(k) plan, you'll need to check with the plan to see if any in-service distribution is permitted.  If not, you won't be able to do a rollover from the 401(k).  If you do perform a rollover from the 401(k), be sure to do it as a direct rollover to avoid otherwise mandatory tax withholding on the distribution from the 401(k).