topic Re: Is a 401k withdrawal taken for the down payment on a first home taxable? in Retirement tax questions

Is a 401k withdrawal taken for the down payment on a first home taxable?

musicluv114 — Sun, 06 Feb 2022 17:45:48 GMT

I thought when the withdrawal was for the down payment on a first home there was a tax break?

Re: Is a 401k withdrawal taken for the down payment on a first home taxable?

VolvoGirl — Sun, 06 Feb 2022 17:49:33 GMT

A 401k is always taxable and a 10% early withdrawal penalty if you are under 59 1/2 unless you have an exception to the penalty BUT buying a home is not one of the exceptions for a 401K. That's only from a IRA withdrawal. For a IRA you can exclude up to 10,000 from the 10% penalty (for each spouse).

Re: Is a 401k withdrawal taken for the down payment on a first home taxable?

Opus 17 — Sun, 06 Feb 2022 19:29:14 GMT

401(k)s and IRAs are controlled by different laws and have different rules, even though they are similar in purpose. If you could’ve done a rollover from the 401(k) to the IRA and then withdrawn the money from the IRA, you would have avoided the 10% penalty on the first $10,000. Unfortunately, you owe income tax and the penalty on your withdrawal.