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401k distribution

I took a 401k distribution in 2021 for a down payment on a new home.  The required taxes and penalty were taken out of the distribution.  Do I need to include the net distribution amount as income on my 2021 taxes filed next year?

2 Replies
Level 15

401k distribution

Your 401k distribution is subject to an early withdrawal penalty of 10% if you are under the age of 59 1/2, plus ordinary income tax.   Distributions from a 401k are not exempt from the early withdrawal penalty  for use as a down payment on a home---only distributions from an IRA can be exempt.   


You will get a 1099R in January/early February and it will have to be entered on your tax return.  The amount withheld from the distribution was only an estimate.


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.



**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Level 15

401k distribution

There is no exclusion of the early withdrawal penalty on a first time home purchase when the the withdrawal is from a 401(k) account.  The withdrawal has to be from an IRA to exclude the early withdrawal penalty on the first $10,000 of the withdrawal for a first time home purchase.


The distribution from the 401(k) has to be reported on your 2021 tax return.  It is entered as ordinary income and taxed at your current tax rate.  Any taxes withheld will also be entered on your tax return as a tax payment.  The 10% early withdrawal penalty cannot be withheld from the withdrawal.  The penalty is assessed on the 2021 tax return as a tax liability.

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