401k hardship withdrawal

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If I withdraw money from my 401k for a down payment on a house using the hardship reason, do I have to use all the money towards the down payment? And do I have to show proof of use next tax season?

Ask the Experts - Refund II - April 2024

JulieS

Alumni - Intuit

No, there's no hardship exception to the early withdrawal penalty. There's an exception for qualified first-time homebuyers, up to $10,000, but it doesn't apply to 401(k) distributions, only to IRAs.

You can take money out of your 401(k) early, as long as your plan allows it, but it'll be included in your taxable income and subject to an early withdrawal penalty, unless you are over 59 1/2. There are some exceptions to the penalty. Follow this link to see more.

Please note that the third column tells you if the exception applies to 401(k) distributions.

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WachswmmAuthor

Level 2

Thanks for responding. Would I have to show how the money was used when I file my taxes?

CatinaT1

Alumni - Intuit

No, you will not have to show proof unless the IRS requests it.

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DoninGA

Level 15

A withdrawal from a 401(k) and you are under the age of 59 1/2 is not eligible for the 10% early withdrawal exclusion for a first time home purchase. That is only available if the withdrawal is from an IRA and only on the first $10,000 withdrawn.

The taxable amount of the 401(k) withdrawal is entered on a federal tax return as ordinary income. You will receive a Form 1099-R for the withdrawal in January of the year following the withdrawal. The 1099-R is entered on the federal tax return as received.