401k withdrawal

[bnrretire]

Hello 

I have a 401(k) age 61 want to withdraw money for home improvements. Will I pay tax on the 401(k) withdrawal?

[xmasbaby0]

Yes, you will pay tax on the 401k distribution.  There is no exception for using 401k money for home improvements.    You will receive a 1099R in late January/early February which must be entered 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.

[marctu]

Traditional 401(k) withdrawals are taxed at the account owner's current income tax rate.  Roth 401(k) withdrawals generally aren't taxable, provided the account was opened at least five years ago and the account owner is age 59½ or older.  Depending upon the amount of your distribution your current income tax bracket may change as well.

Any taxable distribution paid to you is subject to mandatory withholding of 20%, even if you intend to roll the distribution over later.

Thank you for the question @bnrretire 

All the best,

Marc T.

TurboTax Live Tax Expert

27 Years of Experience Helping Clients

[DoninGA]

A withdrawal from a 401k) is taxable income to be reported on your tax return.  Since you are over age 59 1/2 there will not be an early withdrawal penalty.

When you make the withdrawal the plan administrator will withhold 20% of the amount withdrawn for federal taxes.

If you make the withdrawal in 2024 you will receive a Form 1099-R in January or February of 2025.  The Form 1099-R is reported on your federal tax return.

[SwapnaM]

Yes, you will need to pay taxes on the 401(k) withdrawal for home improvements. 

Tax Implications

• Ordinary Income Tax: Withdrawals from a 401(k) are subject to ordinary income tax. The amount you withdraw will be added to your taxable income for the year.
• No Early Withdrawal Penalty: Since you are over 59½, you will not incur the 10% early withdrawal penalty.
• Another alternative is to take a 401(k) Loan: Some plans allow you to take a loan from your 401(k) without immediate tax implications, but you must repay it within a specified period. Employees who lose their job must also pay back the entirety of the loan within 30 to 60 days of termination or risk additional penalties.

@bnrretire Thanks for the question!!