@wtl3rd wrote:
Hi (again),
My employer allows both: traditional and Roth. I pulled the money from both. Is there a higher tax amount on the Roth? Also, is there any tax break for using the money to buy my first home?
Withdrawals from a traditional pre-tax 401(k) account will be subject to regular income tax at any age, plus a 10% penalty if you are under age 59-1/2.
Withdrawals from a Roth option account are more complicated. You can withdraw your contributions without paying any tax or penalties. (You always withdraw the contributions first and the earnings last.) If you withdraw earnings, you are subject to the following rules:
| You are over age 59-1/2 and the account was opened in or before 2017 (for a 2022 withdrawal) |
The withdrawal is qualified and tax-free |
| You are over age 59-1/2 but the account was opened less than 5 years ago |
The withdrawal is not qualified and you pay income tax on the earnings, but not a 10% penalty. |
| You are under age 59-1/2 |
The withdrawal of earnings is subject to income tax plus a 10% penalty. |
There is no exception or special treatment for using 401k money to buy a home. That rule applies to IRAs, but IRAs and 401(k)s are covered by different sections of the tax law, and the rules are different, even though the accounts have a similar purpose. If you had rolled over the funds from the 401(k) to an IRA first and then withdrawn money from the IRA, you could have avoided the 10% penalty on up to $10,000 of withdrawals used for a first time home purchase.
