Using Retirement for First time homebuyer

[Lizzzbrown]

I just purchased a house in April and used some of my 401K retirement for the downpayment.

I am a first time homebuyer, and pulled out more than the $10k that would not be penalized.

1. How will I be able to write off the $10k on my taxes?

2. Would there be another instance for writing off any further expense? 

[leeloo]

That exception to the penalty of early withdrawal from a retirement plan only applies to an IRA. Unfortunately, you will have to pay taxes on that withdrawal.

https://ttlc.intuit.com/community/retirement/discussion/401k-withdrawal-for-home-purchase/00/706617

[Lizzzbrown]

My mistake, it was an IRA - the 401K was no longer active since I had left that company, therefore switching it over to an IRA. 

Thank you!

[JandKit]

Hi Lizzbrown,

Thank you for the question. As noted, if you use the 401K for the down payment, you will pay the 10% penalty as well as tax on the money withdrawn. However, there is a work-around for that. If you borrow the money from the 401K and continue to work, you will not incur any tax or penalty. This holds true only if you continue to work until the full amount of the 401K that you borrowed is paid back.

As belatedly noted, this was not a 401-K since you had left the employment. In that case, you would qualify for the 10% avoidance and only pay the tax on the distribution.