I believe the IRS allows a withdrawy of up to $10,000 from a retirement account ( IRA, 401k, etc ) towards the down payment of a home with no penalty and the withdrawal would not be included as taxable income? Is this correct?
2007-04-10 15:06:28 · 6 answers · asked by Jason 1 in Business & Finance ➔ Taxes ➔ United States
You are talking about a loan against your 401K. In that case you can take money out. However, you are required to pay it back. Depending on the plan you may only have a limited amount to pay it back, and the loan repayment comes directly out of your Payroll each pay period. This is the reason they don't hit you with any penalties or taxes in this case.
However, if you leave your job for any reason(even if they lay you off). That money is due immediatly. If you do not pay it back then you are hit with all the penalties and it becomes earned income.
If you just wanted to take the money out of your 401K, it then becomes regular income and you owe taxes and penalties on it. There is no minimum amount you can get out of paying the penalties or interest.
2007-04-10 18:22:03 · answer #1 · answered by OC1999 7 · 0⤊ 0⤋
No, not even close to correct. In any case, you'd pay income tax on the amount withdrawn from a deductible traditional IRA or other tax-deferred retirement account. If it's taken out of an IRA, the 10% penalty for early withdrawal if you're under age 59-1/2 can be waived.
Whether you can withdraw from a 401K at all while still employed there depends on your employer's plan, but if you can and do, you'll pay the income taxes, plus the 10% penalty if you're under 59-1/2.
2007-04-10 15:19:59 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
No and No
The $10,000 penalty exemption only applies to IRA's and in would be counted as income regardless.
You may want to look in to taking out a loan from your 401k (as a last resort). You have to pay it back but there would be no tax or penalty.
2007-04-10 15:56:36 · answer #3 · answered by Wayne Z 7 · 1⤊ 0⤋
no roll your 401k over and start a 401k with your new job. Try finding a prefoclosure house or a seller who is asking for a price below market value. that 401k is important a pretty good pension with the prices of everything is just not okay. But a house and sell when your retirement money runs out I mean you have alot of options but you will be taxed on the 6k leaving you with not what you thought you would have.
2016-05-17 07:08:23 · answer #4 · answered by catarina 3 · 0⤊ 0⤋
To expound on the previous answers, if your employer will allow it, you can roll over funds from your 401(k) into an IRA, then take the distribution from the IRA. You will still owe tax on the distribution, but you will be able to take the exception to the 10% penalty if it's used for first time home ownership.
2007-04-11 05:13:14 · answer #5 · answered by figment_usa 5 · 1⤊ 0⤋
You can take a LOAN against your 401k. However, if you leave your job, it will be due immediately.
2007-04-10 15:57:12 · answer #6 · answered by poonie 3 · 0⤊ 0⤋