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February 10, 2021
Question

How do I put that I used my 401k to purchase a home and I do not have a lien?

  • February 10, 2021
  • 1 reply
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How do I do this? I cashed out a 401K and used the funds to purchase my mobile home. It does not have a lien, and I do not have a 1098 for it. Should I even put it? Because it requires me to put bank info if I purchased a new home. What do I do?

1 reply

February 10, 2021

If you took the money out of your 401K to purchase a home, then you will likely have 10% additional tax if you are not yet age 59 1/2 at the time of the withdrawal.

 

Unfortunately, there is no exception to you being subject to 10% additional tax on the early distribution from your 401K to buy a house.  There was one available if the money had come from an IRA. There is also no current deduction in place for purchasing a home.

 

If you were affected by COVID, you may qualify for a special CARES provision if you qualify with the following:

 

Q3. Am I a qualified individual for purposes of section 2202 of the CARES Act?

A3. You are a qualified individual if –

  • You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
  • Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
  • You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
  • You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
  • You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

Under section 2202 of the CARES Act, the Treasury Department and the IRS may issue guidance that expands the list of factors taken into account to determine whether an individual is a qualified individual as a result of experiencing adverse financial consequences

 

The code on the 1099R received from your 401K will affect your distribution being treated as a covid one or just early distribution subject to additional 10% tax.