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Is there a tax break on a 401K withdrawal that is used as a down payment on a primary residence

Forum|Forum|7 years ago
June 5, 2019
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Best answer by xmasbaby0

No, there is not. Using funds from a 401k for a down payment is not an exception to the early withdrawal penalty. That is only if you use funds from a traditional IRA or Roth. If you take funds out of your 401k to make a down payment on a home you are subject to the 10% early withdrawal penalty plus ordinary income tax on the added income that will combine with your other income on your tax return. It is an expensive way to make your down payment.

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xmasbaby0Answer

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No, there is not. Using funds from a 401k for a down payment is not an exception to the early withdrawal penalty. That is only if you use funds from a traditional IRA or Roth. If you take funds out of your 401k to make a down payment on a home you are subject to the 10% early withdrawal penalty plus ordinary income tax on the added income that will combine with your other income on your tax return. It is an expensive way to make your down payment.

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