PDA

View Full Version : 401k Early withdrawn - 10% exempt for First time home buy


jpsrao
Mar 10, 2008, 06:25 PM
Dear Sir,



My friend has referred me to ask you this question as you being expert for Forign nationals..



On Feb 13th 2007 I have withdrawn $15000 ( check cut) from $,19.186.89 after fedility deducts taxes etc, thinking to buy home immedialty with out doing much research on penalities. Finally bought first time home in Sept 2007 paying down payment of $9000 from my amount.



Now I am filling taxes and question is can I claim $9000 as exemption from 10% penalty.

I would appreciate your help in this matter.



REgards

Srini

ebaines
Mar 11, 2008, 05:49 AM
No, you are liable for the 10% early withdrawal penalty on the withdrawal of $19186, unless you are 59-1/2 years old (or 55 and retired from service).

ScottGem
Mar 11, 2008, 05:58 AM
The law permits making an inservice withdrawal for use in making a first home purchase. However, it doesn't waive the penalties for doing so. So you will need to pay $1919 in penality. In addition, the $19187 will be added to your income for 2007 and then your total income will be used to determine your tax liability. The $4K that was withheld is used to offset your tax liability the same way as your salary withholding, but it doesn't represent the actual taxes due.

jpsrao
Mar 19, 2008, 05:15 PM
Scott, Thanks for your reply. But in many places I have seen that first time home buy aamount can be excempted for penality. Some sites show if I withdraw from from IRA then no penality. Since I have withdrawn from 401 plan directly, does I need to pay panalty?

ScottGem
Mar 19, 2008, 06:32 PM
The first time home buyer waiver applies to IRAs not 401Ks.