Can anyone tell me if I can do both without having to pay taxes or getting in trouble with
Uncle Sams. This is my first property, and I need to come with $25,000 for a down
Payment and closing cost. I have $12,000 in IRA, and $28,000 in my 401 K.
My 401 K Plan allows me to borrow money up to $10,000, and repay this amount in
Five or more years.
How much funds shoud I take from each one, and avoid penalties or taxes.

Thanks

J.Marquez

Yes, if your plan allows you can borrow from 401K without early withdrawal penalty. Read Your U.S. Tax Return: Elective Deferrals 401(k) Plans (http://taxipay.blogspot.com/2008/08/elective-deferrals-401k-plans.html)

You can also withdraw from IRA up to $10,000 to use the distributions to buy, build, or rebuild a first home without paying 10% penalty. Read Your U.S. Tax Return: Traditional IRA and Roth IRA (http://taxipay.blogspot.com/2008/05/traditional-ira-and-roth-ira.html)

To be clear - you will owe income taxes on the portion of the money you withdraw from the IRA that is attributable to either pre-tax contributions or tax-deferred earnings, assuming this is a traditional or rollover IRA. There is an exception if it's a Roth IRA, but then there are other limitations- post back if that's the case. Also, before you borrow from your 401(k) be aware that if you were to be unable to repay the loan the outstanding loan amount would then be considered an early withdrawal, which would mean that both taxes and penalty would be due. If you quit your job or were laid off while you still had an outstanding balance you would have something like 90 days to repay the loan, or suffer the taxes and penalty.