I am recently divorced and have to withdraw from my 401K in order to make a down payment on a house. I am also in the military and will be deploying to Iraq shortly. Question: If I cash in the 401K when I am in a tax free status (Iraq), will I still be taxed the 20% or just pay the 10% penalty?

It may depend on how large of a amount you remove from the 401k.

Check with your plan administator,as all plans are not alike.mine gives me a one time no penalty withdrawal to buy a house. Yours may be different so always check first.

Hi,
As another said, please call your plan administrator.
If you withdraw the money while in a tax free status, you may have to eventually pay the 20% Federal Tax if you buy in the US. But, I am not a professional, and you really need to talk with the administrator.
Best of luck, and I'm sorry to hear that you have to withdraw some money. I am retired, and at 63, still have some left in my 401K; thank goodness!

You are recentlly divorced, going to Iraq, yet you are buying a house?

Doesn't sound like the best course of action. I think you are better off keepig your money in your 401K, and do not buy a house until you return from Iraq.