I am about to request a hardship withdrawal from my profit sharing to use for a down payment for a new home. I have heard that this money is not taxable if used for a down payment, but have not gotten a definite answer. Will I have to pay taxes at the end of the year? And if so, what percent? I would rather have the tax taken from my withdrawal up front.

Hardship withdrawal from where?

My profit sharing account through my employer.

Most profit sharing plans follow the rules for 401(k) plans, so with that assumption:

A "hardship" withdrawal simply means that the IRS requires that your employer allow you to make a withdrawal for the stated hardship purpose. But it does NOT affect the tax you owe on that withdrawal, nor does it eliminate the 10% early withdrawal penalty. So be prepared to pay income tax (federal and state/local if applicable where you live) plus 10% penalty if you are under age 59-1/2. If you decide to proceed typical practice is for the administrator to withhold 20% for federal income taxes, and nothing for state/local nor the 10% penalty. This is simply withholding - whether you will owe more than that (or less) depends on your tax bracket and can't really be determined until you file your 2012 taxes. Talk to the plan admin as to how this works because details vary. They may require that you submit documentation for this home purchase and they may require that the withdrawal go directly to the closing agent (i.e. title company, escrow agent, or bank - depending on how home purchases work in your state) so as to be sure that the money is indeed used for the stated hardship purpose.

Some advice: it's your money, but I would suggest that if the amount you need can be covered by a loan from your profit sharing plan rather than a withdrawal that would be much more advantageous for you than taking a withdrawal. Post back if you want to know more about how such loans work - but the primary benefits are that the amount of the loan is not taxable and the principal and interest you pay on the loan is to yourself. You can talk to your HR department to see if your profit sharing plan has a loan provision.

Thank you for that information, it was very helpful!