Ask Experts Questions for FREE Help !
Ask
    yflex's Avatar
    yflex Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Feb 23, 2010, 07:34 PM
    Hardship withdrawal and first time homebuyer tax credit
    I took a $75,000 hardship withdrawal from my 401K to purchase my first home. I understand I have to pay tax and penalty for this but am I qualified to receive the tax credit? I closed my escrow October 23, 2009 and I only made $54,000 last year.
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
    		  
    #2

    Feb 24, 2010, 05:02 AM

    Yes, withdrawal for purchase of home is not hardship. You will pay 10% early withdrawal penalty and report the withdrawal as income.
    Check if $75,000 will be added to $54,000 or not to figure out your income for home credit.
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
    Expert
    		  
    #3

    Feb 24, 2010, 07:10 AM

    The $75K is added to your wages as ordinary income, which means your income was at least $129K last year (could be more, if you have other income sources). The first time home buyer's credit is available to you as long as your Adjusted Gross Income is less than $75K if filing as single or $150K if married filing jointly (the limits are a bit for purchases that close after Nov 1, 2009).

    To clarify the withdrawal - purchasing a first home IS called a "hardship withdrawal" from your 401(k), but does not relieve you from having to pay the 10% early withdrawal penalty. The term "hardship" with respect to 401(k) withdrawals merely means that your employer is required to allow you to make the withdrawal for this purpose. Most 401(k) plans allow withdrawals by active employeses ONLY if the purpose meets one of the so-called "hardship" purposes.
Not your question? Ask your question View similar questions
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

I am on H1 since August 2009. Do I qualify for first-time homebuyer tax credit? [ 1 Answers ]

I am on H1B since August 2009 and was a student (on F1 visa status) from July 2003 to July 2009. I bought a home in October 2009. Do I qualify for first-time homebuyer tax credit?

First time homebuyer tax credit with unmarried couple [ 5 Answers ]

I do some pretty easy, straight forward tax returns for some of my friends. One of them recently bought a house and I told him it would be better to claim the first time homebuyer tax credit by amending his 2008 return instead of waiting to receive it when he files for 2009. This is pretty...

Fisrt time homebuyer tax credit [ 5 Answers ]

Hi there, My husband and I came to U.S. last year. We both are holding H1-B visa, but my husband has signed a tax treaty document so he doesn't pay tax while I have to pay tax. Are we eliglible to receive the tax credit for the first-time homebuyer? Thanks. Lu

First time homebuyer credit [ 1 Answers ]

I bought a house with my fiancé in may 2008 it is my first home he was in the process of selling his condo at the time we got married in Nov 2009 - both of our names are on the house ( my maiden name since we were not married at the time of purchase) Can I still get the $3750...

401K Hardship Withdrawal and Credit [ 2 Answers ]

How can I take a hardship withdrawal without having to first ruin a perfect credit rating? Case in point - If I cannot pay my mortgage due to job loss, do I really have to be at the point of foreclosure (where my credit rating will be in ruins) before I can withdraw to paydown my mortgage and...

View more questions Search