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    jpsrao's Avatar
    jpsrao Posts: 3, Reputation: 1
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    #1

    Mar 10, 2008, 06:25 PM
    401k Early withdrawn - 10% exempt for First time home buy
    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    On Feb 13th 2007 I have withdrawn $15000 ( check cut) from $,19.186.89 after fedility deducts taxes etc, thinking to buy home immedialty with out doing much research on penalities.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's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #2

    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's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
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    #3

    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's Avatar
    jpsrao Posts: 3, Reputation: 1
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    #4

    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 Since I have withdrawn from 401 plan directly, does I need to pay panalty?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's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #5

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