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    caroln's Avatar
    caroln Posts: 2, Reputation: 1
    New Member
    		  
    #1

    Mar 29, 2007, 09:58 AM
    Tax penalty to take 401k to pay off house
    :confused: Is there a tax penalty if you take 1/3 of your 401k to pay off your home loan?
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,301, Reputation: 7692
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    #2

    Mar 29, 2007, 10:12 AM
    Yes unless you are at one of the allowed places in your life to take money out. You can borrow against most 401K at very low interest rates
    Dr D's Avatar
    Dr D Posts: 698, Reputation: 127
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    #3

    Mar 29, 2007, 10:35 AM
    Taking money out of your 401-K is generally a bad, bad move. If you are less than 59 1/2 years old, you will get hit with a 10% penalty, AND that amount will be added to your income that you will pay taxes on. I had a good friend who did this, and then had to get a HELOC to pay her tax liability, even though she was old enough to avoid the 10% hit.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #4

    Mar 29, 2007, 10:42 AM
    Unless its needed to stave off foreclosure you will pay a 10% penalty on the an early withdrawal of your 401K. This is in addition to the tax liability that you will have to pay regardless.

    It also doesn't make sense from an economic standpoint since mortgage interest is tax deductible.
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