Tax Experts
401(k) Withdrawal for a Down Payment: Is It Penalty Free?
By Kevin McCormally, Editorial Director, Kiplinger.com
March 16, 2008
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Q. I understand withdrawals from a 401(k) before age 55 are penalty free if used for the down payment of a home. How and where do I report such withdrawal to avoid the penalty?
Kevin's Answer:
Sorry, but the exception to the 10% penalty that applies to up to $10,000 withdrawn from an IRA prior to age 59 1/2 for the purchase of a first home does NOT apply to premature withdrawals from a 401(k).
Such 401(k) withdrawals are taxed and penalized. You figure the penalty on Form 5329
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