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Submitted By: someone
Answered: November 3, 2020 11:14 pm
Answered: November 3, 2020 11:14 pm
I am 67 years old and took a distribution from my 401(k) account to pay closing costs for my new home. Am I taxed on this distribution?
The distribution is included in gross income; there is no exclusion in the law for using retirement account funds for this purpose. However, because you are over age 59½, there is no 10% early distribution penalty. Younger participants taking 401(k) withdrawals for home-buying costs are subject to penalty. The exemption from the 10% penalty only applies to withdrawals from IRAs for first-time homebuyers, and only up to $10,000.
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Tax Glossary
Withholding
An amount taken from income as a prepayment of an individual’s tax liability for the year. In the case of wages, the employer withholds part of every wage payment. Backup withholding from dividend or interest income is required if you do not provide the payer with a correct taxpayer identification number. Withholding on pensions and IRAs is automatic unless you elect to waive withholding.
