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I used an early payment from my 401k to pay
for my house. Will I incur tax
The laws can be confusing around the tax
treatment of pension plans and retirement accounts, but the tax basics
are that 401k plans are different than other retirement accounts such
IRA’s. While there are specific
circumstances where buying a first home will avoid tax consequences
IRA distributions, there is no such thing as a 401k early withdrawal
home purchase exception. The home purchase exception that helps
individuals avoid tax penalties is not available to individuals who
retirement plans. In order to be
eligible for the homebuyers’ exception pursuant to early distributions
IRA’s, the homeowner(s) must be first-time home purchasers and the
must not be for an amount over $10,000.
Married couples are required to satisfy the restrictions for both
spouses in order to avoid the early distribution tax penalty.
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