FAQ Pensions and Annuities: Distributions, Early Withdrawals, 10% Additional Tax

Distributions, Early Withdrawals, 10% Additional Tax

This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Can I withdraw funds penalty free from my 401(k) plan to purchase my first home?

If you are under the age of 59 1/2, you cannot withdraw funds from your 401(k) plan to purchase your first home without being subject to a 10 percent additional tax on early distributions from qualified retirement plans. However, depending on the rules for your 401(k), you may be able to borrow money from your 401(k) to purchase your first home. Your plan administrator should have written information about your particular plan that explains when you can borrow funds from your 401(k) as well as other plan rules.

References:

Publication 575 (PDF), Pension and Annuity Income
Publication 560 (PDF), Retirement Plans for Small Business
Tax Topic 424, 401(k) plans
Tax Topic 558, Tax on early distributions from retirement plans

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