is there a tax guru out there?could i take money out of my 401K for a security deposit on purchase of 1st home?
I am thinking on purchasing a home.
i dont have any money for the security deposit.
i am thinking on using my 401k for 3.5% downpayment and the
00 security deposit on the home.
is that possible?
any tips on how to do this?
could it be done?
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1. Security deposits don’t apply to home purchases, only rentals.
2. You may or may not be able to take an in-service distribution from your 401(k). That’s up to the plan’s rules. Many require you to quit your job to take a distro while others limit you to emergencies. Buying a home is not an emergency.
3. If you are allowed to take a distribution you’ll pay income tax on the entire distribution. If you are under age 59 1/2 at the time you’ll also pay a 10% penalty. While you can take a penalty-free distro from an IRA there is no such provision with a 401(k) plan.
4. Some plans (but NOT all!) will allow you to take a loan from the 401(k) as long as it’s paid back within a set period of time AND you remain an active participant. Any balance outstanding when you cease to be a participant, such as if you lose your job for any reason, must be paid back immediately or it will be treated as a taxable distribution.