Rollovers - Individual Retirement Arrangements (IRAs)
Question: Even though I can't withdraw funds from my 401(k) plan to purchase my first home, can I roll over my withdrawal into an IRA and then withdraw that money from the IRA to use as my down payment without incurring the 10% additional tax for early distributions under section 72(t)?
You can roll funds from a 401(k) plan to an IRA to be able to take distribution from your IRA to purchase your first home and the section 72(t) additional tax on early distributions will not apply if:
- You are eligible for a distribution from your 401(k) plan
- You receive a distribution from a 401(k) plan that is eligible to be rolled over into an IRA
- Your IRA distribution meets the requirements for a qualified first-time homebuyer distribution
The plan administrator for your 401(k) plan is required to notify you whether a distribution from the plan will be eligible to be rolled over into an IRA. Note that funds rolled from a 401(k) plan to an IRA are generally subject to federal income tax withholding at a 20% rate unless you do a direct rollover to the IRA.
To see if your distribution meets the requirements of a qualified first-time homebuyer distribution, refer to Chapter 1 of Publication 590, Individual Retirement Arrangements (IRAs).
- Tax Topic 424, 401(k) Plans
- Publication 560, Retirement Plans for Small Business (SEP, Simple, and Qualified Plans)
- Publication 575, Pension and Annuity Income
- Tax Topic 412, Lump-Sum Distributions
- Tax Topic 558, Tax on Early Distributions from Retirement Plans, Other Than IRAs
Category: Individual Retirement Arrangements (IRAs)
Subcategory: Rollovers Individual Retirement Arrangements (IRAs)