401K dist-1st time homebuyer
Is there any time requirement for taking the exception? For example, could you close on a house in 2003, take the money from the 401k (using an exemption for a first time homebuyer on the first 10K-no penalty) in 2004?
You can't withdraw from a 401K but you might be able to borrow from it, open a Traditional IRA account (rollover) and then use it for a first time home buyer exemption. You will have to see your Administrator to see how your 401K was setup.
If you use the above method, you have 120 days from the time you receive the funds. Also:
If both you and your spouse are first-time homebuyers, each of you can receive distributions up to $10,000 for a first home without having to pay the 10% additional tax.
Re: 401K dist-1st time homebuyer
Thanks for the reply! The problem is, there was a 401k Loan, after which the job was lost. As such, the amount of the 401 K loan that was unpaid, became an early withdrawal (1099). I was just trying to see if I could save someone a lot of grief & taxes. The house was purchased nov 2002 and the job was lost may 2003. Was hoping I could still use the Firsttime homebuyer exemption, but it doesn't sound likely. if you can add any further clarification given my clarification of the circumstances, it will be appreciated!
Re: 401K dist-1st time homebuyer
Just the date of purchase of the home put your friend out of this category. Let me delve a little deeper and see if I can come up with something.
I need answers to the following questions though.
1. What is in box 2 and 7 of the 1099-R?
2. Age of your friend
3. Did they have heavy medical expenses for 2003? Needs to be more than 7.5% of their AGI.
Yeah--I think im grabbing at straws, but would like to save her some cash.
Box 2 has the full amounmt of unpaid loan ($23k)
Box 7 is a dist code 1 (why I was trying to see if the exemption fits)
age=36
Medical--Been there. Due to her being unempliyed I thought I might be able to use the cobra pmts, but they are well under 7.5% and she was unemployed for 10.5 weeks. 12 consecutive unemployed weeks are required to do this.
Re: 401K dist-1st time homebuyer
I have since found in Pub 575 the following:
"Exception for qualified plan, 403b and govt plan loans--At least part of certain loans under a qualified employee plan is not treated as a distribution from the plan. This exception applies only to a loan that either:
is used to buy your main home
or must be repaid within 5 years"
I am thinking I might still be able to use this exception. Any thoughts? i may also contact my local IRS office for further clarification. thanks for a your input so far!
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