I withdrew money from my retirement to buy a house, how will this affect my taxes?
Updated: Jun 29
That depends on the type of retirement account, how much you took out, and if you're considered a first-time homebuyer.
A 401K withdrawal will be added to your other income and taxed. You'll also pay 10% of the 401K withdrawal if taken before age 59.5. Some 401K plans allow loans; this money would not be added to your other income or charged an extra 10%.
A Roth IRA withdrawal of earnings, after contributions are previously withdrawn, will be added to your other income and taxed if you're younger than 59.5 and the Roth IRA is less than 5 years old. You won't pay the extra 10% on the Roth IRA withdrawal if you're considered a first-time homebuyer and take out less than $10,001.
A Traditional IRA withdrawal will be added to your other income and taxed no matter your age. You'll also pay 10% of the Traditional IRA withdrawal if you're younger than 59.5 and take out more than $10,000 for the first-time home purchase.
You're a first-time homebuyer if you haven't owned a home in the previous 2 years. This $10,000 of retirement money could be used for a house for yourself, your spouse, child, grandchild, or ancestor.