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Category: Tax
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Experience:  CPA with tax experience.
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I live in Minnesota and am taking about $33,000 out of my 401k

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I live in Minnesota and am taking about $33,000 out of my 401k for the downpayment on a new home, I'm wondering if there is any way around paying the 10% tax penalty?



Thanks for your question.


No, unfortunately, there is no exception for avoiding the 10% early distribution penalty if you are going to use the funds to purchase a home. You may be able to withdraw the money under a hardship distribution but then it would still be subject to the penalty.


You may want to consider taking a loan from your 401k plan if you are still employed and they offer that feature. Most plans allow you to take up to 50% of your vested account balance as a loan. You would repay through salary deductions. This is the only way to avoid that penalty.


Hope this helps,

Best regards,



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