Have a Tax Question? Ask a Tax Expert
Hello JA Customer,
Hardship withdrawals from a 401k plan are only allowed for the following reasons:
Taking money out of your 401k to pay down or pay off a mortgage balance would not be considered a hardship withdrawal.
Even if you qualify for a hardship withdrawal for one of the reasons listed, you still pay taxes on the money withdrawn. The only thing you are not charged is the extra 10% early withdrawal penalty if you are under the age of 59-1/2.
Whatever amount you take from the 401k plan would be added to your ordinary income for the year, and it is your total income from all sources plus your filing status that determines the tax bracket you are in and the percentage of tax you would pay. Obviously the more you take out in any one year, the higher your tax bracket would be.
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Thank you JA Customer