What would you like to do?
Because the money in your 401(k) has never been subject to income tax, all withdrawals for any reason will be taxed as ordinary income. Furthermore, if you take a premature (generally, under age 59 1/2) distribution from your 401(k) to purchase a home, the distribution will additionally be subject to a 10% penalty tax. You make take an early distribution of up to $10,000 from an IRA to pay qualified acquisition costs to purchase, build, or rebuild a first home without incurring the 10% penalty tax. The distribution will still be subject to income tax. http://www.irs.gov/publications/p590/ch01.html#d0e8323 First Time Home Buyer Tax Credit If you purchased a home for your principal residence after April 8, 2008 and before July 1, 2009, you may be eligible for a First Time Home Buyer Tax Credit of up to $7,500 for your 2008 tax return. To be eligible for the credit, you must not have owned a home as a principal residence in the previous 3 years. http://www.efile.com/tax-deduction/income-deduction/home-deductions.asp
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You can certainly pull out of 401K savings if you thing your debt out weights your savings goal. I will say you jeorperdize your future to get over the present situation…. I suggest to make proper debt reduction plan and saving on your 401K in parallel. You can plan it out and can have a better future. Use Quicken to maintain your account. You'll know everything about what you are spending on
Distributions from a 401k are taxed like any other income. So, it depends on how much you are receiving each year. If you receive $30,000 a year from your 401k, you will… be taxed the same as any person who makes $30,000 per year.
NO. The taxable amount of any distributions from your 401K will be added to all of your worldwide gross income and be subject to the federal income tax at your marginal tax ra…te. It will not make any difference what you use the funds for because the contributions amount to the 401K were NEVER subject to income tax in the year that they were made as a part of your deferred compensation plan.
NEWS ALERT: YOUR IN BANKRUPTCY...YOU HAVE TROUBLE HANDLING FINANCES, You have more debt than you can handle...COMMON SENSE: BORROWING MORE TO GET OUT OF DEBT DOESN'T WOR…K! Don't do it, don't do it, don't do it! Your 401k is exempt from seizure under virtually all circumstances...including bankruptcy. (Example...OJ Simpson, owed a lot to the Browns after they won the wrongful death suit....they could take his Heisman trophy, his cars, his future income from autograph signings, etc, etc....and did and continue to. As a judgement, he can't even escape it through BK. But, they can not touch his multi million dollar 401k/IRA.) If you take a loan against the 401k, the money is no longer protected...it can and will be taken by creditors...given the opportunity....and since your already in serious financial problems now... it's highly possible that can come about. Then your left with a new debt to pay off, that uses up your 401k....and nothing else. Well, something else - you'll have a big new tax bill and debt, because not paying back the loan of the 401k is the same as withdrawing it...so you pay a penalty and everything becomes income! (Rule of thumb, depends on State, but when it becomes a withdrawal, which happens many, many ways, you should consider tax and penalty to be @40% of what you took out). Don't do it, Don't do it, Don't do it! Read the News Alert Again: Making a new debt can only make your problems worse. Now...as maybe a more direct answer: There probably isn't a law against your borrowing from the plan. However, depending on your BK, especially in a C13 though, you agreed to only make financial changes with the approval of the trustee. Failing to do so is almost always responded to first by the BK protection being ceased, and sometimes by fraud charges because not keeping your promises to the court falls under that. Finally, the trustee has a right to the funds when taken out and would want them to pay the creditors in the order required by law/the plan. That may or may not include the IRS. Your paying the IRS would be considered a preferential payment by the other creditors, and they would likely succeed in having the money returned to them.
I would say yes. You are taking a distribution of monies you never paid taxes on.
Yes. But, in each case you would pay the penalty and tax on the withdrawal as income that year.
Generally, your contributions aren't taxed (put in before taxes), and your withdrawals are taxed.
When you first get money, if it is from a taxable source, you pay tax on it no matter where you plan to keep the money. Just because you plan to keep it at home doesn't …make it exempt from tax. For example, if your employer pays you a salary, you have to pay taxes when you get your salary even if you plan on keeping it in your home. But if you just throw the money in a desk drawer or under your mattress, there is no additional tax for keeping it there and no additional tax for later removing it and spending it. Of course, if you spend it on something that is subject to sales tax, you have to pay sales tax whether you get the money from your home or from your bank. On the other hand, if you buy a home and a number of years later find that the previous owner had stashed a large amount of cash in the attic behind a loose board, the money that you found could be taxable if you keep it.
Do I ay taxes on.my 401k at age 62
Distributions from your 401K after you reach your retirement age the taxable amount will be subject to federal income tax at your marginal tax rate and may be subject to some …state income tax.
By withholding I will guess that you mean the amounts that you are contributing to your 401K BEFORE income taxes (deferred compensation amount) that will not be subject to the… income taxes during the year and will reduce the amount of your taxable gross wage amount that is reported in box 1 of your W-2 form at the end of the tax year. The deferred contribution amounts will be subject to income tax in future years when you retire and start receiving distribution the taxable distribution amounts from your 401K plan and at that time the taxable amounts will added to all of your other gross worldwide income on your 1040 income tax return and subject to the federal income tax at your marginal tax rate.
You can have some income tax withheld from the distribution amount are you can choose to make some quartely estimated tax payments or you can wait until you file your income t…ax in the next year after the year that you receive the distribution amount by the due of your income tax for the previous year return and pay the full amount of taxes at that time. A calender year taxpayer the due date for filing and paying any amount owed would be April 15 of the next year
There is a tax on the amount of profit you make on the sale of a home - sale price less the original purchase price. However there are some exemption rules if the home is your… primary residence. Definitely consult with a tax professional to make sure you are taking advantage of all of the exemptions. ans It is a fairly broad rule, with fairly easy to meet qualifications (lived in for the last several years, etc) that make the sale exempt.
Would you ever recommend someone to take money out of their 401k and use it to pay down their mortgage and if so is this allowable as a hardship and what tax implications would apply?
You should make an appointment with your tax accountant or a financial advisor who can review your economic status and then apply expert advice. You should make an appointmen…t with your tax accountant or a financial advisor who can review your economic status and then apply expert advice. You should make an appointment with your tax accountant or a financial advisor who can review your economic status and then apply expert advice. You should make an appointment with your tax accountant or a financial advisor who can review your economic status and then apply expert advice.