I have a client with earnings of 140k and up he just bought a house and took out 19k from his 401k for a down payment. To my understanding, he can only write off if it is an IRA. Now he has a hefty bill to pay for the distribution. Is there anything I can help him with to reduce his liability as a first-time home buyer?
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He'll probably be able to itemize deductions now, as a homeowner.
bought the home Nov. 2021 not much interest or tax property acrued
"To my understanding, he can only write off if it is an IRA."
I think you need to read the rules for 401(k) vs IRA, and the differences between being allowed to make a hardship withdrawal and the penalty exemption. Because this is never a "write off if it is an IRA" and it sure isn't for this client.
Absolutely correct my wording can be a little tricky sometimes
The most significant difference that seems to go wrong, is that a withdrawal from the 401(k) might be permitted, but that is up to the plan administrator and governed by the plan document. That has nothing to do with the taxpayer incurring penalty and paying taxes. But they think it does. "Well, my employer's rep allowed me to have it for the stated reason, so it qualifies, right?"
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