Expert: Allen - 5/7/2006

Question
is there a penalty when you take money out of your profit sharing to purchase a house?
Do you have to pay taxes on withdrawing from it?

Answer
You always have to pay income tax on any withdrawal from the plan. You also have to pay an additional excise tax of 10% on most withdrawals before reaching age 59 1/2. However there are exceptions to the 10% tax. One of them is what is known as a hardship distribution. Under most plans a withdrawal to purchase your primary home qualifies as a hardship distribution. I would check with the plan administrator to find out if this is the case with your plan.