Expert: Carole Dunton - 11/6/2009

Question
Tax wise is it a good idea to pull a 401K out now to purchase a home when you are over 60 and what percent is it taxed?

Answer
Hi,

If you withdraw money from a 401(k) you will pay ordinary income tax, at whatever rate your total income, deductions and exemptions dictate.  If your state has a state income tax, you will pay that in addition to Federal income tax.

If you qualify to claim the first time homebuyer's credit you would have a 10% credit (maximum $8,000) to offset the taxes.  That applies only to the Federal tax, not to your state.

To qualify for the credit you can't have owned a home within 3 years.  They are talking about a credit for those who are not first time homebuyers.  It would be about $6,500 but it hasn't been signed yet so I can't give you any details.

Regards,
Carole