tax implications on a 401k early withdrawal
Good day BP Family,
I've tried to search what kind of taxes I'd face with an early withdrawal from my 401k and have not really found the answer to my particular question. Just using roundish numbers, my annual salary (earned income) is about 100k gross, I'm thinking about withdrawing enough from my 401k to buy some land out right, I would withdraw about 150k, but probably closer to 200 after fees and taxes. I'm curious if I were to withdraw the money on this tax year and buy the property probably next year, or would I be better off wait a month and do it all on the same tax year? Maybe some additional info: my current plan is to redo the deck and kitchen in my current house, rent it out, buy the property, split the lot, build two houses rent one and live in the other, along with if I can put each under an LLC in some way. I know I should consult a tax advisor, I am planning to do that as well. I am just curious possible issues/benefits this may cause and or questions I should ask? Thank you all in advance, This group has been great for information and inspiration.
Most Popular Reply
So you'll pay income tax - I think the bracket would be 24% plus a withdraw penalty of 10% and you'll lose the tax deduction as well. So 34% in taxes. So you withdraw $200k, you pay $68k in taxes.
Not a very good idea in my opinion honestly
You can take a loan for 50k or 50% of the value for "free" (you'll pay back the interest to yourself)
Lots of better strategies here in my opinion