401-k In Service Withdrawal

[KevinMc]

Assuming the Plan Document allows for in service withdrawals and a participant meets the requirements for that withdrawal, are there any tax benefits for a participants who is using the proceeds to purchase a primary residence (first or otherwise?)???? Thanks.

[Guest Sieve]

Except for those tax advantages generally available (such as the 1st-time home buyer's credit), there is no tax advantage I can think of when the $$ come from a plan. For example, the excise tax for early distributions (if prior to age 59-1/2) still applies to plan distributions used for the purchase of a home (but does not apply, to a llimited degree, for a first-time home buyer who is taking the distribution from an IRA).

If the 401(k) plan is the only place the money is, then that probably will determine whether the hardship distribution is taken. However, with the 1st-time home buyer's credit (maximum of $8,000, which expires on 11/30/2009), you might want to take a loan (rather than a hardship distribution) and then pay off the loan when the check arrives from Uncle Sam (since you can buy a home now and elect to use the credit towards your 2008 return, thereby generating a refund check).