Can I avoid paying taxes on a 401k withdrawl?
ihatevfsf asked:
I’m refinancing one of my investment properties and i want to know if i do a 401k withdrawal but use that money towards paying for the closing costs and paying down the principal balance on the investment property. I know I will be subject to the IRS 10% penalty however can i deduct the amount paid to reduce principal and cover closing costs.
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I’m refinancing one of my investment properties and i want to know if i do a 401k withdrawal but use that money towards paying for the closing costs and paying down the principal balance on the investment property. I know I will be subject to the IRS 10% penalty however can i deduct the amount paid to reduce principal and cover closing costs.
February 27th, 2009 at 10:57 pm
You cannot avoid paying taxes for use in investment purposes. Plain and simple.
March 2nd, 2009 at 11:24 am
take a loan from the 401k, money not subject to penalty and you’ll be paying yourself interest.
March 3rd, 2009 at 1:04 pm
Some 401(k) plans allow you to take a loan of one-half of your balance. Some only allow it for certain purposes. If you leave the company, however, many plans require you to immediately pay it all back. You will have to look into the details of your particular plan.
March 6th, 2009 at 8:43 pm
No. It is pretax money. If you withdraw it, you are taxed on the withdrawal.
March 10th, 2009 at 7:28 am
I recall like 10 years ago, that people had a way to use an IRA for investment in “investment” property. The rules and methods were complicated though, as was the accounting. I am not sure if that applies to a 401(k). At least you would have to convert your company 401(k) to a self directed 401(k) if the company allows that. Mine did.
But it will take some work. You should consult a tax and accounting professional. It would be worth the savings if it is possible.
March 11th, 2009 at 11:14 pm
sure the closing costs are deductible…they always are. Principle payments are not. So you can limit the damage but not by a whole lot. And, you’ll be gambling that capital gains taxes when you sell that property will be lower than your current income tax level.