First Time Homebuyer Withdrawal – Any Changes now with CARES ACT?

Are there any changes under CARES Act this year with regard to withdrawals from a 401k for a first time homebuyer?

My first thought is they would have to qualify under Coronavirus Related Distributions if they want to obtain 100k instead of standard 10k penalty free. Is that correct?

If they borrow from a 401k that would be looked at as a hardship, right? Does that negate using funds for home purchase and disallow the waiver of the 10% penalty?



  • The first-time homebuyer exception to the early-distribution penalty only applies to distributions from IRAs, not to distributions from a 401(k).  To be able to use the first-time homebuyer exception one would first have to roll money from the 401(k) to an IRA, and then take the first-time homebuyer distribution from the IRA, but that assumes that the individual is eligible to take regular distributions from the 401(k).  If the individual is still employed by the company providing the 401(k), that’s probably not the case.  A hardship distribution from the 401(k) wouldn’t work because hardship distributions are not eligible for rollover.
  • If the individual qualifies for a Coronavirus-Related Distribution, there is no need to apply the first-time homebuyer exception since a CRD is already exempt from the early-distribution penalty.  A CRD can be used for whatever purpose the individual desires.

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