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What are the taxes and penalties associated with hardship withdrawal?

April 26, 2017associated hardship penalties taxes withdrawal

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What are the taxes and penalties associated with hardship withdrawal?

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If you take a hardship withdrawal you must pay federal taxes and applicable state taxes on the amount of the distribution taken. You may also be subject to a 10% early-withdrawal federal tax penalty, in addition to a state income tax penalty if you are under age 59 ½. You will also not be permitted to contribute for 6 months following the distribution and the limit on your deferrals in the tax year after you receive the hardship distribution will be reduced by the deferrals you made in the tax year you received the distribution.