401(k) Hardship Withdrawal Rules, Taxes and Penalties

A 401(k) hardship withdrawal lets you take money out while you still work for the employer, but only if your plan offers it, the need is "immediate and heavy," and you take no more than the need (plus the tax on it). It is taxed as ordinary income, and before age 59½ you also owe the 10% additional tax unless a separate exception applies: hardship by itself is not one. The money can't be rolled over or paid back. For a single filer earning $55,000, a $12,000 hardship withdrawal in 2026 costs about $1,490 of federal income tax plus a $1,200 penalty.

To run your own numbers, the 401(k) withdrawal calculator has a hardship option: it estimates the federal tax, the 10% penalty, state tax and the 10% default withholding, and can solve for the gross amount you need to net a target. This guide covers the rules behind those numbers: who qualifies, how much you can take, which exceptions can cut the penalty, and when a plan loan is the better choice.

What qualifies as a 401(k) hardship?

Under the regulations, a hardship distribution must be made "on account of an immediate and heavy financial need" and be "necessary to satisfy the financial need" (Treas. Reg. §1.401(k)-1(d)(3)). Whether a need qualifies depends on the facts. The regulation gives its own examples: funeral expenses for a family member generally qualify, and buying a boat or a television generally does not. A need can qualify even if you saw it coming or chose to incur it.

The seven safe-harbor reasons

Most plans don't judge each case. They use the regulation's list of expenses that are deemed to be an immediate and heavy need, in §1.401(k)-1(d)(3)(ii)(B):

A "primary beneficiary" is someone named as your beneficiary under the plan with an unconditional right to part or all of your account when you die. Reasons 6 and 7 are often confused: reason 6 covers repairs to your home after any casualty, while reason 7 covers broader disaster costs, including lost wages, but only in a FEMA individual-assistance area.

A plan can use this list, a narrower one, or its own facts-and-circumstances test, as long as the standards are written in the plan and applied the same way to everyone. Plans don't have to offer hardship withdrawals at all (IRS: hardship distributions). Your summary plan description says whether yours does and which reasons it accepts.

What the "necessary" test requires

A distribution counts as necessary only if all three of these hold, under §1.401(k)-1(d)(3)(iii):

1. It doesn't exceed the need. The need can include the federal, state and local income taxes and penalties reasonably expected to result from the distribution, so you can gross the amount up for tax (see the second worked example).
2. You took other available distributions first. That means other currently available distributions from this employer's plans, such as ESOP dividends, but not other hardship distributions.
3. You told the plan in writing that you lack the cash. You represent, in writing or electronically, that you have insufficient cash or other liquid assets reasonably available, and the administrator has no actual knowledge to the contrary.

What changed in 2019: no suspension, no loan-first rule

Final regulations issued in 2019 removed two old conditions, and they apply to distributions made on or after January 1, 2020:

• No six-month contribution suspension. A plan "may not provide for a suspension" of your elective or employee contributions as a condition of a hardship distribution. Before 2020, most plans stopped your deferrals, and with them the employer match, for six months.
• No requirement to take a plan loan first. IRC section 401(k)(14)(B) says a distribution doesn't fail the hardship test just because you didn't take an available loan. The regulation still lets a plan choose to require nontaxable loans first, so check your plan's terms.

SECURE 2.0 changes to hardship and emergency withdrawals

The SECURE 2.0 Act of 2022 made hardship easier to request and added three distribution types that, unlike hardship, waive the 10% penalty and can be repaid.

Self-certification (section 312)

Section 401(k)(14)(C) now lets the plan administrator rely on your written certification that the distribution is for a safe-harbor reason, is not more than the need, and that you have no other reasonable means to pay. The administrator can't rely on it if it actually knows otherwise. A plan may still ask for documents, so certification does not mean you can discard them.

Emergency personal expense distributions (section 115)

Under IRC section 72(t)(2)(I) and IRS Notice 2024-55, effective for distributions after December 31, 2023:

• Purpose: unforeseeable or immediate financial needs for necessary personal or family emergency expenses. The notice's factors include medical care, casualty losses, imminent foreclosure or eviction, funeral costs, auto repairs and other necessary emergency expenses. Car repairs, notably, are not on the hardship safe-harbor list.
• Limit: one distribution per calendar year, up to the lesser of $1,000 or your vested balance above $1,000.
• Tax: taxable income, but no 10% additional tax.
• Repayment: allowed within three years. Until you repay it, or contribute at least as much as the unpaid amount, you can't take another one from that plan for the next three calendar years.
• Optional for plans. If your plan doesn't offer them, Notice 2024-55 (Q&A A-15) lets you treat an otherwise permissible distribution, such as a hardship withdrawal, as an emergency personal expense distribution on your return, using exception number 23 on Form 5329. That saves up to $100 of penalty, and you may repay that part to an IRA within three years.

Domestic abuse victim distributions (section 314)

Section 72(t)(2)(K) allows a distribution within one year after you become a victim of domestic abuse by a spouse or domestic partner, up to the lesser of the indexed dollar limit or 50% of your vested balance. The limit is $10,500 for 2026, up from $10,300, per IRS Notice 2025-67. The statute defines abuse broadly, including psychological, emotional and economic abuse. You self-certify, the 10% doesn't apply, and you can repay within three years. As with emergency distributions, if your plan doesn't offer this type, Notice 2024-55 (Q&A B-14) lets you treat a qualifying hardship distribution as one on Form 5329 (exception 22), up to the limit.

Qualified disaster recovery distributions (section 331)

Section 72(t)(11) covers distributions taken from the first day of a presidentially declared major disaster's incident period until 180 days after the applicable date, if your principal home was in the disaster area during the incident period and you had an economic loss. The cap is $22,000 per disaster across all plans. These distributions owe no 10%, are included in income evenly over three years unless you elect otherwise, and can be repaid within three years. The Form 8915-F instructions say you can treat a distribution as a qualified disaster distribution regardless of why it was made, and say a qualified disaster distribution made on account of hardship can be repaid. If a disaster prompted your hardship withdrawal, check whether it qualifies before you file.

How much can you withdraw?

Two limits apply: the need (grossed up for tax) and the money types your plan makes available. Section 401(k)(14)(A) lets a plan distribute on hardship your elective deferrals, qualified nonelective and qualified matching contributions, and the earnings on all of them. The IRS hardship page adds that regular employer matching and nonelective (profit-sharing) contributions can also be paid on hardship if the plan says so, and that some plans allow certain pre-1989 amounts. Your plan can offer fewer sources than the law allows, for example only your deferrals without earnings, so the hardship amount on your plan's website may be lower than your vested balance.

Unvested employer money is never available. Money you rolled in from an IRA or an old plan is often available under separate in-service withdrawal rules that don't require a hardship at all, which is worth asking about first.

Taxes and the 10% penalty on a hardship withdrawal

Pre-tax hardship money is ordinary income in the year you receive it, taxed at your bracket rates and usually by your state. Before 59½, the 10% additional tax under IRC section 72(t) applies to the taxable part. The IRS hardship page says plainly that hardship distributions "may also be subject to a 10% additional tax." Approval from your plan answers whether the plan may pay you. It says nothing about the 10%.

Exceptions that can coincide with a hardship

The penalty goes away, fully or partly, only when the hardship also fits one of the exceptions on the IRS page Retirement topics: exceptions to tax on early distributions:

The first-home ($10,000) and higher-education exceptions apply only to IRAs, under section 72(t)(2)(E) and (F), so a 401(k) hardship for a down payment or tuition is fully penalized before 59½. The IRA withdrawal tax rules guide explains those IRA-only exceptions, and the IRA withdrawal tax calculator applies them. One caution on the medical exception: the 7.5% floor is measured on AGI that includes the withdrawal itself, so a larger withdrawal raises the floor.

If you are 55 or older and have left this employer, you don't need a hardship at all. A regular distribution from that employer's plan after separating in or after the year you turn 55 avoids the 10%, and the guide to cashing out a 401(k) after quitting covers what leaving a job does to your options at younger ages.

Roth 401(k) hardship withdrawals

Roth contributions come out without income tax, but a nonqualified distribution from a designated Roth account is split pro rata between contributions and earnings, per IRS Publication 575. The earnings share is taxable and, before 59½, subject to the 10%. A distribution is qualified, and fully tax-free, only after the five-tax-year period and at 59½, disability or death, so most hardship withdrawals from a Roth 401(k) are nonqualified.

Withholding is 10%, not 20%

Section 402(c)(4)(C) excludes any distribution "made upon hardship of the employee" from the definition of an eligible rollover distribution. So the mandatory 20% withholding of section 3405(c) doesn't apply. Instead, section 3405(b) sets a 10% default for nonperiodic distributions, which you can change on Form W-4R, including down to zero. Because tax plus penalty is 22% for most people in the 12% bracket, 10% withholding usually leaves a balance due in April. The tax withholding calculator can help you plan the rest of the year.

No rollover, no repayment

Because it isn't an eligible rollover distribution, a hardship withdrawal can't go back into the plan or into an IRA within 60 days, and the IRS hardship page confirms it can't be repaid. The only routes back are the three SECURE 2.0 types above, for the part that qualifies. If you are moving an old balance rather than spending it, a rollover is a different transaction: the 401(k) rollover calculator compares those options.

Worked examples with 2026 tax brackets

All examples use the 2026 federal figures from Rev. Proc. 2025-32: standard deduction $16,100 single and $32,200 married filing jointly, the 12% bracket ending at $50,400 of taxable income for single filers and $100,800 for joint filers, and 22% above that. State tax is left out.

$12,000 to stop an eviction, single filer, age 38

Other income is $55,000 of wages.

• Taxable income before the withdrawal: $55,000 − $16,100 = $38,900
• Room left in the 12% bracket: $50,400 − $38,900 = $11,500
• Income tax: $11,500 × 12% + $500 × 22% = $1,380 + $110 = $1,490
• 10% additional tax (eviction is not an exception): $12,000 × 10% = $1,200
• Total federal cost: $2,690, or 22.4% of the withdrawal
• Default withholding: $12,000 × 10% = $1,200, so $1,490 is still due at filing

Grossing up to net $10,000 for tuition, single filer, age 35

Other income is $45,000, so taxable income is $28,900 and there is $21,500 of room in the 12% bracket. Each withdrawn dollar costs 12% income tax plus 10% penalty, 22% in all.

• Gross withdrawal needed: $10,000 ÷ (1 − 0.22) = $12,821
• Income tax: $12,821 × 12% = $1,538.52; penalty: $12,821 × 10% = $1,282.10
• Total: $2,820.62, leaving $10,000.38
• Electing 22% withholding on Form W-4R sends $2,820.62 to the IRS and pays you about $10,000, with nothing left to owe

The regulation allows this gross-up because the need includes taxes and penalties reasonably expected from the distribution.

$20,000 for medical bills, married filing jointly, age 50

The couple has $80,000 of wages and pays $20,000 of unreimbursed medical bills this year, and takes the standard deduction.

• AGI with the withdrawal: $80,000 + $20,000 = $100,000; 7.5% floor: $7,500
• Penalty-free under the medical exception: $20,000 − $7,500 = $12,500
• 10% additional tax on the rest: $7,500 × 10% = $750
• Taxable income: $100,000 − $32,200 = $67,800, inside the 12% bracket, so income tax on the withdrawal is $20,000 × 12% = $2,400
• Total federal cost: $3,150, against $4,400 with no exception. Withholding of $2,000 leaves $1,150 due. They report exception 05 for $12,500 on Form 5329.

$6,000 for a funeral when the plan has no emergency option

A single filer, 42, takes a $6,000 hardship withdrawal for a parent's funeral and has no other emergency personal expense distribution that year. Treating $1,000 as one on Form 5329 (exception 23) cuts the penalty from $600 to $5,000 × 10% = $500, and that $1,000 can be repaid to an IRA within three years. The income tax is unchanged.

Hardship withdrawal vs 401(k) loan

If your plan offers loans, borrowing avoids income tax and the 10% as long as the loan meets section 72(p): the lesser of $50,000 or half your vested balance (or up to $10,000 if your plan allows it), repaid in level payments at least quarterly within five years unless the loan buys your main home (IRS: retirement plan FAQs regarding loans).

A loan usually wins when your job is stable and you can afford the payments. Using the eviction example, a $12,000 loan (possible with a vested balance of at least $24,000) costs nothing in tax, while the hardship withdrawal costs $2,690. Hardship makes more sense when you can't carry the payments, when your plan has no loan feature, or when you expect to leave the job before the loan would be repaid.

How to request a hardship withdrawal, step by step

1. Read your summary plan description or the plan's website for whether hardship is offered, which reasons it accepts, which money types it pays from, and whether it requires a loan first.
2. Check the alternatives. A plan loan, an in-service withdrawal of rollover money, or, if you're 59½ or older, a regular in-service distribution may cost less and doesn't need a hardship.
3. Size the request. Total the bill, then gross it up for federal tax, the 10% if no exception applies, and state tax. The 401(k) withdrawal calculator does this in net-target mode.
4. Submit the request and certification. Most recordkeepers take it online. You certify the reason, the amount and that you lack other reasonably available resources.
5. Choose your withholding on Form W-4R. Electing your combined federal rate (for example 22%) avoids a bill at filing.
6. Pay the expense with the funds and keep proof of payment.
7. At tax time, report the Form 1099-R. A hardship before 59½ usually shows code 1 in box 7 (Form 1099-R instructions); claim any exception on Form 5329, or use Form 8915-F for a disaster distribution.

Documentation to keep

Even with self-certification, keep the records that prove the reason and the amount, because the plan can ask for them and the IRS can examine the exception you claim:

• the bill, invoice or notice behind the need: medical statements, the eviction or foreclosure notice, the purchase contract, the tuition statement, funeral home invoice, repair estimates, or FEMA and disaster-area records;
• proof you paid it, such as receipts or bank records;
• your hardship request and certification, and the plan's confirmation of the amount and money types paid;
• your Form W-4R election, Form 1099-R, and Form 5329 or Form 8915-F as filed;
• records of any repayment of an emergency, domestic abuse or disaster portion within the three-year window.

California residents should also know the state adds a 2.5% tax on early distributions unless a state-recognized exception applies (FTB: early distributions), so the gross-up needs that rate too.