What Home Repairs Qualify for Hardship Withdrawal?

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What Home Repairs Qualify for Hardship Withdrawal

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As a homeowner, doing home repairs is necessary to maintain the strength, stability, and full functionality of your own. Some repairs may be necessary due to continued usage, wear and tear, and damages resulting from natural disasters.

However, some of these repairs may come with a price tag too high to be paid out-of-pocket. In such a case, you may need to find a way of paying for the home repairs without leaving a black hole in your financial life. One of the options you may have is 401(k) hardship withdrawal.

However, before you apply for a hardship withdrawal, you may wonder what home repairs qualify for a hardship withdrawal, and what requirements you must meet.

Let’s find out what home repairs qualify as a financial hardship.

Can you use a hardship withdrawal for home Repairs?

A hardship withdrawal acts as a financial safety net when you have urgent, unexpected home repairs. Homeowners can tap into their 401(k) account to get the funds they need, providing a lifeline when expected expenses threaten to cripple their finances.

When you make a hardship withdrawal, you can only withdraw what you need to fix your home plus any additional cash to cover the taxes and penalties you might face when you make the withdrawal. If you qualify for a hardship withdrawal, you will access funds for the specific repairs you want to do.

Related: Do dental expenses qualify for hardship withdrawal?

What home repairs qualify for hardship withdrawal?

Home repairs that qualify for a hardship withdrawal fall into categories that address immediate health, safety, or essential living conditions for you and your family. These often include major structural issues that compromise the integrity of your home, such as foundation repairs or roof replacements.

Essential systems like plumbing, electrical, or HVAC failures may also qualify, as they directly impact the habitability of your home. However, cosmetic upgrades or non-urgent renovations usually do not meet the criteria for hardship withdrawals. 

Repairs that qualify for hardship have to be urgent and necessary, therefore, requiring immediate repair. Remember, before you apply for a hardship withdrawal to make repairs to your home, always contact your retirement plan administrator to understand specific eligibility requirements and ensure you comply with them.

What proof do you need for a hardship withdrawal?

When looking to get approval for a hardship withdrawal, you will be required to provide documentation to prove the financial hardship. You will need to present evidence proving the urgency and necessity of the home repair you want to make. Providing adequate documentation eliminates any suspicion that you lied to get a hardship withdrawal.

For home repairs, you will need to show a quote from a qualified technician who will undertake the repairs. You can also provide invoices of individual items to be purchased, and that are required for home repair. The documentation is required for tax purposes, and you may not need to disclose these to your employer.

When you provide irrelevant documentation, your withdrawal may be rejected due to suspicion of dishonesty. Therefore, clearly show adequate documentation as proof of the hardship withdrawal.  

How to apply for a hardship withdrawal for a home repair

When applying for a hardship withdrawal, you have to follow several steps to get the funds you need to pay for home repairs. Start by contacting your 401(k) plan administrator to obtain the necessary forms to apply for a hardship withdrawal for your repairs. 

Next, provide all the necessary information about the nature of the repair you want to make in your home. You will need to prove that the repairs you want to undertake meet all the requirements for a hardship withdrawal. 

Once you submit the hardship withdrawal application, it can take 3 to 7 business days to get approved and receive a disbursement.

What are the implications of taking a hardship withdrawal?

Before dipping into your retirement nest egg, you must consider the tax implications of the withdrawal.

The first implication after making a hardship withdrawal is that you will have to suspend 401(k) contributions for the next 6 months. As a result, your 401(k) account will experience a slow growth rate, since you won’t be able to make further contributions during that period.

Additionally, unlike a 401(k) loan, you won’t be able to pay back the money you withdraw from your 401(k) account. So, in addition to stunted growth, your account balance reduces significantly, crippling your retirement plan. 

You might also face tax implications for making a hardship withdrawal. Typically, when you make a hardship withdrawal, the withdrawal is subject to income taxes. Additionally, if you are younger than age 59 ½, you will be required to pay a 10% early withdrawal penalty on the withdrawal.  

Alternative ways to pay for home repairs other than a hardship withdrawal

While a hardship withdrawal may provide a financial boost when undertaking home repairs, you may consider going for alternative sources of funds to preserve your retirement money.

Here are some of the alternative options you may have:

Emergency fund or personal savings

An emergency fund or a savings account provides a financial cushion for those moments when you have an unplanned and unbudgeted expense. Drawing from the emergency fund or savings account allows you to cover repair costs without denting your 401(k) account or triggering a taxable event.

Home equity loan or line of credit

You might also want to explore a home equity loan or a home equity line of credit (HELOC). These loans use the equity in your home as collateral and may offer lower interest rates compared to other forms of borrowing.

Personal loan

You may also consider applying for a personal loan from a bank or credit union. Personal loans can provide a lump sum that you can use for home repairs, and the repayment terms can be more flexible compared to other forms of financing.

Credit cards

If the repairs you want to make in your home don’t require a lot of money, then using your credit card can provide a short-term solution. However, approach this option with caution due to the potentially high-interest rates on credit loans. When you take a credit card loan, make a plan to repay the money as soon as you can.

Government assistance programs

Depending on your situation and location, you may access government programs or grants offering financial assistance for home repairs.

However, most of these programs offer financial help for repairs of houses that have issues that may pose health or safety-related risks. You may also benefit from government financial assistance if your house is damaged in a natural disaster like a storm or earthquake.

Insurance claims

If your home homeowners’ insurance covers the repairs you want to make, you can file for a claim and get the finances you need to handle the repairs. Remember, the insurer will assess the repairs or damages to determine if they are covered by the policy you have.

Negotiate a payment plan

Some contractors may be willing to work with you to spread out the cost of the repairs over time. You can also speak with a contractor or service provider and set up a favorable payment plan.


A 401(k) hardship withdrawal can provide you with the financial assistance you need to handle any urgent repairs you need to make in your home. You will need to provide adequate documentation to get approved for the hardship withdrawal.

However, if you want to preserve your 401(k) money, you can consider drawing money from other alternative options like an emergency fund, personal savings, taking a personal loan, taking advantage of government assistance programs, or filing an insurance claim.

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