Using IRA Funds to Buy a Home |
Using IRA Funds to Buy a Home CAUTION: The term “first-time homebuyer” is used both in the context of the penalty-free IRA withdrawal discussed in the article and the first-time homebuyer credit article. Be careful in that the definition of a first-time homebuyer is different for both. Each taxpayer who qualifies as a "First-Time Home Buyer" can make a $10,000 penalty-free withdrawal from an IRA to purchase a home. (Please note that even though the withdrawal might be penalty-free, it is still taxable. Also, this penalty exception does not extend to withdrawals from employer plans such as 401(k)s.) The tax law definition of a first-time homebuyer is quite different from the literal definition of a first-time homebuyer. As it turns out, you can qualify even if you owned a home before or even if you are helping certain family members purchase a home. To qualify for the first-time homebuyer penalty exception, the distribution must meet all of the following requirements:
First-time homebuyer - Generally, you are a first-time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, or build, or rebuild. If you are married, your spouse must also meet this no-ownership requirement. Contact this office for more details on how utilizing this exception may impact your tax consequences. |