A Real Estate Professional
"Committed To Your Journey Home"
http://www.nicoletusseyhomes.net/ Nicole@acquirehomes.com
call Nicole 719-648-1288
Please share this information with someone considering purchasing a home.
"Committed To Your Journey Home"
http://www.nicoletusseyhomes.net/ Nicole@acquirehomes.com
call Nicole 719-648-1288
Please share this information with someone considering purchasing a home.
How to Tap an IRA for a Home Purchase
If you're considering buying your first house, making your purchase sooner rather than later could save you thousands of dollars with the $8,000 tax credit refund. Another interesting option is tapping into your IRA, up to $10,000 penalty-free.
Question?
I am going to buy my first house this month and will withdraw some money from my IRA to make the down payment. I'm not 59½, but I understand that I can avoid the early-withdrawal penalty because the money will be used to buy my first home. What is the rule about using IRA money for a home purchase, and what proof do I need to provide at tax time to show that the withdrawal was for that reason?
Answer
If you have a traditional IRA, you normally would have to pay a 10% penalty on any distribution before you turn 59½ (except to the extent that any of the withdrawal could be attributed to nondeductible contributions). However, you can withdraw up to $10,000 penalty-free over your lifetime to buy or build a first home for yourself, your spouse, your kids, your grandchildren or even your parents. If you're married, your spouse can also withdraw up to $10,000 from his or her IRA penalty-free toward the purchase. The withdrawal will still be taxed in your top tax bracket.
To qualify for the exception, the money must be used to buy or build the home within 120 days of the withdrawal. The definition of "first-time homebuyer" is quite broad: It means a person who hasn't owned a home for the past two years.
Answer
If you have a traditional IRA, you normally would have to pay a 10% penalty on any distribution before you turn 59½ (except to the extent that any of the withdrawal could be attributed to nondeductible contributions). However, you can withdraw up to $10,000 penalty-free over your lifetime to buy or build a first home for yourself, your spouse, your kids, your grandchildren or even your parents. If you're married, your spouse can also withdraw up to $10,000 from his or her IRA penalty-free toward the purchase. The withdrawal will still be taxed in your top tax bracket.
To qualify for the exception, the money must be used to buy or build the home within 120 days of the withdrawal. The definition of "first-time homebuyer" is quite broad: It means a person who hasn't owned a home for the past two years.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
July 13, 2009
I love referrals,
Nicole Tussey, Serving God and Clients
“Committed to Your Journey Home”
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