IRA or Roth Distribution for home purchase

Submitted by Brian Smith on Mon, 2019-05-13 18:48

Good afternoon. Say, there are options available to take a withdrawal from an IRA for a home purchase and I need some clarification and help please.

Some have indicated as long as an individual has not owned a home for 2 years, they may qualify to take up to $10,000 (per person for a couple) from and IRA and avoid the 10% penalty even if they have owned a home in the past.

Others have indicated it has to be for a first time home purchase.

Can you please clarify and the impact on the distribution from and IRA as well as the Roth.

Thank you for your help in advance.



Submitted by Alan - IRA critic on Mon, 2019-05-13 22:54

The purchase has to meet the definition of “first home”, which with respect to ownership of your main home only means you have not owned a main home in the last 2 years. If you  take an early distribution from a TIRA for a first home, you get a penalty waiver up to 10k life time. If you take a distribution from a Roth IRA, there is no tax or penalty up to the amount of your regular contribution balance. For conversions held under 5 years, a first home exception waives the penalty up to 10,000. The 10,000 limit is for life over the total of your owned IRA accounts TIRA and Roth collectively, but applies separately to a spouse’s IRAs. See Pub 590 B for all the first home requirements. A penalty exception is claimed on Form 5329.

Submitted by David Mertz on Mon, 2019-05-13 23:32

Also, if the individual is married, for the individual to qualify as a first-time homebuyer both the individual and the individual’s spouse must meet the first-time homebuyer requirement.

Submitted by Brian Smith on Tue, 2019-05-14 14:48

Thank you both for the feedback, I greatly appreciate it!   So, I’m clear…if they owned a main home before but they rented for last 2 to 3 years… each spouse would qualify to take out  up to $10,000 each (they each have 1 time option).

Submitted by David Mertz on Tue, 2019-05-14 15:34

Correct.  Section 72(t)(8)(D)(i)(I)  defines a “first-time homebuyer” as “any individual if such individual (and if married, such individual’s spouse) had no present ownership interest in a principal residence during the 2-year period ending on the date of acquisition of the principal residence to which this paragraph applies.”

Submitted by Brian Smith on Tue, 2019-05-14 15:37

Thank you for confirming.  Have a great day!

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