is maximum allowed for primary residence vary due to balance
My client is looking to take a distribution out for purchase of primary residence and wanted to know if maximum allowed varies due to the balance in the IRA acct. if some one has 100,000 dollars versus some one else that has 50,000. what is the answer?
Permalink Submitted by Joseph Arsenault on Wed, 2009-06-17 20:49
I am going to assume your asking about the applicability of the 10% penalty.
The balance of your IRA has no bearing on the eligibility to avoid the penalty on a distribution used for a home purchase. If the client is a “Qualified first-time homebuyer” they may take up to $10,000 penalty free (not income tax free) during there lifetime. The distribution must be used before the lose of the 120th day after the day on which the distribution is received.
A first-time homebuyer is a person who has no present ownership interest in a principal residence during the 2-year period ending on the date of acquisition of the new residence.
If your client qualifies as a first-time homebuyer, they may be able to take out $10,000 (assuming this was not performed before) penalty free. Income tax will depend on the mixture after-tax basis in the account, and whether it is a Roth or TIRA.
-J
Permalink Submitted by mk foss on Wed, 2009-06-17 21:44
I agree. If the client’s spouse has an IRA also, he/she can withdraw up to $10,000 without paying a 10% penalty on the withdrawal for the same purchase.
This is one of the provisions that is exempt from the 10% penalty for IRAs only. You cannot get the same benefit if funds are withdrawn from a 401k plan for a purchase.