IRA for 1st time home buyer

Submitted by Douglas Bauerband on Fri, 2017-03-31 14:39

have client who has 401k and rolled over to an IRA (had to get it out of the 401k since he left company and can’t borrow from it)

with the IRA, he is in his 50’s and never bought a house. He would like to take some money from his IRA and put a down payment on his home with out any penalty.

A. does the IRA allow withdrawals for 1st time home buyers without the 10% penalty (he knows he will pay taxes on the withdrawal)?

B. will he get hit with the 10% penalty since he does not want to do the 72t?

thank you,
Douglas



Submitted by Alan - IRA critic on Fri, 2017-03-31 16:43

  • The first time homebuyer penalty exception will waive the 10% penalty, but ONLY for 10,000 as a lifetime limit. If married, his spouse could also withdraw up to 10,000 from her IRA without penalty. For example, if he withdrew 50,000 he would owe the penalty on 40,000 and would file Form 5329 to claim the exception for 10,000.
  • If client withdraws from his IRA for a first home purchase and the deal is delayed or falls through, he has 120 days to roll the funds back to his IRA, and this rollover does NOT count against the one rollover limitation.


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