First Time Home Buyer

Submitted by Brian Kuhn on Fri, 2018-03-30 20:10

Preparer states 2 people filing jointly are deemed a unit for purposes of $10,000 withdrawal option on first time home purchase. So spouse’s IRA distribution from their respective IRA would carry 10% penalty correct?



Submitted by David Mertz on Fri, 2018-03-30 22:52

  • The preparer appears to be confused regarding this.  The $10,000 first-time homebuyer exception is a per-individual exception.  Filing status is irrelevant.  Each spouse can claim a separate $10,000 penalty exception on distributions from that spouse’s own IRAs.
  • For a married individual to qualify as a first-time homebuyer, that individual’s spouse must also be first-time homebuyer.
  • Consider an example where both spouses Art and Betty are first-time homebuyers and neither has claimed any amount of first-time homebuyer exception in the past.  If Art takes a $10,000 taxable distribution from Art’s traditional IRA and uses it to buy a first home, Art can treat his $10,000 as qualifying for the first-time homebuyer’s exception.  If Betty similarly takes a separate $10,000 taxable distribution from Betty’s traditional IRA and applies it to the home purchase as well, Betty also can treat her $10,000 as qualifying for the first-time homebuyer exception.

Submitted by Alan - IRA critic on Fri, 2018-03-30 23:36

  • It’s possible that the preparer’s use of the “deemed unit” term was meant to refer to the first time homebuyer definition. If either spouse fails to meet that definition, neither receives the penalty waiver. If both meet the definition, but one spouse already used up their 10k limit, then the other spouse can use their own 10k limit.
  • Application of the penalty waiver then hinges on a combination of marital status, who has an IRA, who will own the home, who will use the home, which IRA owner has used up their 10k limit, and who meets the definition of “first time homebuyer”. Some odd combinations of the above may occur.

Submitted by Brian Kuhn on Mon, 2018-04-02 14:46

I hope as many planners and individuals get back on here and say thanks at the end of each topic as they should for all these responses you give.  

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