Originally Posted by heather77w
In 2013 I pulled money out of an IRA to use for a down payment on a house. The house won't close until March 2014. Is there any way to still utilize the tax free first $10k from this? We are first time home buyers.
The funds taken out of your traditional IRA for a home purchase will not incur the 10 % penalty for withdrawing money before 59 1/2, but they will be added to your AGI and taxed accordingly.In the case of R-IRA, it doesn't charge taxes for first time home buyers that have had the IRA for 5 years or more. There's no penalty either. Traditional IRA requires you to pay taxes even after 5 years, but there's no penalty.So, even if you are under age 59 1/2, you do not have to pay the 10% additional tax on distribution you receive to buy your first home. So, you’re able to withdraw up to $10K for the purchase of a first home without paying a penalty, But, even though the penalty is waived, you will still be required to pay taxes ,as applicable, on the traditional IRA withdrawal itself. The distribution must be used for the home purchase within 120 days of receipt of the money, or you will be penalized. If the home purchase does not close within the 120 days, the money can be returned to the IRA, but it may be considered a rollover, which can be done only once every 12 months.
your spouse can also withdraw $10K from his or her traditional IRA, so you can collectively obtain $20K penalty-free for a down payment if you’re married. The $10K limit is a lifetime limit for each individual