Originally Posted by tax_Q
I'm withdrawing $10,000 from my TD-Ameritrade rollover IRA account to use it towards my downpayment for my house. I'm a first time home buyer.
My question is - while doing so, there is a section in my brokerage account page to enter Federal Withholding and State Withholding percentage. Not sure what to enter here. Is it OK to enter 'None' here and pay the applicable taxes when I file 2016 returns next year?
No; Aslongas you qualify as a first-time home buyer, you can withdraw up to $10K from your IRA to use as a down payment without having to pay the 10% early withdrawal penalty. However, you'll still have to pay regular income tax( I mean both fed and your state taxes on the $10K of distribution from your IRA) on the withdrawal. So if you're in the 15 percent tax bracket, your $10k withdrawal for a down payment is really only $8.5K.as you can see, as a rule, you aren?t allowed to withdraw any money from your IRA until you are 59 1/2 years old. If you make premature withdrawals, you not only have to pay regular income tax on the money, but a 10% tax penalty as well. However, there are several exceptions to the early withdrawal rules. One of these is for first-time home buyers.