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Old 02-24-2019, 09:28 PM
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Join Date: Feb 2019
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Roth IRA distribution and first home

Hi, everyone; first-timer here.

Last year I purchased my first home (I am 55).

I also withdrew $28,000 from my Roth IRA.

I already knew that since I had paid taxes on that money (it is a Roth), I would not owe any more taxes to the IRS. But I am unclear as to whether or not there is a penalty for withdrawing this amount before the age of 59 1/2.

I am attempting to do my taxes and have run into a snag.

Based on:

https://www.irs.gov/instructions/i8606

Among other things, it seems this form is to report "distributions from Roth IRAs."

I looked at Form 8606, Part 3. Line item instructs me to "enter your total nonqualified distributions from Roth IRAs in 2018, including any qualified first-time homebuyer distributions, and any qualified 2017 disaster distributions (see instructions). Also see 2018 Form 8915B."

I also saw information here:

https://www.rothira.com/roth-ira-withdrawal-rules

I know there is a $10,000 amount (and I believed this might be considered a "qualified distribution"), and I assume I can use this since this is my first home that I purchased. But that means there is another $18,000 in play (would this be considered non-qualified?) Might I have to pay a penalty then?

Also, I am confused about the term "basis:"

"For Roth IRAs, you can always remove post-tax penalty contributions (also known as ?basis?) from your Roth IRA without penalty."

Finally, my wife is in a nursing home, and there are substantial medical expenses for calendar year 2018: $22,860. I wonder if this comes into play, too.

Thank you in advance to anyone who has read this wall of text and might have some guidance.



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Old 02-25-2019, 08:35 AM
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Join Date: Oct 2010
Posts: 5,224
Last year I purchased my first home (I am 55).
I also withdrew $28,000 from my Roth IRA.
I already knew that since I had paid taxes on that money (it is a Roth), I would not owe any more taxes to the IRS. But I am unclear as to whether or not there is a penalty for withdrawing this amount before the age of 59 1/2.========> Withdrawals from your R- IRA will only be classified as qualified distributions if it has been at least 5 years since you first opened and contributed to your R-IRA, regardless of your age when you opened it. If not, distributions re considered as nonqualified. however, the IRS says distributions qualify to be both income-tax and penalty free if
the money is used to buy, build or rebuild a first UP TO A $10k. maximum that is spent within 120 days of the withdrawal.


I am attempting to do my taxes and have run into a snag.

Based on:

https://www.irs.gov/instructions/i8606

Among other things, it seems this form is to report "distributions from Roth IRAs."

I looked at Form 8606, Part 3. Line item instructs me to "enter your total nonqualified distributions from Roth IRAs in 2018, including any qualified first-time homebuyer distributions, and any qualified 2017 disaster distributions (see instructions). Also see 2018 Form 8915B."

I also saw information here:

https://www.rothira.com/roth-ira-withdrawal-rules

I know there is a $10,000 amount (and I believed this might be considered a "qualified distribution"), and I assume I can use this since this is my first home that I purchased. ======>Correct

? But that means there is another $18,000 in play (would this be considered non-qualified?) Might I have to pay a penalty then?=========>Correct; as s aid since You can use up to $10k to pay for your first home, so the $18K is considered non qualified distribution so you need to pay penalty on the amt.

Also, I am confused about the term "basis:"

"For Roth IRAs, you can always remove post-tax penalty contributions (also known as ?basis?) from your Roth IRA without penalty."============>in general,in general, basis is used to refer to the amount of contributed funds in your R-IRA. Roth contributions are not tax deductible, so you've already paid taxes on the money. For this reason, you can look at your R-ira contributions as your r-IRA basis because contributed funds are not taxed when withdrawn.

Finally, my wife is in a nursing home, and there are substantial medical expenses for calendar year 2018: $22,860. I wonder if this comes into play, too.==========>it depends. Only when you itemize deductions on your Sch A of 1040. I mean only when you have You have unreimbursed medical expenses exceeding 7.5% of your AGI.



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