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 Post subject: Question about using IRA funds for first home purchase
PostPosted: Sun Mar 25, 2012 10:41 am 

Joined: Fri Mar 27, 2009 8:35 pm
Posts: 12
Hi guys,

As my post title states, I have a question regarding the use of IRA funds on your first home purchase.

From my understanding, an individual can withdraw up to $10,000 from a traditional IRA w/o paying the 10% penalty to make their "first" home purchase. You can also withdraw up to $10,000 from a Roth IRA's earnings w/o paying the 10% penalty.

So for example, if I had 2 traditional IRA accounts with over $10,000 in each and a Roth IRA with over $10,000 in earnings, could I withdraw $10,000 from each traditional IRA account and my Roth IRA's contributions + $10,000 in my Roth IRA's earnings?

I want to try to preclude any comments about how absurd of an idea this is by stating that I am not planning to do this, but I just wanted to get a better understanding about the rules.

Thanks.


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 Post subject: Re: Question about using IRA funds for first home purchase
PostPosted: Mon Mar 26, 2012 7:48 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1952
hohos wrote:
From my understanding, an individual can withdraw up to $10,000 from a traditional IRA w/o paying the 10% penalty to make their "first" home purchase. You can also withdraw up to $10,000 from a Roth IRA's earnings w/o paying the 10% penalty.

So for example, if I had 2 traditional IRA accounts with over $10,000 in each and a Roth IRA with over $10,000 in earnings, could I withdraw $10,000 from each traditional IRA account and my Roth IRA's contributions + $10,000 in my Roth IRA's earnings?

Nope. It's $10K allowable for IRA contributions. Period. It doesn't matter how many accounts it comes from.

Look at it this way: if the contribution limit for IRAs is $5K for all accounts combined, why would they make the rule different for money going out from the rule for money going in?

Anyway, RIRAs are a different kind of animal. You can get your contributions out anyway regardless of the reason but as for the earnings, it has to be in the account for 5 years or it's taxable.

And don't forget that you have to buy your home within 120 days of withdrawing it or your withdrawal is basically disqualified from being a first time home buyer exemption.

It's kind of hard to tease all that info out from IRS Publication 590 so I did some looking around and I think that Bankrate's http://www.bankrate.com/finance/money-guides/irs-rules-for-early-ira-withdrawals-1.aspx does the best job of summarizing what you need to know.


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 Post subject: Re: Question about using IRA funds for first home purchase
PostPosted: Mon Mar 26, 2012 12:40 pm 

Joined: Fri Feb 10, 2012 6:14 am
Posts: 58
I am doing this. My understanding is that you can use $10,000 total per person. So my husband and I can each withdraw $10,000 penalty free for a first home purchase. You can also withdraw for education (no limit).


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 Post subject: Re: Question about using IRA funds for first home purchase
PostPosted: Mon Mar 26, 2012 1:57 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1952
ssarah wrote:
I am doing this. My understanding is that you can use $10,000 total per person. So my husband and I can each withdraw $10,000 penalty free for a first home purchase. You can also withdraw for education (no limit).

This is true. That $10K limit is per person. But as stated above, not $10K per account.


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 Post subject: Re: Question about using IRA funds for first home purchase
PostPosted: Mon Mar 26, 2012 2:55 pm 

Joined: Fri Mar 27, 2009 8:35 pm
Posts: 12
Thanks for the clarification.


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 Post subject: Re: Question about using IRA funds for first home purchase
PostPosted: Wed Aug 08, 2012 1:59 pm 

Joined: Wed Aug 08, 2012 1:43 pm
Posts: 1
... to continue this train of thought.

It's 10k for each spouse, BUT can I take 20k from my IRA account and claim 10k exclusion for me and 10k exclusion for my spouse.

If that is not clear... I am asking if my spouse can use my IRA (in my name) for the "First Time Home Buyer Exclusion."

Thanks in advance!


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 Post subject: Re: Question about using IRA funds for first home purchase
PostPosted: Wed Aug 08, 2012 9:43 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
Ted wrote:
... to continue this train of thought.

It's 10k for each spouse, BUT can I take 20k from my IRA account and claim 10k exclusion for me and 10k exclusion for my spouse.

If that is not clear... I am asking if my spouse can use my IRA (in my name) for the "First Time Home Buyer Exclusion."

Thanks in advance!


Technically you can, and 10k of earnings will count for the "first" time home buyer and the second $10k will be distributed based as non-qualified distribution (with the ordering rules applying to a Roth IRA). The second $10k cannot ever count for your spouse's "first" time home buyer distribution when taken from an account with your name on it. 1099's will be issued to an individual, and each individual will have to work through a form 8606.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Question about using IRA funds for first home purchase
PostPosted: Thu Aug 09, 2012 8:27 am 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1627
Location: Seattle, WA
Bichon Frise wrote:
Ted wrote:
... to continue this train of thought.

It's 10k for each spouse, BUT can I take 20k from my IRA account and claim 10k exclusion for me and 10k exclusion for my spouse.

If that is not clear... I am asking if my spouse can use my IRA (in my name) for the "First Time Home Buyer Exclusion."

Thanks in advance!


Technically you can, and 10k of earnings will count for the "first" time home buyer and the second $10k will be distributed based as non-qualified distribution (with the ordering rules applying to a Roth IRA). The second $10k cannot ever count for your spouse's "first" time home buyer distribution when taken from an account with your name on it. 1099's will be issued to an individual, and each individual will have to work through a form 8606.


So when you say "Technically you can" you mean "No"?


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