Using an IRA Withdrawal for a Qualified Home Purchase!

Purchasing a home is an expensive proposition that leaves many would-be buyers feeling cash strapped. If that’s you, you might be thinking about taking some money out of your traditional IRA to help fund the purchase. But should you? Afterall, a 10% penalty normally applies to IRA withdrawals before age 59 1/2. The good news is that there’s an exception to the penalty for certain home purchases, subject to a lifetime limit of $10,000.

To qualify, you must be purchasing an eligible “first-time” principal residence for yourself, your spouse, your child, your spouse’s child, your grandchild, or your parent or other ancestor. In addition, neither you nor your spouse, if applicable, can have owned a principal residence within the two-year period that ends on the acquisition date. The acquisition date is the date you enter a binding contract to buy the home or the date the building or rebuilding begins.

Timing is critical. The funds must be spent to pay qualified acquisition costs within 120 days of the day you receive the withdrawal. Qualified acquisition costs include the costs of buying, building or rebuilding a home, plus any usual or reasonable settlement, financing or other closing costs.

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Note: Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.

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For personalized advice or any questions you may have, reach out to us at [email protected] or call 707-557-1040. Learn how using an IRA withdrawal for a qualified home purchase could benefit you, and understand the exceptions to the penalty that apply under specific conditions.

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