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Lev
Lev, Tax Advisor
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I am buying a house for the 1st time and wanted to take ...

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I am buying a house for the 1st time and wanted to take $10,000 out of my traditional IRA for the down payment. I understand that you have to pay taxes on this amount but there is no early withdrawl pentalty, is this correct and how can I verify?
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.

Yes - you are correct - please see for reference the IRS publication 590 - http://www.irs.gov/pub/irs-pdf/p590.pdf - page 53 - see also other exemptions.

Even if you receive a distribution before you are age 59½, you may not have to pay the 10% additional tax if you are in one of the following situations:

  • You use the distributions to buy, build, or rebuild a first home (up to $10,000 of distributions).

To qualify for treatment as a first-time homebuyer distribution, the distribution must meet all the following requirements.

  1. It must be used to pay qualified acquisition costs before the close of the 120th day after the day you received it.
  2. It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer who is any of the following.
  • Yourself.
  • Your spouse.
  • Your or your spouse's child.
  • Your or your spouse's grandchild.
  • Your or your spouse's parent or other ancestor.

When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions cannot be more than $10,000.

If both you and your spouse are first-time home buyers, each of you can receive distributions up to $10,000 for a first home without having to pay the 10% additional tax.

 

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22704
Experience: Taxes, Immigration, Labor Relations
Lev and 5 other Tax Specialists are ready to help you
Customer: replied 6 years ago.
Reply to LEV's Post: Is it different for a 401K or is it exactly the same?
Expert:  Lev replied 6 years ago.

No - that specific exemption is only valid for distributions from IRAs and not valid for distributions from 401k plans - if you need to take distribution from 401k plan - you may roll the money over to IRA account and take the distribution thereafter.

Please be aware that you may not take distribution from 401k plan if you are still employed with the same employer - but you may have a better option - to take a loan from your account - that will not be taxable event.

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