We like to post relevant tax tips, tax resolution information and other events that may effect your income taxes. Please be sure to come back often as we are always adding content to our channel. Hello and Welcome back!
Today William from California wants to know if he can use money from his IRA to purchase a home and not have to pay an early withdrawal penalty. Let’s take a look and find out… Today’s tax tip of the day is brought to you by Patriot Tax Professionals. For honest, ethical tax resolution, contact Patriot Tax Professionals at 877-782-9383 of visiting out website at www.patriottaxpros.com You may be able to use money in your IRA toward the cost of buying a home without incurring an early withdrawal penalty. Let’s take a closer look…
The Smith family has $20,000 in an IRA and wants to use the money for a down payment on a home they would like to purchase. So the question is, “Can they liquidate the IRA without having to pay early withdrawal penalties?” The IRS has determined that you must meet a couple of conditions to qualify for an exemption from an early withdrawal penalty.
1. You withdrawal limited to no more than $10,000
2. This is a “once in a lifetime” exemption, so if you’ve already done this, you are no longer eligible.
3. Your withdrawal must be used for qualified first-time home-buyer expenses only. So you cannot buy the home then use the withdrawal to make home improvements.
4. If you have owned a primary residence in the last 2 years, you are not eligible.
5. Lastly, it is important to remember that the amount withdrawn from the IRA is still subject to all applicable income taxes.
Do you have a question about your income taxes? Be sure to visit our YouTube channel regularly as we are always adding tax tips.
Thank you, Patriot Tax Professionals