A Qualified Distribution From a Roth IRA
- Qualified distributions from a Roth IRA, which are not taxed or subject to the 10 percent early withdrawal penalty, come from accounts opened for at least five years. The five-year period begins with the tax year in which you made the first contribution to the account. So, a first time home buyer can only make a withdrawal for the home purchase if the account has been open for more than five years.
Qualifications for a First-time Home Purchase
- The IRS only allows withdrawals to “buy, build, or rebuild a home.” This means that the person or persons who will be owners of the home cannot have been a primary owner of a personal residence within the last two years, which officially ends on the date of acquisition. The date of acquisition is the date the contracts are signed to purchase or building begins.
Dollar Amount That Can be Withdrawn
- Fotolia.com”> Married couples can potentially take out up to $20,000 to contribute toward a down payment, closing costs, or building and construction fees of a first home purchase. A first-time homebuyer may take a distribution up to $10,000 per home without paying the10 percent penalty that is usually applicable for early withdrawals. The buyer can make the withdrawals in installments or on an as-needed basis. Married couples with Roth IRAs may take out a total of $20,000.
Persons Eligible as Homebuyers
- It is not necessary that the person pulling the money out of a Roth account be the homeowner. Individuals may purchase for themselves, spouses, their children or grandchildren, as well as parents or other ancestors.
What the Money Can Be Used For
- The money must be used for what the IRS calls a qualified acquisition cost. In addition to the cost to purchase, build or rebuild the home, it may also include closing costs and fees associated with financing or the contract signing. These payments must be made within 120 days after the funds are withdrawn.
Similar Posts:
— Admin @ 12:23 pm — 
February 8, 2011
Sorry, no comments yet.