How to Support an IRA Roth Withdrawal for a Home Purchase

Usually money in a Roth IRA cannot be withdrawn until you are age 59 1/2 and the account is at least five tax years years old. However, as long as you meet the five-year requirement, you can withdraw up to $10,000 over the life of your IRA if you are a first-time home buyer. According to the IRS, you are a first-time homebuyer if you have not owned the home you lived in for the last two years. If you're married, both you and your spouse must meet this requirement. You can use the $10,000 for costs of building, buying or repairing the home as well as closing costs.

Things You'll Need

• Form 8606

Instructions

1. Write the amount of your IRA withdrawal on line 19 of Form 8606. To qualify for the exemption from the 10 percent penalty, this amount cannot be greater than your costs or $10,000, whichever is less. For example, if you took out the full $10,000, you would write $10,000.

2. Write the costs of your new home, up to $10,000, on line 20 of Form 8606. For example, if your new home cost $300,000, you would write $10,000.

3. Subtract line 20 from line 19 and write the result on line 21. For example, if you withdrew $10,000 from your IRA to help pay for a home that cost $10,000 or more, you would write zero on line 21.

4. Attach Form 8606 to your Form 1040, 1040A or 1040NR tax return to support your Roth IRA withdrawal for your home purchase.

Tips & Warnings

• You must use the money for purchasing your home within 120 days of withdrawing it in order to avoid the 10 percent penalty.

References

• Roth IRA Rules
• Form 8606 Instructions
• IRS First-Time Home Buyer Requirements

Resources

• Form 8606