You can withdraw up to $10,000 for qualified acquisition costs of your first home and not pay a 10-percent, early withdrawal penalty on that amount. A 10-percent, early withdrawal penalty is imposed on IRA withdrawals before age 59½, unless an exception such as first-time home purchase applies.
To qualify for treatment as a first-time home buyer distribution, the distribution must meet all the following requirements.
- It must be used to pay qualified acquisition costs within 120 days after the day you received it.
- It must be used to pay qualified acquisition costs for the main home of a first-time home buyer such as you, your spouse, children, grandchildren or ancestors.
- You have not withdrawn $10,000 previously for a first-time home purchase.
If both you and your spouse are first-time home buyers, each of you can receive distributions of up to $10,000 for a first home without having to pay the 10-percent additional tax. But this would have to come from separate IRAs (i.e., yours and hers). Since the $18,000 came from your IRA and your maximum exclusion is $10,000, you are subject to the 10-percent penalty on the excess: $8,000.
Qualified acquisition costs include the following items.
- Costs of buying (such as your down payment), building or rebuilding a home.
- Any usual or reasonable settlement, financing or other closing costs.
If you and your spouse have not had a home for more than two years, this will be considered a first home.