my wife and i want to take out funds on her IRA. i have owned a home she hasnt.would we be penalized for early

Question

would we be penalized on early withdrawl if we were using it on a home purchase. i know u can only withdrawl with no penalty if you are a first time buyer. she would be a first time buyer, i wouldnt be.

Answer 1

JQT has given you a reference to some useful information and then failed to follow the advice given! According to the IRS publication, Both you and your wife must be first-time buyers. It follows, then, that you cannot avoid the penalty. This is consistent with US tax law in general, which, for the most part, treats a married couple as one person

Take a look through the whole publication though. There may be something else you can use.

As well as the 10% penalty, you will also suffer a 20% tax withholding (if your actual tax rate is less than that, it will reduce the 10% penalty when you file). I am not a financial advisor but consider this: are you trying to get back on the housing ladder after a period of renting? If so, you need to look at the costs of renting for many years and compare that with the costs of buying, including the penalty that you are going to have to pay. It is never good to pay more than you need to for something, but you may consider it is worthwhile in the circumstances. Please, though, consider all other available options before you do this because it really should be a last resort. If you look at the list of exemptions they are there to help with life's major events, most of them catastrophes.

Answer 2

Yes, she can withdraw her IRA to purchase her first home without 10% penalty. However, only the first $10,000 is penalty free. In addition, both of you have to meet the no ownership requirement.

For more detail description go to IRS publication 590, http://www.irs.gov/publications/p590/ch01.html#d0e8295 and search for the phrase "First home" (it is located close to the end of the document).

Best wishes.

Answer 3

Her IRA + her first purchase = no penalty.