I am 61.5 and want to use my IRA to buy a home for the first time. Do I incur any tax penaties on this.?

Question

How much can I use and do I incur a tax penalty for this? I am 61.5 years old.

Answer 1

Since you are over age 59.5, you can withdraw any amount from your IRA for any purpose without a tax penalty.

However, you will pay income tax on your withdrawal regardless of the use of the money.

Answer 2

No, no penalty regardless of what you use it for. Penalties only kick in if you're under 59 1/2 (or over 70 1/2 and dont' take out the required minimum distributions).

It is taxable as ordinary income, however if it's a traditional IRA. There's no way to avoid that.

Answer 3

You will have to include the entire amount withdrawn in income but there is no penalty on any amount no matter when you take it because you are over 59 1/2. Just be careful of crossing into another tax bracket. Depending on your other income, it may be best to take some out this year and some out next. If you are close to the next tax bracket, it will save you a little in taxes by making two distributions. Even if you decide not to buy the house later, you would still have 60 days to put the money back into your IRA without having to pay the taxes on it. If buying the house is very likely, I would sit down today and figure out what tax bracket you will be in for 2007 and see if it is worth while making a distribution today. It is the last day of the year, after all.

Good luck and have a great New Year.


Hi VB

Answer 4

Before you take the money out, figure out what tax bracket you are in. Then see if the amount you plan to take out will leave you in that tax bracket or put you in a higher one.

If you can withdraw all of the money you need at 15%, that's probably the best you can do. If you withdraw all of the money you need and it pushes you into the 25/33/35% tax bracket, that starts to get expensive.

If you can take some money in several different tax years, it will spread out the tax burden.

Answer 5

No, at 61-1/2 you can withdraw all of your IRA money if you want to, without penalty, no matter what you use it for. You will of course have to pay income tax on the amount withdrawn if it's a traditional IRA and not a Roth IRA.

Answer 6

Since you are over 59 & 1/2 you may withdraw any amount from your IRA without penalty. Of course, regular income tax still applies if it is a traditional IRA.

For those under 59 & 1/2, a first time homebuyer is permitted to withdraw up to $10K without penalty.

Answer 7

There are two different issues: Taxes and Penalties.

Assuming that this is a pre-tax Traditional IRA, you will always pay ordinary income taxes on the withdrawal regardless of what you do with the money.

As you are over 59 1/2, you will not have to pay the 10% penalty associated with an early withdrawal from a IRA.

Answer 8

You shouldn't incur any penalties though if it is a traditional IRA you are going to be taxed on at least part (if not all) of the distribution that you take out of the IRA.

Answer 9

First time home buyers do not.