You can withdraw $10,000 for a first time home purchase, it will be exempt from the 10% penalty for early withdrawal but you still pay regular income tax. The other $15,000 you withdrew is subject to the 10% penalty as well as income tax.
You are only allowed to return funds to an IRA within 60 days of the original withdrawal. If the return was within 60 days, then you will answer in TurboTax that you withdrew 25k, returned 17k, and used the other 8k for the first time home buyer. You will pay income tax but not the penalty on the first time home amount and the returned 17K won’t count as taxable income. But, you have to spell this all out in TurboTax.
In the case of a withdrawal for a first time home purchase, you are allowed to return funds within 120 days. But, you must tell the trustee this is what you are doing, and not all trustees will accept a 120 day return because the limit for most people is 60 days.
If you returned the money after 60 days, or after 120 days, or you returned in less than 120 days but you did not tell the trustee this was a return, then it will be reported as a contribution. IRA contributions are tax deductible up to $6000, or $7000 if you are over age 50, and excess contributions over that are subject to additional penalties.
It’s very important in your situation to understand when you returned the $17,000 and whether you informed the IRA custodian that this was a return or a contribution.
