Need help with a gray area in what's considered a first time homebuyer. IRS is very loose in it's explanation; it seems there's a two-year rule which resets you back to that status after the time has elapsed. I'm trying to avoid the 10% penalty like the first time. Below is a quick synopsis. Thank you.
-Purchased a home in 2016; used IRA funds for down payment.
-Home was primary residence for over two years.
-Joined active duty; converted property to rental in 2018. Principal residence in Texas and rental is in Ohio.
-Rented property out from 2018 to 2020; sold property in 2020.
-Orders to PCS to Washington; looking to borrow from IRA again to supplement the down payment.
My question is this:
Since the rental property in Ohio was not my principal residence (even though we owned it), are we now considered first-timers again since it's been two years?
