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ndrwrly1
Level 1

IRA withdrawal/first time homebuyer

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? 

1 Best answer

Accepted Solutions
ColeenD3
Expert Alumni

IRA withdrawal/first time homebuyer

Yes. It was no longer your main home. I am assuming you rented in Texas.

 

The exact wording from the IRS is: 

First-time homebuyer. Generally, you are a first-time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or rebuild. If you are married, your spouse must also meet this no-ownership requirement.

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1 Reply
ColeenD3
Expert Alumni

IRA withdrawal/first time homebuyer

Yes. It was no longer your main home. I am assuming you rented in Texas.

 

The exact wording from the IRS is: 

First-time homebuyer. Generally, you are a first-time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or rebuild. If you are married, your spouse must also meet this no-ownership requirement.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

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