Can I take an early distribution from my IRA to buy a mobile home that doesn't have a traditional mortgage? How do I prove it was used for that and avoid the 10% penalty?
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Can I take an early distribution from my IRA to buy a mobile home that doesn't have a traditional mortgage? How do I prove it was used for that and avoid the 10% penalty?

 
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Anonymous
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Can I take an early distribution from my IRA to buy a mobile home that doesn't have a traditional mortgage? How do I prove it was used for that and avoid the 10% penalty?

Once you withdraw your contributions, you can take out up to $10,000 for a first-time home purchase – without paying the 10% penalty. As an added bonus, if you’ve had the Roth IRA for at least five years, the withdrawn earnings are tax-free; if it’s less than five years old, the earnings are taxable.  

You are considered a first-time homebuyer if you haven’t owned a home (or had financial interest in one) at any point during the last two years. So, even if you owned a house at some point in the past – say, five years ago – you may well meet the first-time buyer requirement.


The rules differ depending on which type of IRA you have. If you qualify as a first-time homebuyer, you can withdraw up to $10,000 from your traditional IRA to help cover the costs of buying a home. Your spouse can also withdraw up to $10,000 from his or her IRA (remember, IRAs are individual retirement accounts; you don’t “share” them with a spouse). Remember that even though you’ll avoid the 10% early withdrawal penalty, you’ll still owe income tax on any amount you (and your spouse) withdraw.

The rules are a bit different with a Roth IRA. You can withdraw contributions you’ve made to your Roth IRA tax-free and penalty-free at any time, for any reason (this is because you’ve already paid taxes on the contributions). Once you withdraw your contributions, you can take out up to $10,000 of your earnings for a first-time home purchase – without paying the 10% penalty. As an added bonus, if you’ve had the Roth IRA for at least five years, the withdrawn earnings are tax-free; if it’s less than five years old, the earnings are taxable.


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