Does a 2015 distribution of IRA funds for a first-time home purchase reduce my eligible contributions for the "Retirement Savings Contributions Credit" in 2016?

[Phillip1 · Accepted solution]

Yes, any distributions from retirement plans will reduce the retirement savings contribution credit. See this IRS explanation of the "saver's"credit by clicking here.

However, the fact the withdrawal was made for a first time home purchase will allow you to avoid some (if not all) of the early withdrawal penalty for taxpayers under the age of 59.5.