Early withdraw from roth ira for home purchase

[iampeter]

Hi, 

I withdrew from my roth ira (total about 25k). 15k was my contribution and 10k was my earnings. From what I understand, I should be able to withdraw my contributions tax and penalty free, and my earnings should be tax-free because it was my first home purchase. When I put that 1099 info into Turbotax though, it says I owe an additional 7-8k in taxes. 

What's going on?

[dmertz]

On the page in 2020 TurboTax that lists the 1099-R forms that you've entered, click the Continue button and and proceed to the questions that ask for your Roth IRA contribution basis and whether or not your first contribution was to a Roth IRA before 2016.

If your first Roth IRA contribution was for 2016 or later, the $10,000 of earnings distributed in 2020 will be subject to ordinary income tax but not to an early-distribution penalty.

[iampeter]

Hey thanks for your help so far.

I did some testing with how I'm checking boxes, I initially missed the option to write down how much I contributed, so that lowered my taxable income appropriately. The $10,000 in earnings is added to my taxable income. When I check the box to say that this was for purchasing a home, the tax estimate does decrease by $1000, but I'm wondering if it should be more.

Prior to putting in my 1099, my tax estimate is $150. After putting in my 1099, it jumps to $8500. I set my contributions and it goes down to $3200, and then I say the remaining $10,000 is for a first home purchase, and it goes down to $2200. If I check the turbotax summary, I can do the math that shows that $10,000 from my roth ira withdrawal is still being added to my total taxable income, but shouldn't the entirety be excluded? I thought my tax estimate would go back to what it was prior to adding my 1099.

[dmertz]

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When I check the box to say that this was for purchasing a home, the tax estimate does decrease by $1000, but I'm wondering if it should be more.

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That implies that you made your first Roth IRA contribution after 2015.  In that case, use of the $10,000 for a first-home purchase means that you are not subject to the 10% early-distribution penalty (the $1,000 decrease in your balance due) on the $10,000, but the $10,000 is still subject to ordinary income tax.