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If you take a Withdrawal it is taxable on your return and may push you into a higher tax bracket and more income can reduce or eliminate some credits you may qualify for and may make more of any Social Security or SSDI taxable. So be careful. Then there is a 10% Early Withdrawal Penalty if you are under 59 1/2. You can lose like up to 50% of it for taxes and penalties for federal and state.
For a IRA. You can exempt up 10,000 for the penalty for a new home purchase. And that is for each spouse's withdrawal.
For IRA under 59 1/2 early Distribution Penalty See IRS publication 590B for IRA Distributions Page 24 for exceptions
If you qualify as a "first time home buyer", the first $10,000 you withdraw can be exempt from the 10% penalty for early withdrawal. You will still pay regular income tax. Any amount more than $10,000 that you withdraw will be subject to the penalty and the income tax.
For IRS regulations, a "first time" home buyer is someone who did not own or co-own the home they lived in as their main residence at any time in the 2 year period prior to the closing on the new home.
Also, you must withdraw the money before you close, and you must close within 120 days of withdrawing the money. If you withdraw after you close, or it takes more than 120 to close after withdrawing, it won't qualify for the penalty exemption.
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