My husband took money out of his IRA for a first time home purchase. Why is it taxing this withdrawal? We only took $5500 which is below the allowed limit.

[jerry2000 · Accepted solution]

That use of IRA funds does NOT make the withdrawal non taxable. All it does is exempt you from the penalty for early withdrawal. The distribution remains fully taxable.

[wilscooter]

I got that but the exemption is listed as none exempt.  Shouldn't it be exempt since it is?

[wilscooter]

and this is copied from the help area on Turbo tax....

There are several reasons you may not need to pay the 10% or 25% tax for taking an early distribution. For more info, see the details below.

So, now, why are they taxing this when it is a reason that qualifies under the IRS guidelines.

[jerry2000]

You aren't paying the early withdrawal penalty, you are paying ordinary income tax on the distribution.

[wilscooter]

I would suggest you google that and look on the IRS website.  You are incorrect.