@Sierra_T wrote:
My understanding is that IRA’s also provide an exemption to early distribution penalties for home renovations (under specific circumstances).
@GiseleDand @Opus 17 , since you previously answered this question, what are your thoughts?
First, you have to be a "first time" home buyer. For the IRS, "first time" means you had no ownership interest in your main home during the 2-year period ending on the date you bought the home you plan to use IRA monies to buy or rebuild. If you are married, your spouse must also meet this no-ownership requirement.
Second, you have to use the money to buy, build, or "rebuild" your home (per publication 590-B). In the actual tax code, the law says "costs of acquiring, constructing, or reconstructing a residence." I do not know of a specific definition of "reconstruction", but a window air conditioner certainly would not qualify, and I suspect that replacing a central AC or heat pump would not be enough of an improvement to qualify as a "reconstruction" if you were audited, but you may want to seek professional advice.
There are a couple of other rules, you must withdraw the money before you pay for the improvement and you must pay for the improvement within 120 days, and there is a lifetime limit of $10,000 for all withdrawals under the "first time" homebuyer rules.
You always owe regular income tax, the penalty exception would only apply to the extra 10% penalty for early withdrawal.
