Roth IRA - any way to use more than $10K for early home purchase?

[bhuether]

Sorry for reposting - just realized this forum might be better than the general Taxes forum.

-----

Hi, I am in mid 40's, and my wife and I are trying to move to Moscow where my 8 year old son lives. I am US citizen, wife is Russian, her 12 year old son is Russian. My 8 year old son lives with his mother in Russia. My wife's 12 year old son lives with us, so the three of us would be relocating to their home country.

Because my son's mother makes it so hard for me to see my son, my wife and I are planning a move to Moscow. I have enough across 2 Roth IRAs to buy a home there, but I read I can only take out $10K for a home purchase, and I take it that $10K is total across all Roth IRA accounts.

So I am wondering if there are any odd provisions that enable me to use more of my Roth IRA. I mean really odd. I have a court order to see my son, so maybe there is some provision that allows some sort of emergency use of a Roth IRA for family relocation purposes? I have a court psychologist on record saying my son needs therapy already due to the mother's demonization of me, and so my move has a child welfare aspect to it, so I thought maybe there is some sort of really obscure human rights angle or something?? Or a process to request exception to policy? I mean in this case my only reason to purchase the house is to be closer to my son and offset psychological damage that according to court experts his mother is causing. We are currently living on coast of Montenegro, so moving to Moscow is not really desirable, it is just something I am morally obligated to do.

If I decided to just use Roth IRA for more than $10K, I know there is 10% penalty (is that 10% of the money over $10K I use, or is it 10% of the amount, over 10K, attributed as growth?). Also I would be taxed - similar to previous question, would I be taxed on the amount over $10K, the amount being determined by the earnings on the amount over $10K? And that tax rate would be 25% or something?

Anyway, I know with things like this, usually it is the obscure, lesser known aspects of tax law that can facilitate/enable something and really hoping there is some angle that I haven't considered...

For what it is worth, I am an online music instructor (registered business in US), so maybe there are provisions for using a Roth IRA if it is in support of music/art entrepreneurial endeavors? That is, if I bought a separate property as a music studio, does that open different exceptions to early Roth IRA usage?? Also I am military veteran, 80% disability rating, so not sure if that opens up other possible exceptions? I know, I am really reaching here, but $10K for use for a home purchase is quite absurd a limitation, and planning such a complicated move to a city like Moscow really requires me to exhaust all tax angles...

thanks

[dmertz · Accepted solution]

You can use as much of your Roth IRA funds as you want for a home purchase.  The issue is how much of the distribution from the Roth IRA is tax free and how much is subject to penalty.

You always take out your original Roth IRA contributions tax- and penalty-free without having to have any exceptions to the early-distribution penalty.  These are distributed from your Roth IRAs first.  Only if you will be dipping into the investment earnings that were accrued in your Roth IRAs would you have a need to use the first-time homebuyer's exception on up to the first $10,000 of earnings (or taxable Roth conversions that have not met the 5-year holding period).  If it's been more than 5 years since the beginning of the year for which you first made a Roth IRA contribution, the amount of earnings to which you apply the first-time homebuyer's exception will also be income that is excludible from taxable income.  Whatever amount is includible in income will be subject to ordinary income tax.

Just be aware of the requirements to be a first-time homebuyer and that if any of the Roth money is in a designated Roth account in a qualified retirement plan like a 401(k) that money would first have to be rolled over to a Roth IRA and then distributed from the Roth IRA for any of the above to apply.  See IRS Pub 590-B on regarding the definition of a first-time homebuyer.

There are no provisions in the tax code that allow the IRS to waive early-distribution penalties for circumstances other that those explicitly defined in the tax code:  https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...

[bhuether]

Ok, that is great news! thanks!