Roth IRA withdraw and returning the money

[rsd12602]

I took $2,600.00 from my Roth IRA in November 2016 for a down payment on a new home. I ended up not buying the home and returned the money to the account January 2017. Do I have to pay a withdraw penalty since it was not used for its intended purpose and I put it back?

[RichardG · Accepted solution]

According to the IRS, "If you received a distribution to buy, build, or re­build a first home and the purchase or construc­tion was canceled or delayed, you generally can contribute the amount of the distribution to an IRA within 120 days of the distribution. This contribution is treated as a rollover contribution to the IRA."

However, keep in mind that the penalty exception only applies to first-time home buyers.  If this wasn't your first home purchase, the exemption from the penalty never applied to the withdrawal. 

Generally, you are a first-time home buyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or rebuild. If you are married, your spouse must also meet this no-ownership requirement.