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JohnCJudy
New Member

We did early withdraw on 3 IRAs in 2018 to assist in down payment for our house (both first time home-buyers). House was purchased January 2019. Can we avoid 10% penalty?

 
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Hal_Al
Level 15

We did early withdraw on 3 IRAs in 2018 to assist in down payment for our house (both first time home-buyers). House was purchased January 2019. Can we avoid 10% penalty?

Yes. The withdrawal does not have to be within the same calendar/tax year as the home closing.

The closing must have been within 120 days of the withdrawals and the total, penalty free,  withdrawal cannot exceed $10,000 ($20,000 Married, but no more than $10,000 fro each spouse's IRAs).

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Hal_Al
Level 15

We did early withdraw on 3 IRAs in 2018 to assist in down payment for our house (both first time home-buyers). House was purchased January 2019. Can we avoid 10% penalty?

Yes. The withdrawal does not have to be within the same calendar/tax year as the home closing.

The closing must have been within 120 days of the withdrawals and the total, penalty free,  withdrawal cannot exceed $10,000 ($20,000 Married, but no more than $10,000 fro each spouse's IRAs).

View solution in original post

JohnCJudy
New Member

We did early withdraw on 3 IRAs in 2018 to assist in down payment for our house (both first time home-buyers). House was purchased January 2019. Can we avoid 10% penalty?

Thank you! Do I pay the 10% penalty on my 2018 taxes then get it refunded on my 2019 taxes or can I avoid the penalty this year. I went to the IRA section on turbo tax and it had several scenarios listed to avoid the 10% early withdraw penalty, but first time home buyer down-payment was not listed. I'm wondering if there's even a way to claim this in turbo tax.
Hal_Al
Level 15

We did early withdraw on 3 IRAs in 2018 to assist in down payment for our house (both first time home-buyers). House was purchased January 2019. Can we avoid 10% penalty?

No. You do not pay the penalty on your 2018 tax return. You claim the penalty exception on your 2018 taxes, because that the year the distributions (withdraws) were made.  You claim that you used the money to buy a 1st time home, in 2018 (even though the closing was in 2019)
macuser_22
Level 15

We did early withdraw on 3 IRAs in 2018 to assist in down payment for our house (both first time home-buyers). House was purchased January 2019. Can we avoid 10% penalty?

First time home buyer is in the exception list - enter up to $10,000.

What code is in box 7 on your 1099-R?   
Is the IRA/SEP/SIMPLE box checked?

First home buyer won't be in the list unless the 1099-R is coded as an IRA.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
VolvoGirl
Level 15

We did early withdraw on 3 IRAs in 2018 to assist in down payment for our house (both first time home-buyers). House was purchased January 2019. Can we avoid 10% penalty?

ps....You only avoid the penalty on up to 10,000 per person not for each IRA.  Just in case you took out more from one or combined.   So be sure to enter each 1099R under the right person.
macuser_22
Level 15

We did early withdraw on 3 IRAs in 2018 to assist in down payment for our house (both first time home-buyers). House was purchased January 2019. Can we avoid 10% penalty?

The OP said they did not see first time home buyer in the exception list.   That would indicate that the 1099-R entered was not coded as a IRA.  Other retirement account types do not have a first-time home buyer exception.

(I am assuming that the interview was continued after the 1099-R summary screen or the exception list would not have been displayed.)
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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