topic Re: I am trying to reduce the early withdrawl penalty. A covered reason is first time home purcha... in Retirement tax questions

I am trying to reduce the early withdrawl penalty. A covered reason is first time home purchase. Is that only for the down payment?

bgburzynski — Mon, 09 Mar 2026 06:10:44 GMT

Re: I am trying to reduce the early withdrawl penalty. A covered reason is first time home purcha...

DanaB27 — Sun, 13 Feb 2022 20:45:21 GMT

No, qualified acquisition costs include the following items:

Costs of buying, building, or rebuilding a home.
Any usual or reasonable settlement, financing, or other closing costs.

To qualify for treatment as a first-time homebuyer distribution, the distribution must meet all the following requirements:

It must be used to pay qualified acquisition costs before the close of the 120th day after the day you received it.
It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer who is any of the following.
1. Yourself.
2. Your spouse.
3. Your or your spouse's child.
4. Your or your spouse's grandchild.
5. Your or your spouse's parent or other ancestor.
When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions can't be more than $10,000 (IRS).

To enter you exception into TurboTax:

Login to your TurboTax Account
Click on the "Search" on the top and type “1099-R”
Click on “Jump to 1099-R” and enter your 1099-R
Click "continue" after all 1099-R are entered and answer all the questions.
Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount under "First home purchase" (up to $10,000).

Re: I am trying to reduce the early withdrawl penalty. A covered reason is first time home purcha...

Joe Snuffy — Fri, 25 Mar 2022 17:50:18 GMT

What if I purchased my home (VA Mortgage) in 2008, with first time homebuyer credit (interest free loan) of $7500, and I now want to take money from a rollover IRA to pay off the mortgage. Would this count as a way to avoid the withdrawal penalty using the first time homebuyer allowance, even though it's all these years later? It is still to pay off the same first time home. Also, I should say that I've repaid $6k of the $7.5k that I received from the credit. Thanks for any help you can offer.

Re: I am trying to reduce the early withdrawl penalty. A covered reason is first time home purcha...

DaveF1006 — Fri, 25 Mar 2022 22:18:48 GMT

No. This would only apply if you are making a first time home purchase in 2021. Paying off the balance of the mortgage loan does not qualify as an exception for the early withdrawal policy.

To report your 2008 home buyers Credit repayment, go to:

Federal>Deductions and Credits
Your home>Homebuyer Credit Repayment

@Joe Snuffy