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emueting
New Member

First Time Home Buyer

I just closed on my first house last month (I'm single, no dependents). I used a Roth IRA and a rollover IRA for the down payment. I plan to use the first time home buyer exception to not be taxed on the first $10,000 of the rollover, but are there other ways to cut down on the tax bill? And are there other deductions I can plan for? 

 

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1 Reply
melj1
Employee Tax Expert

First Time Home Buyer

Hi,

Investment retirement accounts (IRAs) are supposed to be long-term investments. Because they're intended to help you save for retirement, the Internal Revenue Service (IRS) doesn't want you to withdraw any funds from them before you turn 59½. And to enforce that, you'll normally owe a 10% penalty on the amount you withdraw early, along with income taxes.

 

Still, every rule has its exceptions. It's possible to use funds from an IRA, penalty-free, to buy a house, even if you aren’t six months away from your 60th birthday.

 

You can itemize your deductions with using your new residence. Interest, property taxes and any points paid on the new mortgage. Points on the purchase of a residence new to you, can be deducted in full on the year of the acquisition. 

 

Mel

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