Skip to main content
Retirement PlansTax Tips

First -Time Home Buyer Can Avoid Penalty For Early Distribution From IRA

By August 9, 2014No Comments

If you are buying a home and are short on cash you may want to consider taking up to $10,000 from your traditional IRA to fund the purchase.

Although the withdrawal is subject to income tax you may qualify for a waiver of the 10% penalty on early distribution if you are deemed to be a first-time home buyer. The law defines a first-time home buyer for this purpose as someone who has never owned a home or has not owned a home in the last two years ending on the date of the purchase. If you are married your spouse must also meet this test.

In addition, the money must be used for the purchase within 120 days of the date of distribution and any amount not used for the purchase of your home within this period will be subject to the 10% penalty. You can avoid the penalty by returning any money not used to your IRA within the 120 day period.

Since you will incur income taxes on the distribution it is recommended that you use your IRA funds as a last resort.

Contact Us 

You deserve the best in IRS tax representation, tax preparation, and tax planning services. At East Coast Tax Consulting Group, you’ll work with a licensed CPA who will handle your case from beginning to end. We invite you to contact our team to schedule a free, confidential consultation.

[gravityforms id="5" title="false" description="false" ajax="true" tabindex="199"]
<script type="text/javascript">var gform;gform||(document.addEventListener("gform_main_scripts_loaded",function(){gform.scriptsLoaded=!0}),window.addEventListener("DOMContentLoaded",function(){gform.domLoaded=!0}),gform={domLoaded:!1,scriptsLoaded:!1,initializeOnLoaded:function(o){gform.domLoaded&&gform.scriptsLoaded?o():!gform.domLoaded&&gform.scriptsLoaded?window.addEventListener("DOMContentLoaded",o):document.addEventListener("gform_main_scripts_loaded",o)},hooks:{action:{},filter:{}},addAction:function(o,n,r,t){gform.addHook("action",o,n,r,t)},addFilter:function(o,n,r,t){gform.addHook("filter",o,n,r,t)},doAction:function(o){gform.doHook("action",o,arguments)},applyFilters:function(o){return gform.doHook("filter",o,arguments)},removeAction:function(o,n){gform.removeHook("action",o,n)},removeFilter:function(o,n,r){gform.removeHook("filter",o,n,r)},addHook:function(o,n,r,t,i){null==gform.hooks[o][n]&&(gform.hooks[o][n]=[]);var e=gform.hooks[o][n];null==i&&(i=n+"_"+e.length),gform.hooks[o][n].push({tag:i,callable:r,priority:t=null==t?10:t})},doHook:function(n,o,r){var t;if(r=Array.prototype.slice.call(r,1),null!=gform.hooks[n][o]&&((o=gform.hooks[n][o]).sort(function(o,n){return o.priority-n.priority}),o.forEach(function(o){"function"!=typeof(t=o.callable)&&(t=window[t]),"action"==n?t.apply(null,r):r[0]=t.apply(null,r)})),"filter"==n)return r[0]},removeHook:function(o,n,t,i){var r;null!=gform.hooks[o][n]&&(r=(r=gform.hooks[o][n]).filter(function(o,n,r){return!!(null!=i&&i!=o.tag||null!=t&&t!=o.priority)}),gform.hooks[o][n]=r)}});</script> <div class='gf_browser_unknown gform_wrapper gform_wrapper_original_id_5 gravity-theme whitepaper-cta-popup_wrapper' id='gform_wrapper_1702844415' ><div id='gf_1702844415' class='gform_anchor' tabindex='-1'></div><form method='post' enctype='multipart/form-data' target='gform_ajax_frame_1702844415' id='gform_1702844415' class='whitepaper-cta-popup' action='/first-time-home-buyer-can-avoid-penalty-for-early-distribution-from-ira/#gf_1702844415' novalidate> <div class='gform_body gform-body'><div id='gform_fields_1702844415' class='gform_fields top_label form_sublabel_below description_below'><div id="field_5_2" class="gfield gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible" data-js-reload="field_5_2"><label class='gfield_label' for='input_1702844415_2' >First Name<span class="gfield_required"><span class="gfield_required gfield_required_asterisk">*</span></span></label><div class='ginput_container ginput_container_text'><input name='input_2' id='input_1702844415_2' type='text' value='' class='large' tabindex='199' placeholder='First Name' aria-required="true" aria-invalid="false" /> </div></div><div id="field_5_3" class="gfield gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible" data-js-reload="field_5_3"><label class='gfield_label' for='input_1702844415_3' >Last Name<span class="gfield_required"><span class="gfield_required gfield_required_asterisk">*</span></span></label><div class='ginput_container ginput_container_text'><input name='input_3' id='input_1702844415_3' type='text' value='' class='large' tabindex='200' placeholder='Last Name' aria-required="true" aria-invalid="false" /> </div></div><div id="field_5_1" class="gfield gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible" data-js-reload="field_5_1"><label class='gfield_label' for='input_1702844415_1' >Email Address<span class="gfield_required"><span class="gfield_required gfield_required_asterisk">*</span></span></label><div class='ginput_container ginput_container_email'> <input name='input_1' id='input_1702844415_1' type='email' value='' class='large' tabindex='201' placeholder='Email Address' aria-required="true" aria-invalid="false" /> </div></div><div id="field_5_4" class="gfield gform_validation_container field_sublabel_below field_description_below gfield_visibility_visible" data-js-reload="field_5_4"><label class='gfield_label' for='input_1702844415_4' >Phone</label><div class='ginput_container'><input name='input_4' id='input_1702844415_4' type='text' value='' autocomplete='new-password'/></div><div class='gfield_description' id='gfield_description_5_4'>This field is for validation purposes and should be left unchanged.</div></div></div></div> <div class='gform_footer top_label'> <button type='submit' onclick='if(window["gf_submitting_1702844415"]){return false;} if( !jQuery("#gform_1702844415")[0].checkValidity || jQuery("#gform_1702844415")[0].checkValidity()){window["gf_submitting_1702844415"]=true;} ' onkeypress='if( event.keyCode == 13 ){ if(window["gf_submitting_1702844415"]){return false;} if( !jQuery("#gform_1702844415")[0].checkValidity || jQuery("#gform_1702844415")[0].checkValidity()){window["gf_submitting_1702844415"]=true;} jQuery("#gform_1702844415").trigger("submit",[true]); }' id='gform_submit_button_1702844415' class='gform_button button om-trigger-conversion'>Submit</button> <input type='hidden' name='gform_ajax' value='form_id=5&amp;title=&amp;description=&amp;tabindex=199' /> <input type='hidden' class='gform_hidden' name='is_submit_5' value='1' /> <input type='hidden' class='gform_hidden' name='gform_submit' value='5' /> <input type='hidden' class='gform_hidden' name='gform_unique_id' value='' /> <input type='hidden' class='gform_hidden' name='state_5' value='WyJbXSIsIjE3OGJjZmUyNjg3ZTQyOGFjZTRkZjMzZjBiOTAzYTRlIl0=' /> <input type='hidden' class='gform_hidden' name='gform_target_page_number_5' id='gform_target_page_number_5' value='0' /> <input type='hidden' class='gform_hidden' name='gform_source_page_number_5' id='gform_source_page_number_5' value='1' /> <input type='hidden' name='gform_random_id' value='1702844415' /><input type='hidden' name='gform_field_values' value='' /> </div> </form> </div> <iframe style='display:none;width:0px;height:0px;' src='about:blank' name='gform_ajax_frame_1702844415' id='gform_ajax_frame_1702844415' title='This iframe contains the logic required to handle Ajax powered Gravity Forms.'></iframe> <script type="text/javascript"> gform.initializeOnLoaded( function() {gformInitSpinner( 1702844415, 'https://www.eastcoasttaxconsulting.com/wp-content/plugins/gravityforms/images/spinner.svg' );jQuery('#gform_ajax_frame_1702844415').on('load',function(){var contents = jQuery(this).contents().find('*').html();var is_postback = contents.indexOf('GF_AJAX_POSTBACK') >= 0;if(!is_postback){return;}var form_content = jQuery(this).contents().find('#gform_wrapper_1702844415');var is_confirmation = jQuery(this).contents().find('#gform_confirmation_wrapper_1702844415').length > 0;var is_redirect = contents.indexOf('gformRedirect(){') >= 0;var is_form = form_content.length > 0 && ! is_redirect && ! is_confirmation;var mt = parseInt(jQuery('html').css('margin-top'), 10) + parseInt(jQuery('body').css('margin-top'), 10) + 100;if(is_form){jQuery('#gform_wrapper_1702844415').html(form_content.html());if(form_content.hasClass('gform_validation_error')){jQuery('#gform_wrapper_1702844415').addClass('gform_validation_error');} else {jQuery('#gform_wrapper_1702844415').removeClass('gform_validation_error');}setTimeout( function() { /* delay the scroll by 50 milliseconds to fix a bug in chrome */ jQuery(document).scrollTop(jQuery('#gform_wrapper_1702844415').offset().top - mt); }, 50 );if(window['gformInitDatepicker']) {gformInitDatepicker();}if(window['gformInitPriceFields']) {gformInitPriceFields();}var current_page = jQuery('#gform_source_page_number_5').val();gformInitSpinner( 1702844415, 'https://www.eastcoasttaxconsulting.com/wp-content/plugins/gravityforms/images/spinner.svg' );jQuery(document).trigger('gform_page_loaded', [1702844415, current_page]);window['gf_submitting_1702844415'] = false;}else if(!is_redirect){var confirmation_content = jQuery(this).contents().find('.GF_AJAX_POSTBACK').html();if(!confirmation_content){confirmation_content = contents;}setTimeout(function(){jQuery('#gform_wrapper_1702844415').replaceWith(confirmation_content);jQuery(document).scrollTop(jQuery('#gf_1702844415').offset().top - mt);jQuery(document).trigger('gform_confirmation_loaded', [1702844415]);window['gf_submitting_1702844415'] = false;wp.a11y.speak(jQuery('#gform_confirmation_message_1702844415').text());}, 50);}else{jQuery('#gform_1702844415').append(contents);if(window['gformRedirect']) {gformRedirect();}}jQuery(document).trigger('gform_post_render', [1702844415, current_page]);} );} ); </script>
[gravityforms id="5" title="false" description="false" ajax="true" tabindex="199"]
<div class='gf_browser_unknown gform_wrapper gform_wrapper_original_id_5 gravity-theme whitepaper-cta-popup_wrapper' id='gform_wrapper_439307476' ><div id='gf_439307476' class='gform_anchor' tabindex='-1'></div><form method='post' enctype='multipart/form-data' target='gform_ajax_frame_439307476' id='gform_439307476' class='whitepaper-cta-popup' action='/first-time-home-buyer-can-avoid-penalty-for-early-distribution-from-ira/#gf_439307476' novalidate> <div class='gform_body gform-body'><div id='gform_fields_439307476' class='gform_fields top_label form_sublabel_below description_below'><div id="field_5_2" class="gfield gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible" data-js-reload="field_5_2"><label class='gfield_label' for='input_439307476_2' >First Name<span class="gfield_required"><span class="gfield_required gfield_required_asterisk">*</span></span></label><div class='ginput_container ginput_container_text'><input name='input_2' id='input_439307476_2' type='text' value='' class='large' tabindex='199' placeholder='First Name' aria-required="true" aria-invalid="false" /> </div></div><div id="field_5_3" class="gfield gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible" data-js-reload="field_5_3"><label class='gfield_label' for='input_439307476_3' >Last Name<span class="gfield_required"><span class="gfield_required gfield_required_asterisk">*</span></span></label><div class='ginput_container ginput_container_text'><input name='input_3' id='input_439307476_3' type='text' value='' class='large' tabindex='200' placeholder='Last Name' aria-required="true" aria-invalid="false" /> </div></div><div id="field_5_1" class="gfield gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible" data-js-reload="field_5_1"><label class='gfield_label' for='input_439307476_1' >Email Address<span class="gfield_required"><span class="gfield_required gfield_required_asterisk">*</span></span></label><div class='ginput_container ginput_container_email'> <input name='input_1' id='input_439307476_1' type='email' value='' class='large' tabindex='201' placeholder='Email Address' aria-required="true" aria-invalid="false" /> </div></div><div id="field_5_4" class="gfield gform_validation_container field_sublabel_below field_description_below gfield_visibility_visible" data-js-reload="field_5_4"><label class='gfield_label' for='input_439307476_4' >Email</label><div class='ginput_container'><input name='input_4' id='input_439307476_4' type='text' value='' autocomplete='new-password'/></div><div class='gfield_description' id='gfield_description_5_4'>This field is for validation purposes and should be left unchanged.</div></div></div></div> <div class='gform_footer top_label'> <button type='submit' onclick='if(window["gf_submitting_439307476"]){return false;} if( !jQuery("#gform_439307476")[0].checkValidity || jQuery("#gform_439307476")[0].checkValidity()){window["gf_submitting_439307476"]=true;} ' onkeypress='if( event.keyCode == 13 ){ if(window["gf_submitting_439307476"]){return false;} if( !jQuery("#gform_439307476")[0].checkValidity || jQuery("#gform_439307476")[0].checkValidity()){window["gf_submitting_439307476"]=true;} jQuery("#gform_439307476").trigger("submit",[true]); }' id='gform_submit_button_439307476' class='gform_button button om-trigger-conversion'>Submit</button> <input type='hidden' name='gform_ajax' value='form_id=5&amp;title=&amp;description=&amp;tabindex=199' /> <input type='hidden' class='gform_hidden' name='is_submit_5' value='1' /> <input type='hidden' class='gform_hidden' name='gform_submit' value='5' /> <input type='hidden' class='gform_hidden' name='gform_unique_id' value='' /> <input type='hidden' class='gform_hidden' name='state_5' value='WyJbXSIsIjE3OGJjZmUyNjg3ZTQyOGFjZTRkZjMzZjBiOTAzYTRlIl0=' /> <input type='hidden' class='gform_hidden' name='gform_target_page_number_5' id='gform_target_page_number_5' value='0' /> <input type='hidden' class='gform_hidden' name='gform_source_page_number_5' id='gform_source_page_number_5' value='1' /> <input type='hidden' name='gform_random_id' value='439307476' /><input type='hidden' name='gform_field_values' value='' /> </div> </form> </div> <iframe style='display:none;width:0px;height:0px;' src='about:blank' name='gform_ajax_frame_439307476' id='gform_ajax_frame_439307476' title='This iframe contains the logic required to handle Ajax powered Gravity Forms.'></iframe> <script type="text/javascript"> gform.initializeOnLoaded( function() {gformInitSpinner( 439307476, 'https://www.eastcoasttaxconsulting.com/wp-content/plugins/gravityforms/images/spinner.svg' );jQuery('#gform_ajax_frame_439307476').on('load',function(){var contents = jQuery(this).contents().find('*').html();var is_postback = contents.indexOf('GF_AJAX_POSTBACK') >= 0;if(!is_postback){return;}var form_content = jQuery(this).contents().find('#gform_wrapper_439307476');var is_confirmation = jQuery(this).contents().find('#gform_confirmation_wrapper_439307476').length > 0;var is_redirect = contents.indexOf('gformRedirect(){') >= 0;var is_form = form_content.length > 0 && ! is_redirect && ! is_confirmation;var mt = parseInt(jQuery('html').css('margin-top'), 10) + parseInt(jQuery('body').css('margin-top'), 10) + 100;if(is_form){jQuery('#gform_wrapper_439307476').html(form_content.html());if(form_content.hasClass('gform_validation_error')){jQuery('#gform_wrapper_439307476').addClass('gform_validation_error');} else {jQuery('#gform_wrapper_439307476').removeClass('gform_validation_error');}setTimeout( function() { /* delay the scroll by 50 milliseconds to fix a bug in chrome */ jQuery(document).scrollTop(jQuery('#gform_wrapper_439307476').offset().top - mt); }, 50 );if(window['gformInitDatepicker']) {gformInitDatepicker();}if(window['gformInitPriceFields']) {gformInitPriceFields();}var current_page = jQuery('#gform_source_page_number_5').val();gformInitSpinner( 439307476, 'https://www.eastcoasttaxconsulting.com/wp-content/plugins/gravityforms/images/spinner.svg' );jQuery(document).trigger('gform_page_loaded', [439307476, current_page]);window['gf_submitting_439307476'] = false;}else if(!is_redirect){var confirmation_content = jQuery(this).contents().find('.GF_AJAX_POSTBACK').html();if(!confirmation_content){confirmation_content = contents;}setTimeout(function(){jQuery('#gform_wrapper_439307476').replaceWith(confirmation_content);jQuery(document).scrollTop(jQuery('#gf_439307476').offset().top - mt);jQuery(document).trigger('gform_confirmation_loaded', [439307476]);window['gf_submitting_439307476'] = false;wp.a11y.speak(jQuery('#gform_confirmation_message_439307476').text());}, 50);}else{jQuery('#gform_439307476').append(contents);if(window['gformRedirect']) {gformRedirect();}}jQuery(document).trigger('gform_post_render', [439307476, current_page]);} );} ); </script>