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February 23, 2009

First-Time Homebuyer Distribution

Your Guide

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Definition

A distribution from an IRA used by a first-time homebuyer to buy, build, or rebuild a first home or first-time home.

A first-time homebuyer distribution is not subject to the early distribution penalty .

This exception applies to IRAs. It does not apply to qualified plans, 403(b)s and 457 plans

A first-time  homebuyer distribution must meet the following requirements:

  • It must be used to pay qualified acquisition costs  before the close of the 120th day after the day the participant received the distribution.
  • It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer who is any of the following.
    • The participant.
    • The participant’s spouse.
    • The participant’s child, or a child of the participant’s spouse.
    • The participant’s grandchild, or a grandchild of the participant’s spouse.
    • The participant’s parent or other ancestor, or the parent or other ancestor of the participant’s spouse
  • When added to all the participant’s prior qualified first-time homebuyer distributions, if any, total qualifying distributions cannot be more than $10,000, i.e. the $10,000 is a lifetime limit.

Referring Cite

IRC §72(t)(2)(F);

Additional Helpful Information

  • For married couples, each spouse is eligible for a $10,000 first time homebuyer distribution from his/her own IRA.
  • In cases where a distribution from an IRA is intended to be used for first-time home-buyer purposes, the 60-day period is extended to 120-days, providing  the rollover is being made because the transaction did not occur  by reason of a delay or cancellation of the purchase or construction of the residence

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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