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Tax Law (Questions About Taxes)/IRA/Roth IRA distributions

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Question
Hello John,

Husband and wife, both under 59 1/2 looking to purchase first home.

1. Wife wants to take $10k out of her Regular IRA, subject to tax but not 10% penalty, correct?

2. Husband wants to pull $10k out of his Roth IRA.  The Roth was previously converted from his 401(k).  If he pulls out contribution portion and not earnings, would he then not be subject to either tax or penalty due to the first home buyer exception as well?

3. If he pulls out more than 10k, same on contributions, no tax but 10% penalty correct?  If so, penalty on the whole amount or amount in excess of the $10k?

Thank you,

Jeff

Answer
Jeff,

Thanks for your question.

1. That is correct.
2. That is also correct, assuming that you only withdraw contributions.
3. If you withdraw more than $10,000, you will not pay tax on the withdrawal up to the amount of your contributions. And the first $10,000 will not be subject to penalty. Any withdrawal above $10,000 will be subject to the 10% penalty and tax on withdrawals represented by earnings.

I would also remind you that this is a once-in-a-lifetime exclusion.  Once you use $10,000 as a first time homebuyer, you cannot utilize this provision again.  However, each of you is allowed a $10,000 withdrawal for this purpose.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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