retirement

How to crack open your IRA without triggering a tax penalty

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First-home exemption
First-home exemption | Photographee.eu/Shutterstock.com

First-home exemption

Uncle Sam will bend the IRA rules a bit to help you get into a house.

You can put up to $10,000 of IRA funds toward the purchase of your first home. If you're married, and you and your spouse are first-time buyers, you each can pull from retirement accounts, giving you $20,000 in residential cash.

Technically, you don't have to be purchasing your very first abode. You qualify under the tax rules as long as you (or your spouse) didn't own a principal residence at any time during the previous two years.

You can even share your IRA wealth. The IRS says the first-time homebuyer using your IRA funds for a down payment can be you, your spouse, one of your children, a grandchild or a parent.

You must use the IRA funds within 120 days of withdrawal to pay qualified acquisition costs. This includes the costs of buying, building or rebuilding a home, along with any usual settlement, financing or closing costs.

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