BulldogTom Posted October 22, 2022 Report Share Posted October 22, 2022 TP is a 20 something professional. Parents started a Roth IRA for him when he worked in the family business as a child 15 years ago. Used all the contributions to the Roth IRA to pay for college. Now in his later 20s and is looking to purchase his first home. Wants to know if he can pull the earnings from his Roth IRA for the down payment. I say yes, but only 10K, even though there are no contributions left to pull from. Please confirm. I think I am missing something. Thanks in advance. Appreciate you. Tom Longview, TX Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted October 22, 2022 Report Share Posted October 22, 2022 My son did that several years ago when the limit was $4000. It made a huge difference and he is now set with real estate. I'm not sure of any requirement that the 10% penalty exemption is restricted to contributions. It seems a bit confusing to have exceptions but not for earnings, too. I did not look at IRC Sec. 408A(d), the reference given in Quickfinders. 2 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted October 22, 2022 Report Share Posted October 22, 2022 Yes, because he has had the account for at least 5 years, he can withdraw up to $10K penalty free under that exclusion as long as he meets the requirements for a first-time home buyer. 5 1 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted October 22, 2022 Author Report Share Posted October 22, 2022 39 minutes ago, jklcpa said: Yes, because he has had the account for at least 5 years, he can withdraw up to $10K penalty free under that exclusion as long as he meets the requirements for a first-time home buyer. Thank you Judy. That is how I saw it, but I wanted to make sure I wasn't missing a rule. Tom Longview, TX Quote Link to comment Share on other sites More sharing options...
Max W Posted October 23, 2022 Report Share Posted October 23, 2022 The 5 year rule applies only to earnings. The basis can be withdrawn at anytime, no tax, no penalty.. 4 Quote Link to comment Share on other sites More sharing options...
Lee B Posted October 23, 2022 Report Share Posted October 23, 2022 You need to fill out Part III of Form 8606. In some cases you can avoid the penalty but not the tax. 3 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted October 23, 2022 Report Share Posted October 23, 2022 2 hours ago, Max W said: The 5 year rule applies only to earnings. The basis can be withdrawn at anytime, no tax, no penalty.. In the first post, Tom said that all contributions had already been withdrawn and used for college. 5 Quote Link to comment Share on other sites More sharing options...
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