Frequently Asked Question
My Traditional IRA has been converted to a Roth IRA. Can I still make a qualified withdrawal as a first-time home buyer?
If you converted the funds less than five-years ago, you will not be able to meet the qualified distribution requirements. However, the amount you distribute for use toward the acquisition of a first home will not be subject to the 10% early-distribution penalty. Furthermore, if the amount is less than the amount you converted from your Traditional IRA to your Roth IRA, the amount will also be tax free. For example:
In order for the transaction to be a qualified distribution, you must have had a Roth IRA for at least five years, and you must meet one of the following requirements:
For more information on a qualified distribution, please see Tax Treatment Of Roth IRA Distributions.
This question was answered by Denise Appleby
(Contact Denise)
- If you converted $10,000 or more and you distribute $10,000 for your first-time home purchase, the full $10,000 will be tax and penalty free.
- If you converted $9,000 and you distribute $10,000, the additional $1,000 is counted as earnings and subject to income tax, but the $9,000 will be tax and penalty free.
In order for the transaction to be a qualified distribution, you must have had a Roth IRA for at least five years, and you must meet one of the following requirements:
- Be at least age 59.5
- Be disabled
- Be using the assets to purchase a first-time home
- Be receiving the distribution from a Roth IRA that you inherited from a deceased Roth IRA owner
For more information on a qualified distribution, please see Tax Treatment Of Roth IRA Distributions.
This question was answered by Denise Appleby
(Contact Denise)
by
Denise Appleby
Denise Appleby is founder and owner of Appleby Retirement Consulting,which provides technical consultation, content, coaching, writing, editing and training services on related topics.
With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
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