A:

You and your spouse each qualify for a penalty-free distribution of up to $10,000 for the purchase, acquisition or construction of your principal residence or first home. By IRS standards, you are a first-time homebuyer if you did not own an interest in a principal residence during the two years prior to the purchase of a new home. Further, because it has been five years since you established your first Roth IRA, and the distributions will be used towards the purchase, acquisition or construction of your principal residence or first home, the distribution meets the requirements of a "qualified distribution" and will be tax- and penalty-free.

For more information, see the section on distributions in our Roth IRA Tutorial.

This question was answered by Denise Appleby
(
Contact Denise)

RELATED FAQS
  1. My Traditional IRA has been converted to a Roth IRA. Can I still make a qualified ...

    If you converted the funds less than five-years ago, you will not be able to meet the qualified distribution requirements. ... Read Answer >>
  2. How can I use my Roth IRA savings to buy my first home?

    Use your Roth IRA to help fund the purchase of your first home, and find out about ways to access these funds even if you ... Read Answer >>
Related Articles
  1. Retirement

    How a Roth IRA Works After Retirement

    What retirees need to know about taxes, distributions and passing on your unspent savings to the next generation.
  2. Retirement

    Tax Treatment Of Roth IRA Distributions

    Learn the requirements for withdrawing funds tax and penalty free.
  3. Retirement

    Roth vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
  4. Retirement

    5 Reasons to Convert a Roth To a Traditional IRA

    Here's a quintet of cases when the traditional IRA trumps the Roth version.
  5. Retirement

    Why Roth IRAs Are a Great Idea for All Generations

    A Roth IRA should be in your planning and retirement strategy whether you’re a Millennial, Generation X or Baby Boomer.
  6. Financial Advisor

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  7. Retirement

    Know The Rules For Roth 401(k) Rollovers

    Rolling a Roth 401(k) into a Roth IRA is usually the optimal thing to do.
  8. Retirement

    Roth 401(k) Vs. Roth IRA: Which One Is Better?

    It all depends on your age, your income - and your plans for your retirement nest egg.
  9. Financial Advisor

    How to Help Clients Manage Roth IRA Distributions

    Here's how the five-year rule works with Roth IRAs and what to consider for clients.
RELATED TERMS
  1. First-Time Home Buyer

    An individual who is purchasing a principal residence for the ...
  2. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  3. Roth IRA

    A Roth IRA is an individual retirement plan that bears many similarities ...
  4. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
  5. Principal Private Residence (Canada)

    The home in which a Canadian taxpayer or family maintains its ...
  6. Form 5405: First-Time Homebuyer Credit And Repayment Of The Credit

    A tax form distributed by the Internal Revenue Service (IRS) ...
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center