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

    5 Reasons to Convert a Roth To a Traditional IRA

    Here's a quintet of cases when the traditional IRA trumps the Roth version.
  3. 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.
  4. 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.
  5. Retirement

    The Best Bet for Taxes: Traditional or Roth IRAs?

    Choosing a Traditional IRA over a Roth IRA, or vice versa, depends on financial situation and long-term goals, especially if you want to trade.
  6. 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.
  7. Financial Advisor

    Why You Should Have a Roth IRA

    The world of retirement savings plans is filled with options. Here are the reasons why you should consider a Roth IRA when saving for retirement.
  8. 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.
  9. Taxes

    The Truth About The First-Time Homebuyer Tax Credit

    The $8,000 tax credit might be the push you need to buy your first house, but there are some things you need to know first.
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. Non-Qualified Distribution

    1) A distribution from a Roth IRA that occurs before the Roth ...
  5. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
  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. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  2. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  3. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  4. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  5. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
  6. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
Trading Center