Special provisions allow you to withdraw funds from your IRA before you reach age 59 ½ and not be subject to a 10 percent early withdrawal tax penalty when you purchase a first-time home. The rules are:
- You may take out up to $10,000 from your IRA once in a lifetime to buy a principal residence for yourself and a spouse, child, or grandchild, or your spouse’s child or grandchild.
- The home must be a principal residence of a first-time homebuyer (someone who has not owned a home in the previous two years). If the homebuyer is married, the spouse must not have owned a principal residence during that period, either.
- You must use the funds within 120 days from the time you receive your IRA distribution check. You and your spouse can each withdraw $10,000 from your respective IRAs for a $20,000 down payment if you both qualify as first-time homebuyers.
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