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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76420  
Subject: HOW TO? IRA early distribution for home purchase Date: 11/21/2005 12:33 PM
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I'm wanting to take a $10,000 early distribution from my IRA for a "first time" home purchase. I can figure out the mechanics of taking the distribution from my fund company (Vanguard) but I am trying to find out what the IRS requires.

What I'm trying to find out is...is there anything the IRS requires that I do BEFORE taking the distribution to claim the exemption from the early distribution penalty for a first time home purchase? Or do I just need to file the appropriate forms, whatever they are, when I file my tax return?
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48300 of 76420
Subject: Re: HOW TO? IRA early distribution for home purc Date: 11/21/2005 1:39 PM
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Greetings, sprescott58, and welcome. You asked:

I'm wanting to take a $10,000 early distribution from my IRA for a "first time" home purchase. I can figure out the mechanics of taking the distribution from my fund company (Vanguard) but I am trying to find out what the IRS requires.

What I'm trying to find out is...is there anything the IRS requires that I do BEFORE taking the distribution to claim the exemption from the early distribution penalty for a first time home purchase? Or do I just need to file the appropriate forms, whatever they are, when I file my tax return?


All you need do is file a completed Form 5329 with your income tax return for the year. You would complete Part 1 of the form and indicate code 09 on Line 2 of that form to show that the early distribution from the IRA as shown on Form 1099R issued by your IRA provider was for an authorized exception for the purchase of a new home. By doing so, you will avoid the 10% penalty for an early distribution.

Hope that helps.

Regards ... Pixy



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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48301 of 76420
Subject: Re: HOW TO? IRA early distribution for home purc Date: 11/21/2005 1:58 PM
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That was a big help. Thank you!


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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48352 of 76420
Subject: Re: HOW TO? IRA early distribution for home purc Date: 11/23/2005 11:37 AM
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Surprised that no one mentioned on this thread that this probaby not a good idea. You can never replace the money in your IRA and your retirement pans will always be behind where they would have been otherwise. Also, it's a really bad habit to get into of pulling out your retirement savings. That money isn't for you, it's for future you... don't touch someone else's money ;-).

I'd be better off financially and psychologically (which is definitey related), to just take the time to save up the extra money

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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48380 of 76420
Subject: Re: HOW TO? IRA early distribution for home purc Date: 11/24/2005 1:35 AM
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In fact, I am very conflicted about using any of my retirement funds to go towards purchasing a home. I would rather not use the funds, but there are personal reasons that I am doing it that I won't go into now.


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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48381 of 76420
Subject: Re: HOW TO? IRA early distribution for home purc Date: 11/24/2005 8:00 AM
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I would rather not use the funds, but there are personal reasons that I am doing it that I won't go into now.

That's a good enough answer, but beware if you use it more than a few times during your life to justify robbing your retirement.



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Author: Mark12547 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48408 of 76420
Subject: Re: HOW TO? IRA early distribution for home purc Date: 11/25/2005 10:20 AM
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Have you taken a look at IRS Publication 590? That is where the rules about IRAs, including the use of up to $10,000 (lifetime limit) for a "first time" home purchase.

The Motley Fool write-up of this provision is at http://www.fool.com/school/taxes/1999/taxes990521.htm



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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48410 of 76420
Subject: Re: HOW TO? IRA early distribution for home purc Date: 11/25/2005 5:27 PM
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Yes, that was an excellent write-up of the IRA early distribution for home purchase. I didn't know which tax forms to use though, and the tax reporting required for the distribution.


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Author: Mark12547 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48460 of 76420
Subject: Re: HOW TO? IRA early distribution for home purc Date: 11/27/2005 1:00 AM
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I didn't know which tax forms to use though, and the tax reporting required for the distribution.

If you still have questions about reporting requirements or documentation requirements for the IRS, a good place to ask is on the "Tax Strategies" board.


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