I just read in IRS Pub 590 (2008) that IRA withdrawals are penalty free up to $10,000 when used for the purchase of a first time home for yourself, your spouse, your child, grandchild, or parent. My wife and I have often discussed helping our children buy their first homes and it is one of our investing objectives. My question is: is the $10,000 limit per homebuyer? We have 2 children. Could my wife and I both withdraw $10,000 each for each child to buy their first home when the time comes (a total of $40,000)? When we bought our first home ten years ago I withdrew $2500 from my IRA for closing costs. Pub 590 states that "when added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions cannot be more than $10,000." Is that a lifetime max per IRA holder? Or a lifetime max per homebuyer? A lifetime max seems strange since a first time homebuyer is defined as someone who hasn't owned a home in the past 2 years. When my 8 year old is ready to buy a house, will the IRS still have records of my home buyer withdrawal 25 years prior and will it limit what I can give him?
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