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My husband and I withdrew about $4,700 from his IRA to cover a 5% downpmt on an $83,500 house (houses are easier to buy in Indiana than a lot of places!). We withdrew the extra to cover the taxes on the amount withdrawn.

To add just a little to the previous responses, you'll be taxed on the total amount withdrawn and not rolled back into an IRA within 60 days of the disbursement. In addition, you'll owe the 10% premature distribution penalty on any amount above your qualified home acquisition costs. IOW, you'll pay a penalty on the money you withdrew to pay the taxes.

Phil Marti


Thanks to all those who replied. I'm the person who first asked--the silly person who, together with her husband, in the flurry of first-time home-buying did not get all of their facts or their synapses straight before making the IRA withdrawal. ::blush:: Normally I'm just fine with basic arithmetic as well as basic fact-finding, but this time I was swayed by home-buying anxiety (both mine and my husband's!). ::sigh::

Anyway, we closed on the house yesterday. Here is a refinement of my question.

1) Qualified costs include the downpayment, settlement, financing, and closing costs (we're not going to have to do any building or rebuilding). Our downpayment was $4175.00; settlement costs at closing totaled $1323.90. We'll be more than fine with those two figures combined: in fact, we withdrew less than that total.

However, the sellers gave us $1,500 in closing costs. Is that "counted" for the IRA withdrawal?

1a) Does the inspection we had done on the house (not required by our lender) figure as a "qualified cost"? That was $225.

2) If I understand your collective wisdom correctly, if we did withdraw too much we can simply do the math and then deposit the excess back into the IRA within 60 days of the disbursement and still avoid the 10% penalty.

How am I doing now? :)

Looking forward to your responses,
Abbie Anderson

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