First time home buyers can take up to $10,000 from an IRA without being subject to the 10% early withdrawal penalty. Beware that this exemption to the early withdrawal applies only to IRAs and not to 401(k)s or other retirement plans. This was recently confirmed by the U.S. Tax Court in the following case (Soltani-Amadi, TC Summary Opinion 2019-19).
If you don’t have an IRA but do have a 401(k), or another employer plan, all is not lost. All you have to do is set-up an IRA and roll $10,000 from the employer plan you have to that IRA before you make the distribution. But be careful. You have to be sure the rollover is made before the distribution. If you are under 59½, doing this could save you $1,000.00 in early distribution penalties.
For help with this or any other tax strategy, just give us a call.