Penalty-Free IRA Withdrawals for First-Time Home Buyers

If you've just bought your first house, you and your spouse can both withdraw up to $10,000 from your IRAs without penalty.

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My wife and I are about to purchase a new home. Can we spread the $10,000 withdrawal the IRS allows across my IRA and hers? --L.F., Brooklyn, N.Y.

You can withdraw up to $10,000 from your IRA penalty-free for a first-time home purchase, and your wife can also withdraw up to $10,000 from her IRA penalty-free. The withdrawals from each IRA will be taxable (except any portion attributable to non-deductible contributions).

With Roth IRAs, you can withdraw contributions tax- and penalty-free anytime. And after you withdraw your contributions, you can each withdraw up to $10,000 in earnings as long as you haven’t exceeded the $10,000-per-person limit for all IRAs. If you haven’t held a Roth IRA for at least a five-year period, the earnings will be taxable.

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Kimberly Lankford
Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.