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Tax question.. buying a house

Old 12-19-2011, 06:15 PM
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Default Tax question.. buying a house

My wife left the military this year and we are thinking about possibly using the money from her Thrift Savings Plan (TSP) for a down payment on a house. It won't be a a first home but it would be a primary. What's the rules on using IRA, Roth IRA or other savings plans to buy a primary residence?
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Old 12-19-2011, 08:36 PM
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The answer(s) to your question are of the utmost importance. Consult with your CPA as he or she will be the one to help you when the IRS asks questions in the future. A quick consultation will get you the info you need to make your important decisions.

Good luck.
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Old 12-19-2011, 08:42 PM
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Do you really want to take what should be retirement money and buy a house?
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Old 12-20-2011, 05:01 AM
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It's not recommend to do that unless you really have to. There are still tax penalties for taking your retirement early. With some plans you can write a loan to your self and pay it back with interest to the plan (yourself).
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Old 12-20-2011, 06:28 AM
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The general rule is if you take money from a retirement account, no matter what the money is used for, it will be taxed as ordinary income in the year in which it is received. Of course, ROTH is not taxed or penalized if taken after age 59 1/2. There are a few exclusions for a small portion of the income, but from you posted, none of them would apply to you.
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Old 12-20-2011, 06:42 AM
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Va loan,right? Should need little to no money down,i understand if the motivation is to lower monthly nut but the interest rate you get with VA loan,keep the $$ in the bank,also depending on when you last purchased a home and where you still may qualify for first time homebuyer,i have purchased.4 houses,last was 6yrs ago,i just got approved for first time homebuyer,not sure how it works,my buddy is loan officer and suggested going that route and investing the cash we would have used for closeing and down payment
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Old 12-20-2011, 07:03 AM
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Originally Posted by jking View Post
My wife left the military this year and we are thinking about possibly using the money from her Thrift Savings Plan (TSP) for a down payment on a house. It won't be a a first home but it would be a primary. What's the rules on using IRA, Roth IRA or other savings plans to buy a primary residence?
I don't know what the rules are about a TSP, but if they're like IRA's, etc. don't do it. Penalty for early withdrawal alone will make it a bad move.

I hope you can find other options because that's not ideal.

J
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Old 12-20-2011, 09:37 AM
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I'm trying to figure out what options are on the table so when things come together we can make a good call. If I understand it properly, she can transfer from the thrift savings plan to a ira or , if she wants to do a roth ira, she pays income taxes to do so.

The core question here is "Is there a way to dig into a retirement accounts to purchase a primary residence that makes financial sense?"

I'm pretty sure you can withdraw funds without penalty in some circumstances but I'm pretty fuzzy on the rules.

We currently own a home but may move this summer. One option is to sell the current home, another is to rent it out which will leave us with more limited cash to purchase the new house.
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Old 12-20-2011, 09:52 AM
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A first time home buyer for IRS purposes is someone who has not owned a principal residence for at least 2 years. If this test is met, the 1st $10,000 withdrawn from an IRA is not subject to the 10% penalty. It is subject to income tax however.

Look at it this way. If you are in the 25% marginal income tax bracket and you do not qualify as a 1st time homebuyer, you will be paying 35% of whatever you withdrawl in tax and penalty, so a $10,000 withdrawl only nets you $6,500.
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Old 12-20-2011, 10:15 AM
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Pretty good article here ... http://www.kiplinger.com/columns/ask...2009/q0713.htm


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