It’s often difficult for young and middle-age taxpayers to come up with a down payment on a house. However, if you or your kids have your hearts set on a “dream home,” think outside the box.
Strategy: Consider an IRA as a secondary source of funds. Although IRAs are intended for retirement savings, tapping into your account might make sense if it helps to close the deal.
The main advantage of using an IRA is that the distribution may be exempt from the usual tax penalty for early withdrawals.
Here’s the whole story: Normally, if you receive a distribution from an IRA prior to age 59½, you must pay a 10% tax penalty, in addition to the regular income tax you owe. The 10% penalty is assessed on the taxable portion of the distribution (i.e., the pro rata amount representing deductible contributions and earnings).
However, there are several key exceptions to this rule, including one for the first $10,000 of funds received by fir...(register to read more)