How your Roth IRA can help your adult children purchase their first home

IRA’s are long term investment accounts to help you plan for retirement. In many cases, in order to enjoy the full tax benefits, the money needs to be held in the account until you reach at least 59 ½ years of age. Did you know however, that there are a few exceptions? The 10th one on the IRS published Exceptions List is … “Homebuyers.” 

A withdrawal of up to $10,000 can be made to support qualified first-time homebuyers and not be subject to the 10% early additional tax penalty. Above that, if you have a Roth IRA, you already paid taxes on the contributions so the withdrawal itself is not assessed as income. The even better news… the exception is not limited to you; it can also be used for a spouse, child, grandchild, or even parent.

Who qualifies as a first time home buyer? The short answer is an individual or married couple that has not owned a primary residence in the last 3 or more years. A more detailed definition can be found HERE.

The year over year demand for housing, especially in Northern Arizona, has continued to increase. This increase in demand on top of inflation, a pandemic, and so much more has only made it even more difficult for our First-Time Homebuyers to secure a home. If you have an IRA or a Roth IRA, now would be a great time to talk with your accountant and see if you are able to help them before the home prices increase again. That $10,000 gift could be the key they need in order to purchase a home and investment that continues to create security for them for years to come!