Hi,

I am US resident for tax purposes and am younger than 59.5. I own a home in city A which has been rented out. I am paying mortgage for it.

I want to purchase a home in the city B, where I am working now. This will become our primary home.

I withdrew some money from my IRA in 2013 to pay for the home in city B. Is $10000 of my withdrawal eligible for "no penalty" since it was used for our future primary home. What proof should I produce to claim that when filing 2013 taxes?

Regards
Srivatsan

The key is WHEN did you buy the house in City A? If it was more than five years, then no problem with getting $10K from IRA with no penalty.

Less than five years requires in do some research for a proper answer.

Hi AtlantaTaxExpert,

Thanks for the response. The construction of home in city A began in November 2010 and was completed and handed over to us in November 2011. It is not more than five years yet.

Regards,
Srivatsan

Then probably not. The IRS says you must be a NON-home owner for FIVE YEARS for the purchase to be considered a FIRST HOME BUYER.

Thanks for your response ATE. I have one more query.

In 2012 March, I had contributed 5000 USD towards 2011 IRA. While filing 2011 taxes, I got to know that there is NO tax benefit of my contribution to IRA. So, in 2013 January, I withdrew that 5000 USD. My IRA custodian returned 5000 and indicated that $51 is taxable income. Should I file amended return for 2012 and report the $51 or should that be reported along with 2013 Federal return?

Thanks
Srivatsan

If you withdrew it in 2013, claim the $51 on your 2013 tax return.