Question

Dollar amount a first-time homebuyer can withdraw penalty-free from an IRA to use for the purchase of a home

a) $5,000
b) $10,000
c) $15,000
d) $20,000

Answer 1

A first-time homebuyer can withdraw $10,000 penalty-free from an IRA to purchase a home, though potential income taxes on the withdrawal should be considered.

Step-by-step explanation:

The dollar amount that a first-time homebuyer can withdraw penalty-free from an IRA (Individual Retirement Account) for the purchase of a home is $10,000. This is a special provision in the tax code that allows new homeowners to use IRA funds to cover some of the costs associated with buying a home. However, it's important to note that while the withdrawal is penalty-free, it may still be subject to income taxes, depending on the type of IRA and the individual's tax situation. This applies to both Traditional and Roth IRAs, but the specific tax implications may vary. When considering an IRA withdrawal for a home purchase, it's advisable to consult a financial advisor or tax professional to understand all the implications.