Liquidating ira for home purchase
The main purpose of an Individual Retirement Account is to provide tax-advantaged retirement savings.
Many of the costs you might use your IRA to pay are considered allowable early distributions.
By default, your custodian will have to withhold 10 percent of the distribution, but you can arrange to have more withheld to cover taxes you might owe.
You might also be able to arrange for state tax withholding if your state has an income tax and if your state and custodian allow for it.
Alert your plan custodian if you have not received a form 1099-R showing the distribution by the end of February following the year of the IRA liquidation.
All distributions from a traditional IRA will be taxed as regular income unless some of your contribution was after-tax.In addition, if you liquidate before reaching age 59 1/2, you will have to pay an additional 10 percent penalty with certain exceptions.