Can my IRA be a down payment for a house?

Q: Can I cash out my IRA’s to put down on a house? —Pete P., Portland, Ore.

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A: You can, but there are a few hoops you have to jump through to keep the IRS happy.

First of all, you can only do this if you’re a “first time” home buyer. (In IRS-speak, that means you haven’t owned a home in two years. If you’re married, same goes for your wife.)

Next, you can only use $10,000 of IRA savings. If you’re married and your wife has an IRA, she can use another $10,000 from her savings. You also have to use the money within 6 months of withdrawing it. And you can do this only once.

Oh, and you’ll have to pay taxes on any gains form the investments that were held in the IRA.

If you don’t meet these criteria, or you want to withdraw more than $10,000, you can still use the money. But you’ll have to pay a 10 percent penalty for “early withdrawal.” For more information refer to Publication 590, page 29. (It’s a pdf file, so make sure you have Acrobat reader before downloading.)