A first home. You do not have to pay the 10 percent tax on IRA withdrawals of up to $10,000 that are used to buy, build, or rebuild a first home. And if both you and your spouse are first-time homebuyers, the limit doubles to $20,000. To qualify, the distribution must be spent on acquisition costs for a house for you, your spouse, or either of your children, grandchildren, parents, or other ancestor within 120 days of the distribution. But you can't use your IRA to help each of these people buy a first home. "There's a lifetime cap of $10,000 for each IRA owner," says Linda Gardner, a certified public accountant and co-owner of Blue Heron Capital in Englewood, Colo. You are considered a first-time homebuyer if you had no interest in a main home during the two-year period before the new home was acquired. If your new home purchase falls through or becomes delayed, you must put the money back in your IRA within 120 days of the distribution to avoid the tax.
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