Surprise! Your Roth IRA Can Help You Buy a Home This Year

If you've been faithfully contributing to your Roth IRA account, the IRS is giving you a bonus: The ability to use funds to build or purchase a new home without incurring taxes or penalties. If you qualify, you can make your homeownership dreams a reality with this special Roth IRA early withdrawal exception that's about to make your life a bit sweeter.

Roth IRA holders always have the right to withdraw their contributions without penalty or taxes. But your Roth IRA includes both contributions and earnings. Once you've taken out all your contributions, withdrawals of earnings before you reach age 59 1/2 are typically subject both to income tax and to a 10% penalty.

However, you're allowed to withdraw up to $10,000 of the Roth IRA's earnings for a first-time home purchase and bypass the 10% penalty and taxes. This $10,000 homebuyer exemption is in addition to all the contributions you've made. So if you've contributed $50,000 to your Roth IRA account over the last ten years, you can take out the entire $50,000 plus the $10,000 homebuyer exemption amount.

Source Fool.com