tambi
Level 2
‎04-07-2022 09:19 PM

1st time homebuyer in 2021, age 76, took a $136,000 distribution from 401k for down payment on house. With this distribution, her income is over $200,000. She was told she can waive $10,000 of the distribution since she was a 1st time homebuyer. The 1099-R shows all of distribution is taxable and code 7 for normal distribution. She called her brokerage company and they said her "tax person needs to make the adjustment" on her taxes. She set aside $20,000 to pay her taxes due to the large distribution but she owes over $36,000.  Is there a $10,000 tax break for a 1st time homebuyer, if so, where does this get entered in Lacerte?

0 Cheers
sjrcpa
Level 15
‎04-07-2022 09:31 PM

There's an exception to the 10% penalty for early withdrawal of up to $10,000 from IRAs for first time home purchases.

N/A for your client. See Form 5329 instructions.


The more I know the more I don’t know.
Terry53029
Level 15
Level 15
‎04-08-2022 08:40 AM

There are exceptions for the 10% penalty for withdrawing money from qualified retirement accounts if you are under 59 1/2, but the funds are subject to income tax. Seeing that your client is over 59 1/2 she is not subject to the 10% penalty, but if you have a 0 basis in the account it is always taxable income

IRonMaN
Level 15
‎04-08-2022 08:49 AM

We need to find the barber that keeps spreading that rumor about the "free money" for first time homebuyers.  It must be a big barbershop since it seems that quite a few folks have posted here about that "deduction".


Slava Ukraini!
rcooley25
Level 11
‎04-08-2022 11:55 AM

I agree

You will never know how many times I have ran in to that same situation this tax season

qbteachmt
Level 15
‎04-08-2022 12:22 PM

Just wait until she sees how much her Medicare premium increases.

*******************************
Don't yell at us; we're volunteers