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Level 2
March 3, 2025
Question

Exemption of penalty for early distribution to purchase first home.

  • March 3, 2025
  • 2 replies
  • 9 views

My client withdrew $100,000 to purchase his home how can I exempt the $10,000 penalty from his return, he is 45 years old.

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2 replies

sjrcpa
Level 15
March 3, 2025

You can't. 

Maybe $10,000 of the distribution can be exempt from the penalty. Was the withdrawal from an IRA? Or from 401(k), etc?

Or, how old is the client?

Look at Form 5329 and its instructions for applicable exceptions to the penalty.

The more I know the more I don’t know.
Just-Lisa-Now-
Intuit Community Champion
March 3, 2025

Only  the first $10,000 can be exempt from penalty ($1,000) when its taken from an IRA (401ks dont count), you'll use Form 5329 for that exception.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪