Penalty-Free Withdrawals for First-Time Homebuyers refer to the provision that allows individuals to withdraw funds from certain tax-advantaged retirement accounts, such as an Individual Retirement Account (IRA), without incurring the usual early withdrawal penalty of 10%.
To qualify, the withdrawal must be used for qualified first-time home purchase expenses, and the individual must be classified as a first-time homebuyer, which generally means they have not owned a home in the past two years. The maximum amount that can be withdrawn penalty-free is $10,000 for each individual.
For example, if a married couple, both first-time homebuyers, withdraws $10,000 each from their IRAs to purchase their first home, they can do so without the early withdrawal penalty, allowing them to access funds to help with the down payment or other related costs.
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