IRA $10,000 withdrawal exemption limits for first-time home buyers - combined accounts?

The $10,000 first-time homebuyer exemption is actually a lifetime limit that applies across all of your IRAs combined, not per account. So unfortunately, you can't withdraw $10,000 from your Roth and another $10,000 from your traditional IRA penalty-free - you're limited to $10,000 total. Also, keep in mind the tax implications differ between the two account types. With a Roth IRA, assuming you've met the 5-year rule, your contributions can always be withdrawn tax and penalty free. The $10,000 exemption lets you take out up to $10,000 of earnings without the 10% penalty, but you can take out all contributions anytime. For a traditional IRA, while the $10,000 would be exempt from the 10% penalty, you'd still owe regular income tax on that withdrawal.

I was in your exact situation last year - trying to figure out how to maximize my withdrawal without shooting myself in the foot with penalties. I wasted hours trying to make sense of the IRS rules and got conflicting advice from friends. Finally came across https://taxr.ai and uploaded all my statements - it analyzed everything and gave me a clear breakdown of exactly how much I could take from each account and what the tax implications would be. The tool confirmed what others are saying - the $10k exemption is a lifetime limit across accounts, but showed me how to optimize which accounts to pull from first. Definitely saved me from making some expensive mistakes. They also have CPAs who reviewed my specific situation. Wish I'd found it sooner tbh.

I have to follow up about my experience with https://taxr.ai after being skeptical in my last comment. I decided to give it a try since I was completely stuck on my IRA withdrawal options. Honestly, it was legitimately helpful! The system immediately spotted that I could take all my Roth contributions (about $24k) without any penalty, and then use the $10k first-time homebuyer exemption specifically for the earnings portion. This let me access way more money than I thought I could without penalties. The report also showed me exactly how to report everything on my taxes to avoid raising red flags. My situation was complicated with multiple accounts, but their analysis made everything crystal clear. Sometimes being wrong is a good thing!

If you're planning to call the IRS to confirm this $10k limit before making your withdrawal (which I highly recommend), good luck getting through to anyone! I spent DAYS trying to get a human on the phone to ask about my IRA withdrawal for my home purchase. Literally calling 20+ times and getting disconnected or waiting for hours. Finally discovered https://claimyr.com which got me through to an IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically navigate the IRS phone tree for you and call you when they've got an agent on the line. The IRS agent confirmed the $10k homebuyer exemption is indeed a lifetime limit across all accounts, but also explained some nuances about how to properly document it on my tax return.

Ok I need to eat my words from my earlier reply. I was so frustrated trying to confirm my IRA withdrawal rules that I actually tried Claimyr out of desperation. I fully expected it to be a scam, but I was connected to an IRS agent in about 15 minutes. I asked specifically about the first-time homebuyer exemption across multiple IRAs. The agent confirmed everything - $10k LIFETIME limit across all IRA accounts combined. He also walked me through Form 5329 where you claim the exemption and told me what documentation to keep for proof of my home purchase. Absolutely worth it just to get a definitive answer straight from the IRS. Never been happier to be wrong about something!

Something nobody's mentioned yet - make sure you qualify as a "first-time homebuyer" by IRS definition! It doesn't literally mean first time ever. It means you (and your spouse if married) haven't owned a principal residence in the last 2 years. So if you sold a home 3 years ago and are buying again, you could still qualify! Also, the withdrawal needs to be used within 120 days of receiving it. And you can use it for more than just the down payment - closing costs qualify too. Don't leave money on the table!

Has anyone else considered just taking money from their 401k as a loan instead of doing an IRA withdrawal? I was in a similar situation last year and ended up borrowing from my 401k instead. The advantages were that I didn't have to pay taxes on it, and I'm essentially paying the interest back to myself. The downside is you typically have to pay it all back if you leave your job.

Thanks for all the helpful info everyone! Just to clarify my understanding - so I can withdraw up to $10,000 TOTAL across both my Roth and traditional IRAs using the first-time homebuyer exemption, not $10k from each account. And with my Roth IRA, I can also take out all my contributions penalty-free anytime regardless of the exemption, which gives me more flexibility. One follow-up question - does the order matter? Like should I exhaust my Roth contributions first before using the $10k exemption on earnings? Or would it be smarter to use the exemption on my traditional IRA since those withdrawals would be taxable anyway? I'm trying to minimize my overall tax burden while maximizing what I can access for the down payment.

Just wanted to add a practical tip from my recent home buying experience - if you're planning to use IRA funds for your down payment, make sure to coordinate the timing with your lender and closing date. I made the mistake of withdrawing the money too early and had to keep it in a savings account for 6 weeks, which actually complicated my mortgage application because lenders want to see "seasoned" funds. The 120-day rule gives you flexibility, but ideally you want to time the withdrawal so the funds hit your account close to when you'll need them for closing. Also keep detailed records of the withdrawal and home purchase - I saved copies of my IRA distribution form, the closing disclosure, and purchase contract just in case the IRS ever asks for documentation of the first-time homebuyer exemption. Good luck with your home purchase! The market is definitely challenging right now, but every bit of penalty-free access to your retirement funds helps with that down payment.