Does anyone on Metafilter have experience using IRA funds to purchase real estate?

January 21, 2004 7:24 PM

You can use your IRA to buy real estate? A read through of the web site made me think it was a scam, but a quick trip to Google led to a bunch of other links, including this one from msn.com.

Does anyone on Metafilter have experience using IRA funds to purchase real estate?
posted by alms to Work & Money (4 answers total)

Aha! You can indeed do this, and I did this to suppliment my first home downpayment. I had a tough time finding information on it, and even local CPAs were stumped. It was a Clinton-era change that they hadn't used so I had to do most of the research myself and pool resources with another friend buying a house and using an IRA.

These two articles at the Motley Fool helped me, friends, and CPAs figure stuff out.

The gist of it is that you can use up to $10k from your IRA accounts for a first home purchase. The fineprint says that if you are married, that means up to $10k each. Also, it's a 10k lifetime thing, and your "first home" in this case means the first home you've bought in the past three years. So legally, you could use $5k to buy a home and in four years pull another $5k out and use that on a second home. And your spouse can do the same. It's pretty cool.

I haven't done the tax part yet, but my accountant insists that she just needs to fill out a form to waive the tax on the withdrawl, though it'll be as if I made $10k more in 2003.
posted by mathowie at 7:56 PM on January 21, 2004

up to $10k from your IRA accounts for a first home purchase.

It's been a while since I worked (as a customer service rep, so don't think I actually knew anything) in retirements, but one should note that the $10,000 figure is the important one: the IRS lets you have any number of "first-time" home experiences. You can only spend $10,000 total on them though. So $10k once, $5k twice, etc.
posted by yerfatma at 4:17 AM on January 22, 2004

I know that many 401(k) plans allow you to borrow (and then repay) from your account for real estate purchases, generally up to half the balance of your account or $10K, whichever comes first. You can then repay it over ten years (unless your employment status changes, at which time you may have to pay the balance back all at once).
posted by briank at 7:04 AM on January 22, 2004

many 401(k) plans allow you to borrow (and then repay) from your account for real estate purchases

This is true. You may have to pay interest, depending on the plan, but since you're borrowing the money from yourself, the interest usually goes back into your 401(k.), IIRC.
posted by kindall at 4:52 PM on January 22, 2004