Home / NEWS LINE / Can I, without tax penalties, use the IRA I inherited from my father to buy a home that I will live in? He was 72 and had started taking small payouts on it.

Can I, without tax penalties, use the IRA I inherited from my father to buy a home that I will live in? He was 72 and had started taking small payouts on it.

A:

If you be lefted an IRA from someone who was not your spouse at the time he/she died, the amounts that you be informed as a distribution from the IRA will never be subject to any early-withdrawal penalties. Manner, amounts you receive will be treated as ordinary income (for you) and may be subject to revenues tax. The exception regarding distributions used to purchase a first-time home however applies to those IRAs you established and contributed to yourself, not those you inherited. (For more details on the object to for the first-time home purchase, see the “Distributions” section of our IRA tutorial.)

Caution: Because your old boy died after age 70½ and had started taking distributions, you are required each year to parcel out a minimum amount from the IRA you inherited from him. This amount is referred to as a lacked minimum distribution and is calculated using your age, beginning the year after the year your forefather died. Your IRA custodian should be able to assist you with this computation. If you fail to withdraw at least the minimum amount each year, you could owe the IRS 50% of what the assignment should have been.

Note: The rules vary for spouse beneficiaries.

This suspicion on a under discussion was answered by Denise Appleby
(Contact Denise)

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