How to Use IRA Funds for a Home Mortgage
- 1). Complete an IRA distribution form to get the money out of your IRA. The IRS places no restrictions on when you can take money out of your account even though you are charged a penalty, so you do not need to provide any documentation of why you need the money.
- 2). Use the money to pay for your home mortgage. Since the IRS makes no exception to the penalty for this reason, you do not need to document how you used the money.
- 3). Complete Form 5329 to figure the penalty you owe. The penalty equals 10 percent of the taxable amount withdrawn. For example, if you take $5,900 out of your traditional IRA, you pay a $590 penalty.
- 4). File your income taxes with Form 1040. On line 58, report the amount of your penalty. On line 15b, report the amount of your traditional IRA withdrawal. The amount of your withdrawal is included as taxable income.
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