IRA & First-Time Homebuyer
Moderator: Mark T Serbinski CA CPA
IRA & First-Time Homebuyer
Quick question:
As a former US resident who is now a resident in Canada, can I withdraw up to $10,000 USD from my IRA (and $10,000 USD from my spouse's IRA) and avoid the tax penalty via the first-time homebuyer exception?
In other words, does the IRS allow this exception to be applied to homes bought out of the US?
Regards,
Matt
Yes.
But remember that this only applies to the PENALTY, not to the tax, and also means that the amount will be fully taxable in Canada.
So, this will simply be regarded by both IRS and CRA as a $10,000 chunk of income, and all you will be 'saving' is the 10% penalty, which will be more than made up by the extra Cdn tax-rate, since your foreign tax credit will thus be less.
<b>There is absolutely no tax advantage to doing this whatsoever.</b>
Your alternative is to have this money pass thru an RRSP for 90 days and thus be eligible for both the tax deduction and Home Buyers Plan.
<i>nelsona non grata</i>
But remember that this only applies to the PENALTY, not to the tax, and also means that the amount will be fully taxable in Canada.
So, this will simply be regarded by both IRS and CRA as a $10,000 chunk of income, and all you will be 'saving' is the 10% penalty, which will be more than made up by the extra Cdn tax-rate, since your foreign tax credit will thus be less.
<b>There is absolutely no tax advantage to doing this whatsoever.</b>
Your alternative is to have this money pass thru an RRSP for 90 days and thus be eligible for both the tax deduction and Home Buyers Plan.
<i>nelsona non grata</i>