qbteachmt
Level 15

"I read that the withdrawn earnings are both tax- and penalty-free as long as you use them to buy, build, or rebuild a home."

Nope, but it not "up to $10,000" either. That is a life-time maximum, but not the only reason there might not be penalty or income tax.

There are ordering rules: https://www.investopedia.com/retirement/tax-treatment-roth-ira-distributions/

"distributions of Roth IRA assets from regular participant contributions and nontaxable conversions can be taken at any time, tax-free and penalty-free. However, distributions on taxable conversion amounts may be subject to the 10% early distribution penalty. Distributions of earnings that are part of a non-qualified distribution are taxable and may be subject to an additional 10% early-distribution penalty."

"and used the total distribution for purchase of a first home."

"Even if you are under age 59½, you don't have to pay the 10% additional tax on up to $10,000 of distributions you receive to buy, build, or rebuild a first home. To qualify for treatment as a first-time homebuyer distribution, the distribution must meet all the following requirements.

  1. It must be used to pay qualified acquisition costs (defined next) before the close of the 120th day after the day you received it.

  2. It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer (defined below) who is any of the following."

You would need to look at it step-by-step.

 

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