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Posted by Herb Smith on February 19, 2008, 2:19 pm
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> Or - Should I borrow from my IRA to purchase a residence?
>
> I have $44,000 in my IRA and I'm about to purchase my first residence
> (a condominium). �Can I borrow from my IRA, pay interest to my IRA and
> deduct that interest?
>
> I'm already putting about 30% down on a $280k purchase. �I can get a
> mortgage at 5.5%. �If I borrow from my IRA, I can pay 7.5% interest to
> myself. �Is this deductible? �Should I take out a larger mortgage or
> borrow from my IRA? �If I were not paying to myself, it seems like a
> poor choice.
You CANNOT borrow money from your IRA, for ANY reason. To do so would
be a prohibited transaction and be deemed as a total distribution of
the IRA, subject to tax and early withdrawal penalties.
You CAN, however, use/withdraw up to $10,000 to acquire a "first
residence", which would be taxable but not subject to the early
withdrawal penalty. This a lifetime limit for this exclusion. See IRS
Pub 590 for additional detail.
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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