Purchasing real estate with IRA funds and living in it NOW

We get asked all the time, “Can I use my IRA to purchase real estate that I can actually live in?”  There is not a simple “yes” answer to this question, but it can be done.

The IRS has a rule called a 72T Distribution.  Using this rule it is possible to purchase real estate through your IRA and live in it now. 

From the IRS Publication 590

You can receive distributions from your traditional IRA that are part of a series of substantially equal payments over your life (or your life expectancy), or over the lives (or the joint life expectancies) of you and your beneficiary, without having to pay the 10% additional tax, even if you receive such distributions before you are age 59 ½.  You must use an IRS-approved distribution method and you must take at least one distribution annually for this exception to apply.

The payments under this exception must generally continue until at least 5 years after the date of the first payment, or until you reach age 59 ½, whichever is later.  If a change from an approved distribution method is made before the end of the appropriate period, any payments you receive before you reach age 59 ½ will be subject to the 10% additional tax.

There are a few accepted methods for determining how much must be distributed under this scenario.  We strongly suggest seeking advice from a professional to determine the best way for you to proceed.

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