What is a common limit for a first-time home purchase distribution from a Roth IRA?

The limit for a first-time home purchase distribution from a Roth IRA is $10,000. This provision allows individuals to withdraw up to this amount without incurring a penalty or taxes, provided the funds are used to purchase, build, or significantly improve a first home. This withdrawal can be particularly beneficial for first-time homebuyers by easing the financial constraints associated with home purchasing.

This limit applies to the individual account holder; however, if a married couple both have Roth IRAs, they can each withdraw up to $10,000, potentially allowing for a total of $20,000 for the purchase. The Roth IRA distribution must be used for a qualifying first home purchase within a specified time frame, and the account holder must meet the other requirements set forth by the IRS to benefit from this exemption.

If someone were to reference other amounts, such as $5,000 or $15,000, they do not align with the established IRS guidelines for Roth IRA first-time homebuyer distributions, which helps clarify why those amounts are not acceptable answers. The $20,000 amount implies that it might be a couple's combined distribution but does not represent a single individual's limit.