Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Qualified Acquisition Cost

What it is:

A qualified acquisition cost refers to the cost of buying, building, or rebuilding a home. Investors can often withdraw qualified acquisition costs from their IRAs without paying early withdrawal penalties.

How it works (Example):

Let's assume George wants to buy a $250,000 house. This is George's first home purchase. In order to make a substantial down payment, he wants to take $15,000 out of his Roth IRA

Because George is only 30, he normally cannot withdraw money from his IRA without a hefty penalty. However, because George is using the money for qualified acquisition costs, he can withdraw money from his IRA penalty-free.

In many cases, there is a limit (around $10,000) on the withdrawals allowed under the first-time home buyer provision (for more, visit www.IRS.gov or read 5 Safe Ways to Tap Your Roth IRA Before You Retire). It is important to note, however, that qualified acquisition costs also include settlement and closing costs

Why it Matters:

Many investors are unaware that they can tap IRAs to fund first-home purchases. It is especially important to note that "first-time home buyer" does not always mean the buyer can never have owned a home; the term typically refers to people who have not owned a home for several years (for more, visit www.IRS.gov).

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...