1st time homebuyer credit/Penalty IRA early distribution

[Penelope]

Client wants to take $30,000 early distribution from IRA to buy new home. He qualifies as 1st time homebuyer and is within the income limits. My understanding is that $10,000 of the early distribution can be taken penalty-free if the funds are used by a 1st time homebuyer for that purpose. This means there would be a $2,000 early distribution penalty.

Question: Can the fully refundable 1st time homebuyer credit be applied to the $2,000 penalty? He understands the home must be purchased before Dec 1, 2009.

Thanks!

[solomon]

Per the 2009 draft 1040, the credit will appear on Line 67.

[Penelope]

Appears it can be applied to any IRA penalty

Thank you. I see the 2009 draft form 1040 and line 67. Since line 67 (First time Homebuyer credit from form 5405) is included in Total Payments, line 71, I am going to assume that this "payment" can be applied to any early IRA withdrawal penalty (from form 5329) on line 58 of the 2009 return. Thanks again.