If you’re planning to buy your first home in 2026, getting your finances in order is a critical step.

As you move through the closing process and settle in, it’s also important to understand how recent changes to IRA rules could affect both your near- and long-term financial picture.

By brushing up on updated contribution limits, income thresholds, and early-withdrawal rules, you can make smarter decisions that support your home purchase while keeping your retirement goals on track—and avoid unwelcome surprises along the way.

In 2026, there are three primary updates to IRAs every homeowner, whether new or existing, should be aware of:

For the 2026 tax year, the IRS has raised the annual contribution limits to $7,500—up from $7,000 in 2025.

If you’re 50 or over, these limits increase to $8,600. Note that they’re intended for traditional and Roth IRAs combined.

To be eligible for a Roth IRA, you may now earn up to $168,000 if you’re a single filer and $252,000 if you’re married and filing jointly.

These figures have increased slightly from $165,000 and $246,000 in 2025.

If you have an employer-sponsored retirement plan, your income determines whether you qualify for a tax deduction.

In 2026, the deduction begins to phase out if you earn $81,000 to $91,000 as a single individual and $129,000 to $149,000 if you file jointly.

If you do take advantage of an IRA as a first-time homebuyer—or someone who hasn’t owned a home in the last two years—you can avoid the 10% early withdrawal penalty. However, there are few caveats.

The funds must be used within 120 days from the day you withdraw them to pay for “qualified acquisition costs”—buying, building, or rebuilding a home for yourself, a spouse, child, grandchild, or parent.

According to Jeff Hunter, wealth strategist at TD Wealth in Chadds Ford, PA, the 120-day deadline is crucial to understand. “Even if you miss it by one day, your entire withdrawal becomes subject to the 10% penalty,” Hunter explains.

Note the way these withdrawals are taxed depends on the type of IRA.

“With a traditional IRA, your penalty may be waived, but your withdrawal will still be taxed as ordinary income. With a Roth IRA, your contributions will always be withdrawn tax‑ and penalty‑free,” says Nicholas Hamilton, national manager of Alliant retirement and investment services at Alliant Credit Union in Chicago.

There are limited situations where tapping an IRA for a down payment can make sense but plenty where it backfires.

“Using a small amount of Roth contributions—late in the buying process and with a clear plan to resume retirement savings quickly can sometimes work,” says Hamilton.

On the flip side, draining a traditional IRA, relying on retirement funds as a primary down payment strategy, or assuming home equity will replace retirement savings can lead to long‑term regret.

“Buying a home can build wealth, but not if it quietly undermines your future retirement paycheck. The biggest risk isn’t the tax bill—it’s the lost compounding that can’t be recovered,” explains Hamilton.

For example, let’s assume that you decide to withdraw $10,000 from your IRA at age 30 to help fund a new home purchase. What’s the opportunity cost of that decision as compared with simply leaving the money in your IRA to grow until you retire at the age of 67?

“If we assume an 8% annual rate of return on your IRA funds, that $10,000 would have grown to over $172,000 by the time you retire,” explains Hunter.

Brian Zink, CEO and founder of No Upfront Tax Relief in Phoenix, points out that pulling early from an IRA can make financial strain worse if it means making an unaffordable home work.

“The goal of buying a home should be to improve long-term financial stability, not weaken it,” says Zink.

Remember that penalty‑free doesn’t mean consequence‑free. The IRS may not charge a penalty, but withdrawing funds is essentially shrinking a retirement account that was designed to grow for decades.