A 37 year-old writer withdraws $⁢4,000 from a traditional IRA. The withdrawal qualifies under the IRS first-time homebuyer exception. How will this withdrawal be treated for tax purposes?

A traditional IRA withdrawal is generally included in taxable income, so the $4,000 is taxed as regular income. The first-time homebuyer exception waives the 10% early-withdrawal penalty for an eligible distribution; it does not make the withdrawal tax-free. Therefore, the withdrawal has no penalty but is taxed as regular income.

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