At 71 She’ll Take $80,000 Out of Her IRA to Close on the Condo Before Her House Sells. On Day 58 She’ll Put It Back, and the IRS Will Never Count a Dollar of It as Income

A traditional IRA owner can withdraw money for up to 60 days without paying tax, as long as they roll the full amount back in on time. This is the 60-day IRA rollover rule, and a retiree can use it as a short-term bridge loan when buying a new home before the old one sells.

A 71-year-old who takes $80,000 to close on a condo and puts the full amount back on day 58 reports none of it as taxable income. The money also has no interest charge and needs no lender approval.

How a 60-Day Rollover Turns Your IRA Into a Bridge Loan

Under the general rule, any amount paid from an IRA counts as gross income, but an exception may apply. The entire amount received goes back into an IRA “not later than the 60th day after the day on which he receives the payment or distribution”.

The law places no restriction on what the money does in between, and it can cover a down payment and closing costs, provided the same dollar amount lands back in an IRA before the deadline. Partial repayment also works. Whatever is put back within the window remains tax-free, and only the shortfall becomes taxable.

Where This Rule Sits in the Tax Code

The general rule taxing IRA payouts is 26 U.S.C. § 408(d)(1). The rollover exception is § 408(d)(3)(A)(i), and partial rollovers are covered by § 408(d)(3)(D). IRS Publication 17 states: “You can withdraw, tax-free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA.”

Who Qualifies and Who Gets Shut Out

Age 71 is a good time to use the rule. Under SECURE 2.0, anyone who reaches 72 after December 31, 2022, and 73 before January 1, 2033, has a required minimum distribution (RMD) age of 73. A 71-year-old in 2026 falls in that group and owes no RMD this year. Rollovers of any amount “required to be distributed” are also blocked. An owner already taking RMDs has to take that year’s required amount first, and those dollars can never go back into the account.

Owners past age 59½ also avoid the early-distribution penalty if the plan falls apart. Non-spouse beneficiaries of inherited IRAs are excluded entirely under § 408(d)(3)(C). So is anyone who already completed an IRA-to-IRA rollover in the prior year, under § 408(d)(3)(B).

How to Run an $80,000 Bridge in Five Steps

1. Check the last 12 months. The IRS allows only one rollover from an IRA to another (or the same) IRA in any 12-month period, no matter how many IRAs you own. Roth conversions and trustee-to-trustee transfers do not count toward that limit.
2. Request the distribution and decline withholding. IRA custodians withhold 10% from nonperiodic payouts unless you elect out. On $80,000, that withholding comes to $8,000, so only $72,000 reaches you. Rolling over the full amount would require $8,000 from other savings, and the withheld tax would be refunded at filing time.
3. Count from the day you receive the money. The clock starts on the day the funds arrive. Redepositing days before the 60th day leaves room for delays.
4. Put back the full amount as a rollover contribution. Tell the receiving custodian the deposit is a rollover so it isn’t classified as a regular annual contribution.
5. Report it correctly. Your Form 1099-R will show the withdrawal. On Form 1040, report only the non-rollover portion as taxable on line 4b and check the box on line 4c for rollovers.

What Happens If the House Sale Slips Past Day 60

The main risk is the deadline: amounts not returned within the window “don’t qualify for tax-free rollover treatment” and are taxable in the year distributed. A delayed closing would turn the full $80,000 into 2026 ordinary income, which can also raise the taxable share of Social Security benefits. The IRS can waive the deadline for casualty, disaster, or other events beyond the owner’s reasonable control. The three routes are an automatic waiver, self-certification, or a private letter ruling. A buyer backing out of a sale is a weak fit for those standards, so holding enough cash or credit to return the IRA reduces exposure if the house does not sell in time.

Using the rollover also uses up the year’s limit. Publication 17 notes that the 1-year period “begins on the date you receive the IRA distribution, not on the date you roll it over.” While the money lies outside the IRA, it also earns nothing inside the account. By comparison, the national average 12-month CD yielded 1.73% APY as of October 1, 2026.

Rules for processing rollovers may change. In Notice 2026-49, Treasury and the IRS said they are considering guidance to standardize rollovers under Section 324 of SECURE 2.0, including a move away from paper checks. Comments are due October 23, 2026.

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