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What if more than one person contributed to an account that had a qualified withdrawal during the tax year?

The contribution must be prorated.

The proration is equal to the actual contribution less the share of the qualified withdrawal that is equal to the qualified withdrawal multiplied by a fraction, the numerator of which is the taxpayer’s contributions to the account and denominator of which is the total of all contributions made to the account during the year. The net contribution amount cannot be less than $0.

Example: Sarah, the account holder, contributed $6,000 to a first-time home buyer account. Another taxpayer also contributed $2,000 during the tax year for a total annual contribution to the account of $8,000. A qualified withdrawal of $5,000 for an earnest money payment also occurred. To arrive at her net contribution, Sarah must determine what portion of the total withdrawal she must net against her contribution. The net contribution is calculated as follows:

$6,000 (Sarah’s contribution) / $8,000 (total contributions) = 75%

75% (0.75) x $5,000 (withdrawal) = $3,750 (Sarah’s prorated portion of the withdrawal)

$6,000 - $3,750 = $2,250 (Sarah’s net contribution)

$2,250 should be entered in the contribution box for this account.