Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
No penalty for early withdrawal of IRA funds to pay higher education expenses (MS Word)
No penalty for early withdrawal of IRA funds to pay higher education expenses (.pdf)
No penalty for early withdrawal of IRA funds to pay higher education
expenses
Dear Reader:
I am writing to advise you of a particular tax benefit for people
facing the prospect of paying ever-escalating college costs. The law
lets individuals receive distributions from their IRAs (including
Roth IRAs) to pay higher education expenses without incurring the
10% early withdrawal penalty that usually applies to withdrawals
from an IRA before age 59-1/2. (The regular income tax on the
distribution still applies.)
The penalty-free withdrawal is available for “qualified higher
education expenses,” meaning tuition at a post-secondary educational
institution, as well as room and board, fees, books, supplies, and
equipment required for enrollment or attendance. Expenses for
graduate level courses are also covered.
The expenses can be incurred by the IRA owner, his or her spouse, or
any child or grandchild of either spouse. There is no requirement
that the child or grandchild be a dependent of the IRA owner.
This provision is just one of several aimed at easing the burden of
paying the bills for higher education. If you have any questions
about this or any of the other provisions, please do not hesitate to
call.