IRA tax free withdrawel for kids education
Is there a provision where you can withdraw IRA funds penalty free and tax free for children’s education?
Is there a provision where you can withdraw IRA funds penalty free and tax free for children’s education?
Permalink Submitted by Alan Spross on Tue, 2007-10-16 19:09
Penalty free but not tax free. With respect to the exception to the early withdrawal penalty, the expenses must be qualified higher education expenses paid for the year by IRA distributions in the same year. Understanding the definitions is key. See Pub 590, p 53.
The former Education IRAs are now called Coverdell education savings accounts. The name change reflects that these never were true IRA accounts, but tax free savings accounts for qualified educational expenses. Withdrawals from these accounts to pay for qualified expenses are actually tax and penalty free, but they are not really IRAs.