Education Provision ??
Is there any provision available for someone to utilize a ‘Premature’ IRA distribution from an existing Traditional IRA account for secondary type education purposes without the premature penalty ? I am being told there is.
As always your reponse is greatly appreciated…
Gregg Guiol
Permalink Submitted by mk foss on Thu, 2009-12-10 18:49
There is no 10% penalty for withdrawls from an IRA for higher education. There is no dollar amount restriction, as long as you spend for education as much as you withdraw that year. The education would be books, tuition and necessary equipment. Dorm fees work if at least a half time student. The education can be provided to the taxpayer, spouse, a descendant of the taxpayer or spouse or an ancestor of the taxpayer or spouse.
You don’t have to trace the funds directly to the education, the penalty doesn’t apply to the amount actually expended. It must be current education – meaning that you can’t use the funds to pay off student loans. You also can’t “double dip” – expenses used to avoid the 10% penalty cannot also be used for education credits or deductions.