IRS 10% waiver for higher education expenses
Can a student take out a loan in the same year as requesting an IRA distribution w/o the 10% penalty?
Example: 2012 student loan was taken for $10,000. IRA distribution of $10,000 was done and a request for the exception to the penalty. As long as there were $10k worth of qual. higher education expenses IN 2012, does this work?
Permalink Submitted by Alan Spross on Thu, 2012-08-16 17:05
Yes, that’s OK. Pub 590, p 50 indicates that QHEEs can be paid with loan money, gifts, inheritance, 529 plan etc and the IRA distribution can still have the penalty waived (File form 5329 with Code 08).
However, QHEEs must be reduced by Coverdell distributions, PELL Grants, scholarship or fellowship grants, employer or veterans educational assistance.