IRA Penalty Exceptions

Submitted by Dean R Crouthamel on Fri, 2024-03-22 16:10

I have a client who wished to take money out of his IRA to give to his daughter who is a Senior in college and will be graduating this year.

The money is to be used to help her paydown her college debt.  Could this be treated as a higher education expense to avoid paying the 10% penalty.  Client is under the age of 59 1/2.

Thanks



Submitted by Alan - IRA critic on Wed, 2024-04-03 22:10

Yes, unless the bulk of the qualified expenses were paid via tax free grants or scholarships that must be used to offset the qualified expenses. The amount of the penalty free IRA distribution cannot exceed the amount of qualified expenses that remain.

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