Roth IRA For College Expenses
My understanding is if a withdrawal prior to 59.5 from a Roth is used for college expenses it avoids the 10% penalty, however does it also avoid the built up gain being taxed as income? Thanks.
My understanding is if a withdrawal prior to 59.5 from a Roth is used for college expenses it avoids the 10% penalty, however does it also avoid the built up gain being taxed as income? Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2015-11-13 02:21
The Roth ordering rules still apply prior to 59.5, so your earnings come out last. Therefore, unless you distribute a large portion of your Roth, the distribution will probably come from your contributions tax and penalty free. If your distribution also comes from conversions held under 5 years, then the 10% penalty is waived to the extent of the qualified higher education expenses paid. If there are any earnings distributed as well, the earnings will be taxable but not penalized.
Permalink Submitted by Brian Kuhn on Fri, 2015-11-13 14:03
This is a great service thanks very much.