IRA withdrawl and 529 contribution

Submitted by William Bailey on Fri, 2017-03-31 14:45

I took an early withdrawl from my IRA to help fund my childs college tuition costs. Before I paid the tuition I deposited the $18,000 into a 529 savings account. The funds remained in the 529 account for a short time and then I withdrew it to pay the tuition. All of this activity took place in the same year. Is there any reason whyI cannot use the tuition exception for the IRA penalty?



Submitted by Alan - IRA critic on Fri, 2017-03-31 18:31

The higher education exception to the IRA early withdrawal penalty can be claimed on Form 5329 for higher education expenses paid from a 529 account distribution in the same year. From p 25 of Pub 590 B:

When determining the amount of the distribution that is not subject to the 10% additional tax, include qualified higher education expenses paid with any of the following funds. Payment for services, such as wages. A loan. A gift. An inheritance given to either the student or the individual making the withdrawal. A withdrawal from personal savings (including savings from a qualified tuition program).

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