401k education withdrawal

Forum|Forum|5 years ago
July 13, 2020
1 reply
0 views

I am trying to understand the implications of an early 401k withdrawal for mostly education expenses. Say I withdrew $60,000 for education expenses but I had grossed it up $12,000 (20%) to cover income taxes due on the withdrawal for a total of $72,000 withdrawn. Am I allowed to report the $72,000 as education expenses to avoid paying the 10% penalty on both amounts? Otherwise I am paying a 10% penalty or $1,200 which seems wrong. Any advice?

MinhT1

The exception to the 10% tax penalty on early distributions for qualified higher education expenses only applies to IRA, SEP and Simple IRA plans. It does not apply to withdrawals for 401(k) plans.

Please see this IRS document for more information.

In any case, you have to apply the gross distribution to the education expenses. The tax withheld is for you to take care of.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"