Traditional IRA withdraws for higher education

Forum|Forum|4 years ago
June 17, 2021
1 reply
0 views

I am finishing up my undergrad degree and plan on using funds from my traditional ira to cover the expense as higher education. I’ve already made a withdraw to pay for summer semester. Will I get the proper forms from the university come tax time to prove to the IRS so I’m not penalized the 10% early withdraw being I’m under 59 1/2. Also, I will still pay income tax on the funds come tax time right?

thanks!

Hal_Al

Employee

Q. Will I get the proper forms from the university come tax time to prove to the IRS so I’m not penalized the 10% early withdraw being I’m under 59 1/2.

A. The only tax form issued by the school is the 1098-T. There is no additional/special form for paying with an IRA distribution. But it doesn't matter. TurboTax will prepare form 5329 to claim the exception. You do not need to submit any other proof with your tax return. You claim the penalty exception based on your own records. Proof will only be needed if you are "audited".

Q. Also, I will still pay income tax on the funds come tax time right?

A. Yes. Tax is still due. The education exception (for a pre 59-1/2 distribution) is only for the 10% penalty.

Note: you can still claim an education credit or deduction, when you pay tuition with IRA money. It's a case where a little "double dipping" is allowed.