why is my amount owed increasing when I use early retirement fund withdrawal for educational purposes? I thought there was no penalty for this?

Forum|Forum|5 years ago
June 29, 2020
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Best answer by Hal_Al

The 10% early withdrawal penalty* is waived when you use an IRA for higher education. Burt, the tax is still due. So, that would explain the amount you owe increasing when you enter the 1099-R.

*The penalty exception is for IRAs only and does not apply to a 401k or other types of retirement plans.

Hal_AlAnswer

Employee

The 10% early withdrawal penalty* is waived when you use an IRA for higher education. Burt, the tax is still due. So, that would explain the amount you owe increasing when you enter the 1099-R.

*The penalty exception is for IRAs only and does not apply to a 401k or other types of retirement plans.

RES2Author

Thank you!

Carl11_2

Employee

While the withdrawal may be exempt from the early withdrawal penalty, it is still taxable income. The taxability of that income will be offset by the "qualified" education expenses it is used to pay for.

Any amount not used for qualified education expenses will be taxed. If an early withdrawal, it will also be penalized at an additional 10%.