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turbomom0
New Member

My rollover ira fund will not come in time pay my son's tuition. Can i pay the tuition with a credit card and then use the rollover to pay the expense on the credit card

 
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Anita01
New Member

My rollover ira fund will not come in time pay my son's tuition. Can i pay the tuition with a credit card and then use the rollover to pay the expense on the credit card

You can certainly do what you are proposing.  Your use of the term "rollover" is a little confusing.  Such an IRA is usually created by rolling over money from a pension plan or 401k to an IRA.  The rollover occurs at the time you make that transfer.

If you later take a distribution from the IRA, that distribution is taxable if the funds distributed were not previously taxed.  There may also be an early distribution penalty if you are under 59 1/2.


The amount of tuition used for any education credit or deduction would be the amount you paid with your credit card.  The payoff of the card would not be relevant to your education expenses credit or deduction.

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2 Replies
Anita01
New Member

My rollover ira fund will not come in time pay my son's tuition. Can i pay the tuition with a credit card and then use the rollover to pay the expense on the credit card

You can certainly do what you are proposing.  Your use of the term "rollover" is a little confusing.  Such an IRA is usually created by rolling over money from a pension plan or 401k to an IRA.  The rollover occurs at the time you make that transfer.

If you later take a distribution from the IRA, that distribution is taxable if the funds distributed were not previously taxed.  There may also be an early distribution penalty if you are under 59 1/2.


The amount of tuition used for any education credit or deduction would be the amount you paid with your credit card.  The payoff of the card would not be relevant to your education expenses credit or deduction.

dmertz
Level 15

My rollover ira fund will not come in time pay my son's tuition. Can i pay the tuition with a credit card and then use the rollover to pay the expense on the credit card

You can use a distribution from a Rollover IRA in 2018 to pay off your credit card, however, the higher education expenses paid in 2017 will not be applicable as an exception to an early-distribution on this 2018 IRA distribution.  Only qualified higher education expenses paid in 2018 will be applicable as an exception to the penalty.  Paying the expenses in 2017 by credit card then paying the credit card bill in 2018 does not turn a 2017 expense into a 2018 expense.

On the other hand, if the tuition is being paid in 2018, this will be an expense paid in 2018 and can be applied to a 2018 IRA distribution to reduce or eliminate the early-distribution penalty.

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