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RES2
Level 1

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

 
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Hal_Al
Level 15

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

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. 

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3 Replies
Hal_Al
Level 15

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

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. 

View solution in original post

Carl
Level 15

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

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%.

 

RES2
Level 1

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

Thank you!

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