Q. For the IRA, I don't have to not have to pay 10% early withdrawal fee, but I do have to worry about paying taxes on the 10K?
A. That is correct, in the case of a traditional IRA. In the case of a Roth IRA, you may withdraw your contributions, both tax and penalty free. If you need to dip into the Roth earnings, then the tax would apply, but not the penalty*.
Q. Please, can you clarify if this applies to both 401K and also the ROTH IRA account.?
A. No. Only IRAs are eligible for the education penalty exception.
Q. Is there any tax advantage to taking the withdraw from 401K versus the ROTH IRA account?
A. No. Just the opposite, the advantage is for taking money from the IRA.
* Roth IRA withdrawal. There is no tax on any portion of a withdrawal, from a Roth IRA, that is attributable to contributions (since contributions were not deductible, that is they were made with "after tax money"). Tax & 10% early withdrawal would only be applicable to earnings and (in some cases) conversions. The first money to come out a Roth is deemed to be from contributions.
You may withdraw any part of your contributions (or conversions) from a Roth IRA at any time without tax or penalty. Remember, this was all after tax money when it went in. It's when you start withdrawing the earnings (prior to the age 59-1/2 rule and/or the 5 year rule) that you start getting into a tax or penalty situation.
You are allowed to withdraw your original contributions (what you put in) without paying tax (for the reason you stated, you have already paid tax on that money). After all your contributions have been withdrawn and you start dipping into the "earnings", they will be taxed if you are under 59-1/2.
