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What qualifies as higher education to avoid 10% early withdrawal penalty from my IRA
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Retirement tax questions
Yes, you can use the cost of the tuition. For the purposes of the 10% additional penalty exception, higher education means costs of tuition, fees, books, supplies and equipment to a post secondary school (college, university, vocational schools) eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) post secondary institutions.
Note: living expenses are not allowed for the additional 10% penalty tax exceptions on early distributions.
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Retirement tax questions
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Retirement tax questions
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Retirement tax questions
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Retirement tax questions
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Retirement tax questions
Would this include paying off a Parent Plus Loan. Example: $10K parent plus loan awarded and deferred until graduation. The tuition portion is $10K and interest is $3K for a total owed $13K. Would you be able to use a traditional IRA early distribution and avoid the 10% on the full $13K?
I understand the $13K would be added as taxable income. Correct.
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Retirement tax questions
No. Loan repayments are not education expenses even though the loan may have been used to pay education expenses.