I used a roth ira for qualified education, but I don't see where they ask the question in turbo tax. I believe that are charging me the 10% penalty.

[ThomasM125]

If your form 1099-R that reported the distribution had code "J" in box 7 then you should see a question in one of the screens after you enter it that says Did you use your IRA to pay for any of these expenses? and one of the options is Higher Education. That is where you should enter the amount you paid for your college expenses. 

[dvail2180]

Thomas,

Good morning.  I have code "J" on my 1099-R for Roth funds used to pay for a child's higher education expenses.  When I get to the screen asking about expenses, higher education is not one of the options listed.  The only solution I found is after adding in my contributions to the Roth (more than the disbursed amount), the taxable amount goes away.  Any thoughts on the correct way to handle it?  Thank you.

Dan 

[RogerD1]

How the early distribution (under 59-1/2 years old) from a Roth account is taxed depends on whether it is an IRA or 401(k), so I'll supply both scenarios here.

If the funds were withdrawn from an IRA, the rules are that contributions made to the account can be withdrawn at any time free of tax.  If the distribution you received from the IRA was less than the amount of contributions you made, then the distribution is completely tax free.  If the distribution is more than the total contributions and it is an early withdrawal, then only the amount of the distribution in excess of the total contributions is taxed and penalized.  The penalty can be removed if the funds were used in situations such as payments for higher education expenses,.

If the funds were withdrawn from a 401(k) instead, the rules are that any early distribution contains a proportion of contributions and earnings equal to the portions in the complete account.  For example, if you had a Roth 401(k) with a value of $50,000 and $30,000 of that was contributions at the time of the distribution, then 60% of distributions made at that time would be contributions (100*30000/50000) and 40% would be earnings.  The amount of the earnings taxed for an early distribution would also be subject to tax plus the 10% penalty.  And, unlike distributions from the Roth IRA, there is no penalty exception for using the funds for higher education.

Based on what you posted, it sounds like your distribution was from an IRA and that the amount of the distribution was less than the total contributions - in this case, the distribution would be tax-free!