I withdrew money from a Roth IRA to pay A college loan. I got a 1099-R (J-Code). How do I avoid paying taxes on the withdrawal amount?

[jlskelly]

When I opened the Roth IRA the intent was to use it to pay for college tuition. Which is allowable. I'm unclear in Turbo Tax where/what information to enter so I'm not taxed on the amount in my 1099-R.

[jlskelly]

So I understand Roth IRA "earnings" are taxable. But the if you withdrawal from the "original" investment (dollars I've already payed taxes on) then that amount should be totally tax free, right?

[macuser_22]

The "education" exception to the 10% penalty does not apply to paying student loans.

You can always withdraw your own Roth contributions tax and penalty free.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR  Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

One of the followup questions will ask for your prior year** contributions not previously withdrawn.   Those contributions that still remain in the Roth will not be taxed or subject to a early withdrawal penalty. That will add a 8606 form to your tax return with the Roth contribution and tax calculation in part III.

Note: **Prior year - any 2018 Roth contributions should be entered into the IRA contributions section.  They will not show up in the prior years contributions but will be accounted for on the 8606 form that calculates the taxable amount.

[CarolynM · Accepted solution]

While you can take the distribution and avoid the early withdrawal penalty, it is still subject to income tax.

Code J reflects this: Early distribution from a Roth IRA, no known exception