Withdrawing IRA for education tax exempt?

[Fergieleung]

What do I need to do when filing for tax to prevent penalty fee if I were to withdraw 401k for education?

[MinhT1]

The exception to the 10% penalty for withdrawals for higher education applies only to withdrawals from an IRA account, and not from a 401(k) account.

Please read this IRS document for more information.

If this applies to you, here are the steps to follow in TurboTax.

1. After you have entered all your forms 1099-R, on the summary page Review your 1099-R Info, click Continue 
2. Follow the interview until you arrive at the page titled Did you use your IRA to pay for any of these expenses?
3. Enter the amount of your education expenses in the box next to Higher education and click Continue
4. Your early withdrawal penalty will be waived.

[dmertz]

Using the funds for qualified education expenses exempts the distribution from an early-distribution penalty, not from income tax, and only applies to distributions from IRAs, not from a 401(k).  If your 401(k) permits you to take an ordinary distribution, you can roll the distribution over to an IRA and then take a distribution from the IRA to avoid the early-distribution penalty.

[LRDominguez]

What if there was a distribution from an IRA account in 2023, but the education expenses were paid in 2024? The income from the IRA were paid in the 2nd week of January for the current spring semester of 2024.

Can the higher education cost be included on the 2023 tax return? In order to avoid the early withdrawal penalty?

[dmertz]

"What if there was a distribution from an IRA account in 2023, but the education expenses were paid in 2024? The income from the IRA were paid in the 2nd week of January for the current spring semester of 2024."

That would not qualify for the penalty exception.