If your child’s annual tuition is $15,000, but she received a $10,000 scholarship, qualifying tuition expenses are just $5,000. If you or your dependent received grants or scholarships, you must deduct that amount when determining qualified expenses. Room and board is only considered a qualifying expense for those enrolled at least half-time.įor any qualified expense, students must enroll at least half-time for eligibility, so you can’t use an IRA withdrawal to fund one or two classes per year. However, it is your responsibility to verify that the school is eligible before making an IRA withdrawal. The United States Department of Education determines which such institutions are eligible, but if a college, university or vocational school participates in federal student aid programs, the school should qualify. Tuition, administrative fees, equipment, supplies and books are considered qualified expenses at eligible institutions of higher learning. Not every educational expense qualifies under IRS regulations. If you are over age 59 ½ and the account has been in existence for the five-year minimum, there is no tax on withdrawn contributions or earnings. As long as your account has been in existence for at least five years, you can withdraw your contributions tax-free. You will pay tax on the distributions at your regular income tax rate, although it is always possible that the withdrawals will put you into a higher tax bracket.Ī Roth IRA account follows different rules, since it is funded with post-tax dollars and no 10 percent penalty applies for any withdrawal. These are tax-deferred accounts, funded with pretax dollars, and many people can deduct their IRA contributions on their federal income tax forms. ![]() If you withdraw money from a traditional IRA for educational expenses, you will avoid the 10 percent penalty, but not the tax on the withdrawals. ![]() ![]() However, you may still end up paying income tax on these withdrawals. You can withdraw funds from your traditional or Roth IRA for qualified educational expenses without having to pay a penalty.
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