As college tuition become due, taxpayers are looking for sources of funds to pay make these payments. Often, as a last resort, many taxpayers are forced to dip into retirement funds. If you find yourself in this situation, keep in mind that withdrawals from an IRA before age 59 ½ are exempt from the 10% early distribution penalty if they are used for qualified higher education expenses. Examples of these post-secondary qualified expenses are books, tuition, and room and board. While this type of withdrawal is exempt from the 10% penalty, it is still subject to income tax in the year taken.
Please contact us if you find yourself in this situation, or have any other questions regarding IRS distributions and penalties.