IRA for tuition

[thyme4change]

I have put a lot of money into my tax deferred 401k and IRA over my life, and although I managed to get a respectable amount into a place I can reach it before age whatever - it would be a lot more comfortable for me if I used IRA funds to pay tuition for my kids. I know I will have to pay taxes, but I can avoid the 10% penalty because tuition is a carve out.

How does the process work? Like, I get the money from Schwab, and they ask me if I want to have something withheld, and then I have to prove to the IRS that I paid tuition? What do I need as proof - is there a form or something? Will Turbo Tax know how to deal with that?

[minnesotapaintlady]

This is a few years old, but nothing has really changed since then with regards to using an IRA for education.

ttlc.intuit.com/community/retirement/discussion/i-took-withdrawal-from-ira-to-pay-for-higher-education-expense-but-now-my-income-is-too-high-to/00/346400

As is with the 529 withdrawals, you're on the honor system with the IRS when filing your taxes.  You don't have to prove anything to Schwab or include anything with your taxes, but you're expected to keep all your receipts/records in case you're ever audited.

[thyme4change]

Thanks MN - that is helpful.

Do you know if I can take a distribution this year for tuition I paid last year?

[minnesotapaintlady]

That I don't know.  With 529s the withdrawal has to be in the same year as expenses unless used to pay loans, but I haven't researched using IRA money.

[thyme4change]

Apr 17, 2023 13:56:42 GMT -5 minnesotapaintlady said:

That I don't know.  With 529s the withdrawal has to be in the same year as expenses unless used to pay loans, but I haven't researched using IRA money.

I think it has to be in the same year. I guess I should have thought about this a few years ago. Granted that was before I quit my job so cash flow expectations were different.

[minnesotapaintlady]

Apr 17, 2023 15:45:50 GMT -5 thyme4change said:

Apr 17, 2023 13:56:42 GMT -5 minnesotapaintlady said:

That I don't know.  With 529s the withdrawal has to be in the same year as expenses unless used to pay loans, but I haven't researched using IRA money.

I think it has to be in the same year. I guess I should have thought about this a few years ago. Granted that was before I quit my job so cash flow expectations were different.

Yeah, sounds like it.  I dug into IRS publication 970 (this is from page 54 Education Exception to Additional Tax on Early IRA Distributions)

You can take a distribution from your IRA before you
reach age 591/2 and not have to pay the 10% additional
tax if, for the year of the distribution, you pay qualified education expenses for:
• Yourself;
• Your spouse;
• Your or your spouse's child, foster child, or adopted
child; or
• Your or your spouse’s grandchild