Did you know that the IRS has several exemptions to the 10% IRA early withdrawal penalty?
Normally when a person takes money out of their IRA prior to reaching the age of 59 1/2, not only are they hit with regular income tax on the money taken out they are also hit with a 10% penalty. The 10% penalty is set to discourage people from taking money out of their IRA’s and leaving it be until retirement. It’s no secret, everyone knows that the costs for college are continuously sky-rocketing. The IRS has some relief for those seeking to go to college on IRA funds. Although the taxpayer is still taxed on the money taken out, they are not hit with the 10% penalty if the money is used for qualified higher education expenses.
What expenses can qualify?
1) Tuition
2) Books
3) Room & Board
4) Fees
5) Supplies
Who can use the expense?
1) The IRA owner
2) Spouse of IRA owner
3) Kids of IRA owner
4) Grand kids of IRA owner
Did you take money out of your retirement for college and get hit with the 10% penalty? Depending on how long it has been, you could file for an amended return to get that 10% penalty back. If you would like to know more about filing an amended return, this exemption, or others associated with the 10% exemption that are available feel free to contact us