Consider Withdrawing Funds From Your IRA – Penalty Free!
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Consider a Roth IRA Conversion During Your Low Income Years Determine if Your MBA Expenses Are Deductible on Your State Tax Return Consider Recognizing Long- Term Capital Gains in Low Income Years |
by Lewis A. Weinstein
Founder of GenerationTax
When you withdraw funds from your IRA you typically must pay a 10% early distribution penalty. However, if you withdraw funds from your IRA to pay for your MBA tuition, course materials and room & board you will not be subject to the 10% early distribution penalty. You will pay regular taxes on the amount withdrawn, but again you will not be subject to the 10% penalty. In addition, if you are married, your spouse can withdraw funds from their IRA to pay for your education expenses free of the 10% penalty.
It should be noted that you will pay a 10% early distribution penalty if you withdraw funds from your 401(k) regardless if you use the funds to pay for education purposes. However, there is a simple little work around. You can avoid the 10% penalty of your 401(k) if you rollover the funds from your 401K directly into an IRA and then withdraw the funds from your IRA to pay for your qualified education expenses.