IRA Withdrawals

"IRA Withdrawals" submitted by SchoolGrantsfor Editorial Team and last updated on Friday 22nd July 2011

IRA withdrawals before age 59 1/2 are now allowed without penalty for early withdrawal. The qualifying funds withdrawn can only be used for education expenses for academic periods beginning on or after January 1, 1998.

There are no income requirements and IRA withdrawals may be used for yourself, your spouse or any child or grandchild of either individual.

Example:

The parents of a college freshman have been contributing to a traditional IRA for a number of years. Their student's financial aid package covered all but $3,000 of the cost of tuition and fees for the academic period of September 1999 through December 1999. The parent taxpayer (age 45) may withdraw money from their IRA to cover the tuition fees including room and board without being assessed the 10% early withdrawal penalty. However, the distribution will still be taxed at the parent's tax rate.