Removing money from IRA w/o penalty - options

Can I extract money from an IRA without penalty for any of the following:

- college expenses for a dependent

- repairs to a primary home

I have three types of IRA's available, Regular, Roth and SEP. All have been invested for at least five years.

Thanks for any pointers.

Reply to
Another Poster
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No to repairs.

Yes to college expenses. See the fine print. From publication 590

Higher education expenses. Even if you are under age 59½, if you paid expenses for higher education during the year, part (or all) of any distribution may not be subject to the 10% additional tax. The part not subject to the tax is generally the amount that is not more than the qualified higher education expenses (defined later) for the year for education furnished at an eligible educational institution (defined later). The education must be for you, your spouse, or the children or grandchildren of you or your spouse.

When determining the amount of the distribution that is not subject to the 10% additional tax, include qualified higher education expenses paid with any of the following funds.

... ...

Do not include expenses paid with any of the following funds.

... ...

Qualified higher education expenses. Qualified higher education expenses are tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a student at an eligible educational institution. They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. In addition, if the individual is at least a half-time student, room and board are qualified higher education expenses.

Reply to
removeps-groups

I'm not sure what this Do Not Include means?

Surely if you exclude an IRA distribution used to pay for higher education from the early distribution excise tax, you are not restricted from using those same funds for claiming an Education Income Tax credit.

Reply to
Arthur Kamlet

You didn't state your age, we assume you are under 59.5.

One thing is for sure, you can always withdraw your own direct contributions to a Roth IRA at any time with no penalty or tax. (Conversions are a different matter, but can also potentially be withdrawn tax and penalty free after five years). Investment earnings in the Roth are also a different matter.

-Mark Bole

Reply to
Mark Bole

The full quote is

Do not include expenses paid with any of the following funds.

  • Tax-free distributions from a Coverdell education savings account. * Tax-free part of scholarships and fellowships. * Pell grants. * Employer-provided educational assistance. * Veterans' educational assistance. * Any other tax-free payment (other than a gift or inheritance) received as educational assistance.

Yes, certainly looks like you can do this. Because you pay ordinary tax on the distribution.

There might be special rules like you have to pay directly from the IRA to the educational institution, so that the 1099-IRA (or whatever it is) is coded right.

Reply to
removeps-groups

I seriously doubt you can get the IRA custodian to code it "right."

That's why they made form 5329.

In fact, when the IRA custodian calculates and distributes a payment as part of a series of substantially equal periodic payments, you might think they would code it a 2, and Fidelity and Vanguard used to do just that.

No more. Those are now coded code 1 and you go file a 5329 to exclude from early distribution tax.

Reply to
Arthur Kamlet

Thanks all... sounds like I can probably do what I need. I will do some reading in 590 and come back with any follow up questions.

Reply to
Another Poster

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