Rules for Withdrawals From a Roth IRA for Education Purposes

by Rebecca Lake

A Roth IRA is a type of tax-advantaged retirement account. Contributions to a Roth IRA are not tax-deductible, however, you may make qualified withdrawals without incurring a tax penalty. In addition to funding your retirement, you may also use your Roth IRA to pay qualified education expenses. If you're considering taking an early distribution from your Roth IRA to pay for college, you need to understand the IRS rules for doing so.

Eligible Student

The IRS permits you to make withdrawals from a Roth IRA to pay for education expenses for an eligible student. According to IRS Publication 970, an eligible student is defined as yourself, your spouse, your children and their descendants. Foster children and adopted children also qualify under IRS guidelines. You cannot use Roth IRA funds to pay expenses for your siblings, other relatives or any individual not related to you by blood or marriage. Eligibility is not affected by age or enrollment status.

Qualified Expenses

To qualify as a penalty-free withdrawal, Roth IRA funds may only be used for specific education expenses. For IRS purposes, qualified expenses include tuition, books, fees, supplies and equipment that are required as a condition of enrollment. You may also include expenses for services or equipment required by a special needs student. You may use funds to pay room and board expenses if the eligible student is enrolled on at least a half-time basis. Expenses must be associated with enrollment at an eligible educational institution. Under IRS guidelines, this is any college, university, vocational or technical school that is eligible to participate in student aid programs administered by the U.S. Department of Education.

Tax Implications

Typically, you would be assessed a 10 percent early withdrawal for taking funds out of your Roth IRA prior to age 59 1/2. The early withdrawal penalty is waived for qualified education withdrawals, however, some or all of your distribution may still be subject to regular income tax. According to IRS guidelines, if any part of your distribution includes earnings, this portion is considered taxable. Any portion of earnings withdrawn but not used for education expenses are subject to regular income tax and the 10 percent withdrawal penalty. Withdrawals of contributions only from a Roth IRA are tax-free regardless of age.

Considerations

Consider every option before tapping your Roth IRA to pay for education expenses. While you can avoid a tax penalty for the early distribution, you lose out on future earnings for the money you take out. Using IRA funds for college may also prevent you from taking advantage of other education tax benefits, such as the American Opportunity Credit or Lifetime Learning Credit. The IRS does not allow you to claim multiple tax benefits for the same education expenses in any one tax year.

About the Author

Rebecca Lake is a freelance writer and virtual assistant living in the southeast. She has been writing professionally since 2009 for various websites. Lake received her master's degree in criminal justice from Charleston Southern University.

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