IRA Withdrawal for Educational Expenses


My daughter is 24 and she just went back to school. Can I withdraw money from my IRA to help her with her educational expenses?

Answer

You can withdraw money from an IRA at any time, however if you are under the age of 59 1/2 you will have to pay a 10% early withdrawal penalty as well as the income taxes due on the amount withdrawn. However, there is an exception for IRA withdrawal for educational expenses.

The IRS makes an exception for the 10% penalty if you are under the age of 59 1/2 if the funds are to be used for higher education expenses at an eligible educational institution for you, your spouse, or the children or grandchildren of you or your spouse.

According to the IRS (publication 590), 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.

Eligible educational institution is any college, university, vocational school, or other post-secondary educational institution eligible to participate in the student aid programs administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit-making) post-secondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.