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Q: early withdrawal ira taxes ( Answered 4 out of 5 stars,   0 Comments )
Subject: early withdrawal ira taxes
Category: Business and Money > Finance
Asked by: deadyak-ga
List Price: $10.00
Posted: 30 Dec 2005 20:21 PST
Expires: 29 Jan 2006 20:21 PST
Question ID: 611363
I have a simple ira that I started about two years ago and would like
to liquify it and use the balance to pay for college expenses.  The
customer support agent I spoke with said I would be exempt from the
10% early withdrawal tax if I used it to pay for schooling but MAY
still have to pay a 25% tax.  I'm not savy on tax law but would like
to know what to expect to pay on early withdrawaling a $4000 ira for
Subject: Re: early withdrawal ira taxes
Answered By: efn-ga on 31 Dec 2005 11:44 PST
Rated:4 out of 5 stars
Hi deadyak,

If you withdraw $4,000 from your SIMPLE IRA and use it all for tuition
in the same year, you can expect it to be taxed as ordinary income.

The Internal Revenue Service says "Generally, the same tax results
apply to distributions from a SIMPLE IRA as to distributions from a
regular IRA.",,id=111420,00.html#distributions

Generally, if you withdraw funds from an IRA before age 59 1/2, you
pay regular income tax plus a 10% penalty tax, but you don't have to
pay the penalty tax if you use the money for "qualified higher
education expenses."  Tuition is explicitly defined as a qualified
expense.  There is no dollar limit on this exemption from the penalty

As that page says, you may not be exempt from the penalty tax if you
get any tax-free educational assistance.  You would have to add up all
your qualified educational expenses, which may include more than
tuition, then subtract your tax-free educational assistance.  This
gives you your adjusted qualified education expenses, which is the
number you can use to decrease the amount of your IRA distribution
that is subject to the penalty tax.

Additional Link

Article on Qualified Higher Education Expenses on the

Please note that Google Answers does not provide professional tax or
legal advice.  If you need any more information about this, please ask
for a clarification.

deadyak-ga rated this answer:4 out of 5 stars
thanks much, that explained it well

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