Early IRA distribution

[Sparky]

If a parent co-signed on a student loan and then withdrew funds early from her IRA to pay it off in 2013, even though child is no longer a student, can she exclude the 10% penalty? the exception for form 5329 states: 08 IRA distributions made for higher education expenses

Cannot find any more. Thanks.

[Kram BergGold]

The logical answer is no

The funds paid off an education loan rather than being used to pay tuition. I would say the penalty applies.

[mastertaxguy]

Ira withdrawal used to pay student loan guarantee

1. CONFIRM WITH TAXPAYER that they did not have a basis in the IRA. You do not state that this was a Roth but if it was, there is a basis in the Roth.
2. The TP may have used the funds to pay off the loan, but look to see what else was going on. Did they have high medical expenses beyond the 7.5%? Or did they replace all or a portion of the withdrawal within 60 days?
3. Was TP disabled?
4. They may be able to deduct the interest portion of the student loan payoff (subject to phase outs and such).
5. Maybe they, or a dependent, had other higher education expenses during the year which could be used to offset the penalty, if paid by TP even from non-IRA funds.

[Zonetta]

Similar Question

Client took out funds from IRA to pay off student loans. It sounds like that is not exempt from the penalty under ordinary circumstances. Am I reading that right?

[Lion]

Yes, you are reading that right.