Ira Withdrawal For Education

[New York Enrolled Agent]

This particular client wants to pay for a computer with IRA money and I told him that it MUST be a written requirement of the college. Is that correct? I know that it is required for a 529 plan.

Thanks for all of the previous replys.

The exception in §72(t) for the IRA withdrawal uses the same definition for qualified higher education expenses as defined in §529(e)(3)

(3) Qualified higher education expenses.

(A) In general. The term “qualified higher education expenses” means—

(i) tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution; and

(ii) expenses for special needs services in the case of a special needs beneficiary which are incurred in connection with such enrollment or attendance.

(B) Room & Board (not applicable to your question) ....

[BOB W]

This particular client wants to pay for a computer with IRA money and I told him that it MUST be a written requirement of the college. Is that correct? I know that it is required for a 529 plan.

Thanks for all of the previous replies.

[Black Bart]

Well, so am I.

Bart, maybe all you said is true, and I know you are posting "tongue in cheek", but I certainly am glad that NYEA cruises around "this" message board and offers us opinions, references and solutions.

Sandy

That York Yank is about one of the smartest guys (knows lotsa stuff) who's ever posted here and, in fact, doesn't qualify for the "ill-mannered" part (he caught one of my errors once and came close to sayin' "Pretty please with sugar, look at it like this...).

(Note to NYEA-- I take it back about WWF "Raw"'; more likely it's "Entertainment Tonight").

On that subject, I was wondering what ever happened to former boarders John Spada and Luis Mopeo -- they used to post some good stuff and I just wonder where they went. Have you seen anything by them in a long time?

[S T]

Maybe

Bart, maybe all you said is true, and I know you are posting "tongue in cheek", but I certainly am glad that NYEA cruises around "this" message board and offers us opinions, references and solutions.

Sandy

[Black Bart]

Showoff! Bookworm!

IRC §72(t)(2)(E)...No $ limit noted in the exception except you can't exceed the q.h.e.e.

Ever' time I make a general practitioner diagnostic coup, some dang Yank reg-rat specialist comes along and undercuts it. And I was impressed a right smart amount with my Sherlock Holmes detective method too.

Guess Granny was right -- she used to say Yankees (1) are blunt & ill-mannered (2) talk funny (3) know lotsa stuff (4) live far off.

P.S. I bet you secretly watch WWF "Raw" (instead of readin old EA Journals) when nobody's home.

[New York Enrolled Agent]

IRC §72(t)(2)(E)

(E) Distributions from individual retirement plans for higher education expenses. Distributions to an individual from an individual retirement plan to the extent such distributions DO NOT EXCEED the qualified higher education expenses (as defined in paragraph (7) ) of the taxpayer for the taxable year.

No $ limit noted in the exception except you can't exceed the q.h.e.e.

[Black Bart]

Bob,

Is there an IRA limit on how much a distribution can be for penalty free educational expenses?

My head keeps saying $10,000 but I'm sure it is wrong.

I can't find anything laying out a specific amount but I did find a related Tax Court case (EA Journal 8-07) which leads me to agree with David that there's no ceiling.

A taxpayer withdrew $20,000 in 2001 and paid off credit card charges incurred for education expenses back in 1999. IRS did not challenge the amount at all, but rather argued that educational expenses not paid in the same year incurred were not penalty-free. $7,900 of the ed expenses were incurred and paid in 2001 (year of withdrawal) and Tax Court allowed that but denied the penalty exemption for the rest of the $20K. So the fact that TC was even arguing about the $20K leaves us to conclude that amount was possibly penalty-free.

[BOB W]

Thanks Dave for your reply.....................

[David1980]

$10,000 would be for first home exception. I don't think there is any limit on the amount for higher education, but obviously you are going to have a practical cap at "what's the most you can actually spend on higher education?"

[BOB W]

Is there an IRA limit on how much a distribution can be for penalty free educational expenses?

My head keeps saying $10,000 but I'm sure it is wrong.