IRAs - Withdrawl for Education
Penalty-free distributions can be made beginning January 1, 1998 from IRAs if used to pay higher education expenses for a taxpayer or spouse, and any child or grandchild of either. Effective January 1, 2002 the annual contribution limits increase from $500 to $2000 and expansion of the rules allows that these funds may now also be used for elementary and secondary education expenses, as well as higher education expenses.
This includes:
· tuition,
· fees,
· books,
· supplies,
· required equipment,
· room and board, and
· graduate courses.
The amount of education expenses is reduced by tax-free scholarships and other tax-free assistance.
Qualified plan participants whose plans permit, may want to consider transferring funds to an IRA for penalty-free educational distribution.
NOTE:
Penalty-free education distributions cannot be made from qualified retirement plans.
Disclosure
MEA Financial Services/Paradigm Equities, Inc. does not give tax or legal advice. The comments regarding the law and tax treatment simply reflect our understanding of current interpretations of such laws. Since laws are always subject to interpretation and possible changes, we recommend that you seek the counsel of an attorney, accountant or other qualified tax advisor regarding these matters as it applies to your particular situation.
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