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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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college room and board and 401k withdrawals

Customer Question

regarding 401K withdrawal for covered college expenses....how do I show that room and board expenses exceeded withdrawal so I do not have to pay the 10% penalty? Where do I show this info?
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.
A 401(k) is considered to be a qualified plan. Early distributions from qualified plans do not have an exception to the 10% penalty for qualified education expenses.

However, distributions from IRA accounts do have an exception for qualified education expenses. Also, qualified higher education expenses are expenses for tuition, fees, books, supplies and equipment required for enrollment or attendance at an eligible educational institution. Under certain conditions room and board can be paid as well, for students under guaranteed plans (state prepaid tuition programs) who are at least half-time students.

Did you distribute from a 401(k) or an IRA?

Do you meet the qualification to offset the 10% penalty with room & board charges?
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: My withdrawal was from what is called and Savings and Security Plan through my employer...when I read about the 10% penalty being offset on the IRS website, it indicated that room and board was a covered expense and didn't mention anything about state prepaid tuition programs. My child's room and board did exceed the amount withdrawn from this plan and I wanted to know how to show it on my taxes.
Expert:  Christopher Phelps replied 11 years ago.
If your making pre-tax contributions to the plan it is likely a "qualified plan" and thus does not have a "qualified education expense" exception to the 10% early distribution penalty.
Also, given what you said I am sure the room and board would not qualify even if you had made the distribution from an IRA.

Sorry.

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