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rramsook
rramsook, Enrolled Agent
Category: Tax
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Experience:  Specialize in Individual,Corporate, and payroll tax matters.
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Hi, I withdrew funds from my IRA to pay for my daughters college

Resolved Question:

Hi, I withdrew funds from my IRA to pay for my daughter's college tuition. Now I get hit with an early withdrawal penalty, my AGI is higher, and I am able to deduct only a tiny fraction of what I paid in tuition. I need some help.
Submitted: 1 year ago.
Category: Tax
Expert:  rramsook replied 1 year ago.

rramsook : Hello, welcome to just answer
rramsook : You will be able to avoid paying the 10% penalty by filing form 5329 electing that you took a distribution. From your IRA to pay for education costs.
rramsook : On part one of form 5329, enter code 8 on line 2.
rramsook : code 8 represents a IRA distribution taken to pay for Hugh education expenses.
Customer:

Hi are you online?

Customer:

Hello again.

Customer:

This was a three-part question: 1) How do I avoid the 10% penalty? (you answered that); 2) how do I prevent my IRA withdrawal from being taxable income?; 3) How I deduct the $20,000+ I paid in tuition?

Customer:

Please answer the rest of the questions. Thanks!

rramsook, Enrolled Agent
Category: Tax
Satisfied Customers: 304
Experience: Specialize in Individual,Corporate, and payroll tax matters.
rramsook and 3 other Tax Specialists are ready to help you
Expert:  Barbara replied 1 year ago.

Another expert here -

How do I prevent my IRA withdrawal from being taxable income? The answer is you cannot prevent it. You can only avoid paying the 10% penalty as detailed by the previous expert.

How I deduct the $20,000+ I paid in tuition? The maximum education credit is $2,500 per student for the American Opportunity Credit, and up to $2,000 per return for the Lifetime Learning Credit. You cannot use both credits for the same student. OR

You may, however, be able to reduce your income by taking the tuition and fees deduction which can reduce your taxable income by up to $4,000. You cannot take this deduction if your modified adjusted gross income is more than $80,000 if you are filing single or more than $160,000 if you are filing a joint return.

I'm sorry if this is not the answer you were looking for, but it is my responsibility to give you accurate information.

Thank you and best regards.

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