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Old 04-13-2016, 06:35 PM
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401k early distribution used for paying college expenses

Hi There, My wife has spent the prior 3 years in college for which we've spent about 50k total, she finished the school last year in the summer; at the beginning of 2015 we ran out of money and we borrowed some from banks, so I took 23k from my 401k to help cover 2013 / 2014 / 2015 college expense. However last year she only spent 6k for college, the difference to 50k was spent on prior years.
When i report the 401k distribution there is a penalty (10%) exemption for higher education, however the question there is how much money you've spent for that education. It is not clear if we are talking about year 2015 (which in our case was only 6k) so my question is am i allowed to put the entire 50k that we've spent for the entire college (that includes expenses for 2013 and 2014) ? apparently that makes a difference on what the actual penalty fee results.


Thank you!



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Old 04-14-2016, 06:46 PM
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Originally Posted by krony View Post
Hi There, My wife has spent the prior 3 years in college for which we've spent about 50k total, she finished the school last year in the summer; at the beginning of 2015 we ran out of money and we borrowed some from banks, so I took 23k from my 401k to help cover 2013 / 2014 / 2015 college expense. However last year she only spent 6k for college, the difference to 50k was spent on prior years.
When i report the 401k distribution there is a penalty (10%) exemption for higher education, however the question there is how much money you've spent for that education. It is not clear if we are talking about year 2015 (which in our case was only 6k) so my question is am i allowed to put the entire 50k that we've spent for the entire college (that includes expenses for 2013 and 2014) ? apparently that makes a difference on what the actual penalty fee results.


Thank you!
you areallowed to put the entire 50k that you've spent for the entire college (that includes expenses for 2013 and 2014)
If your qualified expenses exceed the amount of your IRA withdrawal, you won't owe any additional tax penalties.all Qualified? post-secondary education expenses are claimed; Qualified higher education expenses are defined as tuition, fees, books, supplies and equipment required for the enrollment or attendance of a student at an eligible educational institution. They also can include room and board, if the student is enrolled at least half-time.



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Old 04-14-2016, 06:47 PM
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Join Date: Oct 2010
Posts: 4,835
Quote:
Originally Posted by krony View Post
Hi There, My wife has spent the prior 3 years in college for which we've spent about 50k total, she finished the school last year in the summer; at the beginning of 2015 we ran out of money and we borrowed some from banks, so I took 23k from my 401k to help cover 2013 / 2014 / 2015 college expense. However last year she only spent 6k for college, the difference to 50k was spent on prior years.
When i report the 401k distribution there is a penalty (10%) exemption for higher education, however the question there is how much money you've spent for that education. It is not clear if we are talking about year 2015 (which in our case was only 6k) so my question is am i allowed to put the entire 50k that we've spent for the entire college (that includes expenses for 2013 and 2014) ? apparently that makes a difference on what the actual penalty fee results.


Thank you!
Payment of college tuition and related educational costs such as room and board for the next 12 months for you your spouse, dependents, or children who are no longer dependents.If your qualified expenses exceed the amount of your IRA withdrawal, you won't owe any additional tax penalties.all Qualified? post-secondary education expenses are claimed; Qualified higher education expenses are defined as tuition, fees, books, supplies and equipment required for the enrollment or attendance of a student at an eligible educational institution. They also can include room and board, if the student is enrolled at least half-time.

However, if your distribution exceeds your qualified expenses, you'll owe the 10-percent penalty on the amount that exceeds your expenses



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