How to Take Cash From a Roth IRA for Education
You're smart to have piled up money in your Roth IRAs over the years. Now it appears you might need to tap into the IRA before you retire, to pay for one of life's other big rites of passage: post-secondary education for yourself or your children. There are provisions that allow you to withdraw money from your Roth IRA tax- and penalty-free. Earnings that come out are usually taxed and penalized, but not when you use the money for qualifying post-secondary education expenses. Qualifying expenses include tuition, room and board for post-secondary schools such as colleges, graduate schools or trade schools.
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Instructions
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Submit an IRA withdrawal form to your financial institution to request a Roth IRA distribution. Specify the amount that you want to withdraw and how you want the money transferred out of the Roth IRA, such as to your checking account.
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File Form 8606 with your income taxes to determine whether your Roth IRA withdrawal for education includes contributions, earnings or both. You must include Form 8606 when you file your income taxes.
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File Form 5329 if you have any earnings included in your Roth IRA distribution. Next to line 2, write the code "08" to signify that you took the distribution for qualifying education. As long as your educational expenses equal or exceed your distribution, you will not owe an early withdrawal penalty. If you do owe a penalty, you must report it on line 58 of your Form 1040 tax return.
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Report the contributions withdrawn from your Roth IRA on line 15a of Form 1040. This amount is merely for reporting; it does not increase your taxable income.
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Report the amount of earnings withdrawn on line 15b. Even though the IRS does not impose an early withdrawal penalty on earnings distributed for post-secondary education expenses, you still have to pay income taxes -- so you must include it in your taxable income.
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