What Are Some IRS Rules About Education IRAs?


Quick Answer

One of the primary rules about individual retirement account or IRA distribution is that early distribution for educational expenses are exempt from the additional 10 percent tax. The Internal Revenue Service (IRS) considers IRA distributions (or withdrawals) by the account holder before the age of 59 1/2 during the tax year as early distributions, which are generally subject to the additional tax. However, the distribution is exempt from the additional tax if the money will be for the education expenses of the account holder, the account holder's spouse or the account holder and the spouse's children or descendant, notes the IRS.

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Full Answer

An IRA is a type of account provided by financial institutions where individuals can store up funds for their retirement. An IRA is a good way to save money for retirement because such accounts, which can grow from interests, dividends or capital gains are not taxable. Upon retirement, the account holder can also withdraw money from the account without having to pay any tax for it.

Expenses for tuition, books and supplies that are required for enrollment in an eligible educational institution quality as education expenses, as stated by the IRS. Eligible institutions include any college, university, vocational school or other post-secondary educational institution that is participating in a student aid program administered by the United States Department of Education.

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