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18 Mar 2018, 08:01
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Hey all,
So it seems that you are allowed to use money in an IRA (not a 401k though) to pay off higher education tuition and avoid the 10% penalty.
You would obviously still have to pay taxes BUT, I'm wondering if you decide to use the IRA money as a grad student, with no income, wouldn't your tax bracket be very low? So my essential question is, would it be wise to use say 30k from my IRA to pay b-school tuition since I would avoid the 10% penalty and not be taxed as high as a grad student?
I'm sure my logic/knowledge falls apart somewhere, so I'm just hoping someone can enlighten me.
Thank you!
So it seems that you are allowed to use money in an IRA (not a 401k though) to pay off higher education tuition and avoid the 10% penalty.
You would obviously still have to pay taxes BUT, I'm wondering if you decide to use the IRA money as a grad student, with no income, wouldn't your tax bracket be very low? So my essential question is, would it be wise to use say 30k from my IRA to pay b-school tuition since I would avoid the 10% penalty and not be taxed as high as a grad student?
I'm sure my logic/knowledge falls apart somewhere, so I'm just hoping someone can enlighten me.
Thank you!
mvictor
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19 Mar 2018, 15:42
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Actually, using your IRA to pay your Tuition can be a good idea. You avoid paying the 10% penalty, and in addition, if you have 0 income, you basically can pay 0 in taxes.
Note that the new, 2018, tax bracket for single is 10% for income up to $9,525, while your standard deduction would be $12,000. I would assume that you would be able to take up to 12k out of your IRA account and pay off your tuition. In the same time, if you do not have any other income, you would avoid paying both taxes and penalties.
Nonetheless, I would rather suggest checking with a tax professional.
I found a good article about it
https://www.usnews.com/education/best-c ... or-tuition
Note that the new, 2018, tax bracket for single is 10% for income up to $9,525, while your standard deduction would be $12,000. I would assume that you would be able to take up to 12k out of your IRA account and pay off your tuition. In the same time, if you do not have any other income, you would avoid paying both taxes and penalties.
Nonetheless, I would rather suggest checking with a tax professional.
I found a good article about it
https://www.usnews.com/education/best-c ... or-tuition
