i am under 59, want to take $'s out of my IRA to pay off college loan is the 10% penalty waived if i do it in 98?please respond firstname.lastname@example.org thanks tony c
<<i am under 59, want to take $'s out of my IRA to pay off college loan is the 10% penalty waived if i do it in 98?please respond email@example.com thanks tony c>>Don't think so, Tony.The "penalty free" provision for the payment of "higher education expenses" from funds taken from an IRA don't seem to apply to the payment of college loans. Generally, the penalty free withdrawal is available for "qualified higher education expenses", meaning tuition as well as room and board, fees, books, supplies, and equipment required for enrollment or attendence. This includes both pre and post graduate expenses. The "qualified higher education expenses" don't include payments of loans previously used to pay expenses. But you should certainly be aware of the fact that in 1998, interest paid on certain loans used for qualified higher education. There are a number of restrictions (AGI restrictions, and timing restrictions for the payment of the loan interest) that you should be aware of. But if you qualify, the interest is deductible "above the line", which means that you do NOT have to itemize your deductions in order to benefit from the interest paid. Your school (the financial aid office) should have additional specific information on both the penalty-free IRA withdrawal, the deductions for interest of higher education loans (not to mention the new Hope credit and Lifetime Learning Credit) that they will be more than happy to provide for you. But if you have any other follow up questions, please post 'em here.TMF TaxesRoy
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