U.S. · Retirement accounts
Is an IRA withdrawal for college penalty free?
The 10% additional tax is waived up to your qualified expenses, but income tax can still apply.
Mostly. Publication 970 says that if you take an IRA distribution before age 59 and a half to pay qualified higher education expenses for yourself, your spouse, or your or your spouse's child, foster child, adopted child or grandchild, you avoid the 10% additional tax on the part of the taxable distribution that is no more than your adjusted qualified education expenses. Only the excess is hit. You may still owe regular income tax on the taxable portion.
Amount exposed to the 10% additional tax
Result
What the exception does and does not do
Publication 970 begins with the default rule: a distribution from any IRA you own, traditional (including SEP), Roth or SIMPLE, before you reach age 59 and a half generally carries a 10% additional tax, which for a SIMPLE IRA may be as high as 25%. The education exception removes the additional tax; it does not make the distribution tax free. You may owe income tax on at least part of the amount distributed. The publication states the test simply: if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses, none of it is subject to the additional tax, and if the taxable part is more, only the excess is.
Who and what qualifies
The expenses can be for you, your spouse, your or your spouse's child, foster child or adopted child, or your or your spouse's grandchild, and must be paid in the same year as the distribution. Qualified expenses are tuition, fees, books, supplies and equipment (including computer equipment and related services) required for enrollment or attendance at an eligible educational institution, including costs tied to a recognized postsecondary credential program. They also include special needs services. If the student is at least half-time, room and board qualifies, up to the greater of the school's cost-of-attendance allowance or the actual charge for school-owned or school-operated housing. Certain elementary and secondary expenses, among them tuition, curriculum, instructional materials, outside tutoring by qualified tutors, test fees, dual enrollment fees and educational therapies, are included as well.
An eligible educational institution is generally any college, university, vocational school or other postsecondary institution eligible to participate in a Department of Education student aid program.
Adjusted qualified education expenses
To find the amount not subject to the additional tax, start with qualified expenses and subtract tax-free educational assistance: the expenses used for tax-free Coverdell ESA distributions, the tax-free part of scholarships, fellowships and Pell grants, veterans' assistance, employer-provided assistance and other nontaxable educational payments. Do not reduce expenses by money the student gets as wages, loans, gifts, inheritances or withdrawals from personal savings, including 529 savings.
The publication's examples
In Example 1, a 32-year-old teacher takes a year off for graduate school and pays $5,800 of qualified expenses from $5,000 of tax-free employer assistance and a $3,200 IRA distribution whose taxable part is $500. AQEE is $5,800 - $5,000 = $800. Because $800 exceeds the $500 taxable part, no additional tax applies, but the teacher still reports $500 as income. In Example 2 the teacher had deducted some contributions, so the taxable part is $1,000. That exceeds AQEE by $200, so the 10% additional tax is $20 on that $200; the remaining $800 escapes it. The calculator above applies the same comparison, and shows the 25% SIMPLE IRA alternative for the amount over the limit.
Reporting
The payer should send Form 1099-R by early February. Report the taxable part of the distribution on Form 1040, 1040-SR or 1040-NR, line 4b. If you claim the education exception, file Form 5329 to show how much, if any, is subject to the additional tax, and the result goes on Schedule 2 (Form 1040), line 8. The 1099-R box 7 code matters, so see our 1099-R code lookup. Other IRA withdrawal rules, such as first-home or disability exceptions, are outside this publication, and so is whether your state adds its own penalty. If your plan is a 401(k) rather than an IRA, the education exception here does not apply; see our 401(k) early withdrawal page.
Sources
- IRS Publication 970, Tax Benefits for Education (2025): Chapter 8, Education Exception to Additional Tax on Early IRA Distributions. Read November 2, 2026.
Edition read: Publication 970 (2025), for use in preparing 2025 returns. Dollar limits, income thresholds and dates in this publication are for tax year 2025; check the current publication and form instructions for the year you file. This page summarizes the publication and does not replace it.
Frequently asked questions
Is there a penalty for IRA withdrawals used for college?
The 10% additional tax is waived up to your adjusted qualified education expenses. The taxable part of the withdrawal is still subject to income tax.
Whose college costs count?
Your own, your spouse's, and those of your or your spouse's child, foster child, adopted child or grandchild.
Does the exception apply to a 401(k)?
No. Chapter 8 of Publication 970 covers IRAs only: traditional, SEP, Roth and SIMPLE.
Does room and board count?
Yes, if the student is enrolled at least half-time, up to the school's cost-of-attendance allowance or the actual charge for school-owned housing, whichever is greater.
Which form reports the exception?
Form 5329, with any additional tax carried to Schedule 2 (Form 1040), line 8. The taxable part of the distribution is reported on line 4b of Form 1040.
Not tax advice
This page summarizes an IRS publication and is not tax, legal or financial advice. A CPA or an enrolled agent can confirm how a rule applies to your return. Everything runs in your browser; nothing you enter is sent anywhere.