Time Your IRA Withdrawal Carefully
A 2005 Tax Court case decision said
distributions from your IRA to pay for
higher education are free from the 10%
additional tax only to the extent that they do not exceed the education costs for the taxable year of the distribution. In other words,
you cannot withdraw money penalty free to
pay for previous year expenses or for expenses
you anticipate in forthcoming years until that
taxable year begins. The higher-education
expenses exception applies to qualified costs of
both the taxpayer and his or her spouse, as well
as those of their children and grandchildren.