Sigh. Please call the IRS customer service group - 1-800-829-1040 to speak with a specialist for further clarification. In the meantime, here's verbatim from their site: Note, that they discuss the Traditional IRA and qualified withdrawals for college expenses. The Roth IRA must be open for a minimum of 5 years in order for a withdrawal to be "qualified". At that time, all qualified withdrawals from a Roth IRA are Fed tax free.
Here's what the IRS says about withdrawals from an IRA:
Notice 97-60 Using IRA Withdrawals To Pay Higher Education Expenses
Beginning January 1, 1998, a taxpayer may make withdrawals from an individual retirement account (IRA) to pay the qualified higher education expenses for the taxpayer, the taxpayer's spouse, or the child or grandchild of the taxpayer or taxpayer's spouse at an eligible educational institution. The taxpayer will owe federal income tax on the amount withdrawn, but will not be subject to the 10 percent early withdrawal tax that applies when amounts are withdrawn from an individual retirement account before the account holder reaches age 59½. (NOalTE: They are talking about a Traditional IRA here, not a Roth IRA. With a Traditional IRA, qualfieid withdrawals are taxed at your normal income tax rate)
Questions and Answers:
When can an individual first make a withdrawal from an IRA to pay for qualified higher education expenses without paying the 10 percent early withdrawal tax?
What are the requirements for an "eligible educational institution"?.
When are IRA withdrawals usually subject to the 10 percent early withdrawal tax?
In addition to the Education IRA, TRA '97 also created the Roth IRA. May a taxpayer make a withdrawal from a Roth IRA to pay for his/her child's qualified higher education expenses?
Questions and Answers About
Using IRA Withdrawals To Pay Higher Education Expenses
Q.1. When can an individual first make a withdrawal from an IRA to pay for qualified higher education expenses without paying the 10 percent early withdrawal tax?
A.1. On or after January 1, 1998, an individual can make withdrawals from his/her IRA to pay for qualified higher education expenses for academic periods beginning on or after January 1, 1998, without paying the 10 percent early withdrawal tax. See Notice 97-53, 1997-40 IRB. The 10 percent early withdrawal tax does not apply to a distribution from an IRA to the extent that the amount of the distribution does not exceed the qualified higher education expenses for the taxpayer, the taxpayer's spouse, and the child or grandchild of the taxpayer or the taxpayer's spouse at an eligible educational institution. For purposes of this rule, the term "qualified higher education expenses" means tuition, fees, books, supplies and equipment required for the enrollment or attendance of the student at an eligible educational institution. Qualified higher education expenses also include room and board if the student is enrolled at least half-time. Qualified higher education expenses paid with an individual's earnings, a loan, a gift, an inheritance given to the student or the individual claiming the credit, or personal savings (including savings from a qualified state tuition program) are included in determining the amount of the IRA withdrawal which is not subject to the 10 percent early withdrawal tax. Qualified higher education expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free employer-provided educational assistance are excluded.
Questions and Answers About
Using IRA Withdrawals To Pay Higher Education Expenses
Q.2. What are the requirements for an "eligible educational institution"?.
A.2. An "eligible educational institution" is any college, university, vocational school, or other postsecondary educational institution that is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088) and, therefore, eligible to participate in the student aid programs administered by the Department of Education. This category includes virtually all accredited public, nonprofit, and proprietary postsecondary institutions. (The same eligibility requirements for institutions apply for the Hope Scholarship Credit, the Lifetime Learning Credit, and Education IRAs.) (See Q&A4 ; Q&A3 ; and Q&A16 .)
Q.4. In addition to the Education IRA, TRA '97 also created the Roth IRA. May a taxpayer make a withdrawal from a Roth IRA to pay for his/her child's qualified higher education expenses?
A.4. Yes. A taxpayer may make a withdrawal from a Roth IRA, as they can from other IRAs, to pay qualified higher education expenses without paying the 10 percent early withdrawal tax.