I worked in Nevada for 5 years with an H-1B visa. Now I am back to the school for my MBA degree in Atlanta, Georgia. I have $12,000 vested in my 401K Account. Since I am neither a US citizen nor a permanent resident, I am considering to cash my 401K and use it for my tuition. As I understand correctly, the existing law states that my MBA tuition is eligible for early withdrawal penalty exemption. What would be the procedure to take advantage of this law? How about state tax? Could I waive the state tax penalty as well?

One last question, for the tax purposes, am I considered Nevada or Georgia resident? When I applied to get a Georgia driving license, State of Georgia rejected my application since I live at the dorm and there is no utility bill on my name. I still have Nevada driving license and my driving license states my address in Nevada.

I really appreciate your help. Sincerely,

AtlMNO:

Normally, higher tuition costs are a valid reason to qualify for the exemption to the 10% early withdrawal tax, but only for an IRA, NOT a 401K.

You need to roll the money into a rollover IRA first, then withdraw it for your educational costs.

You are still a Nevada resident, which has no state income tax. Georgia will not tax your IRA withdrawal until you establish residency in Georgia, so do it before you finish your schooling.