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    ohararfrykman's Avatar
    ohararfrykman Posts: 2, Reputation: 1
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    #1

    Jan 14, 2007, 09:56 AM
    Early Withdrawal from 401k for tuition
    In 2006 my brother withdrew (not a loan) $5,000.00 from his 401(k) to go towards his daughter's first year tuition. What tax liability is he facing?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #2

    Jan 15, 2007, 11:30 AM
    He will owe normal state and federal income taxes on the $5,000 PLUS a 10% Early withdrwal Penalty if he is not at least 59.5 years of age.

    The better way for him to have handled this was to roll the money over into a rollover IRA, then withdraw the money from the IRA. That way, he could have claim the Higher Education Expense exemption, which applies ONLY to IRA withdrawals, not 401Ks.
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