If you need to take out loans for school, a good place to borrow from is your own Roth IRA! You can take out as much money as you’ve put in without any penalties!<\/p>\n
For instance, if you put $5000 into your Roth IRA a few years back and now there is $7000 in the account, you can withdraw up to $5000 scott free if it’s for school. When you do it, make sure you note it on your taxes or the IRS will think you had 1) an early withdrawal and a penalty, 2)additional income for the year. It’s important to note that a regular IRA doesn’t have this magical tax advantage.<\/p>\n
Turbotax caught this detail and my (rather expensive) tax preparer missed it, despite me reminding him about it. After amending our returns for the last two years, Megan and I now have >$5k in refund checks coming!<\/p>\n
(In Turbotax, in the section “Traditional and Roth IRA Contributions” there is a section that starts out “Withdraw from Lee’s Roth IRA Before 2016?”. You say “yes” and go from there. Of course, this means you have to figure out exactly how much you’ve contributed vs how much is in the account, which is a complete PITA. But it’s taxes, of course it’s a PITA!)<\/p>\n