Using a Roth IRA for childs education

[Guest ryally]

Can I set-up a Roth IRA in my name and use the money to pay for my childrens educations?

Also, can my wife do the same in her name?

Thanks,

BB

[Guest skitown]

Did you get an answer to your question?

Using a Roth IRA for College Education?

Many people viewed your post - but there have been no answers to your question.

Is there an answer out there?

[Michael Devault]

There are two types of distributions from Roth IRAs: Qualified distributions and non-qualified distributions.

Qualified distributions are those made after a 5 year "holding period" AND made on account of death, disability, after attaining age 59-1/2 or for first time homebuyers. These distributions are not included in income and are, therefore, income tax free.

Other distributions are included in income to the extent of any gain in the Roth IRA, after principal is withdrawn. Further, there may be a 10% penalty on the amount included in income. One exception to the 10% penalty is for certain educational expenses for you, your spouse or your children.

So, while you can use the money to pay for educational expenses, any gain you withdraw from the Roth IRA will be subject to income tax, but not penalties.

Take a look at IRS Publication 590 for more information. It's available on the IRS' website.

Hope this helps.

[Guest skitown]

I am looking at IRS Publication 590, pg. 56:

http://ftp.fedworld.gov/pub/irs-pdf/p590.pdf

"Redemptions for qualified higher education expenses do not have to pay the 10% tax on early distributions on the taxable part of any distributions that are not qualified distributions."

If all of my contrubutions have been taxed, I would not have a "taxable portion.."

I am confused as the form does not come right out an say that higher education costs are available for early distributions - tax free. It just says you do not have to pay the additional 10% tax.

[JAMES PATRICK]

If the withdrawal is not qualified --- the Roth is open 5 years AND you are not 59 1/2 --- then the earnings on the contributions would be taxable, although the 10% penalty would be waived.