What Are Qualified Higher Education Expenses for IRA Withdrawal?

Qualified higher education expenses for an IRA withdrawal are tuition, required fees, books, supplies, equipment, and — for students enrolled at least half-time — room and board, paid at a school that participates in federal student aid programs. The expenses can be for you, your spouse, or a child or grandchild of either of you.¹ When the withdrawal matches those expenses, the 10% early distribution penalty disappears, though the money is still taxed as ordinary income.

Expenses That Qualify

The IRS defines qualified higher education expenses by cross-reference to 26 U.S.C. § 529(e)(3). The categories that count:

Tuition and required enrollment or attendance fees, including mandatory student activity fees.
Books, supplies, and equipment required for the student’s program of study.
Computer equipment and software, peripherals, and internet access used primarily by the student during enrollment. Software designed for sports, games, or hobbies is excluded unless it is predominantly educational.²
Special needs services connected to the enrollment or attendance of a student with disabilities.¹

The recurring test is whether the school requires the item for enrollment or attendance. A textbook on the course syllabus counts. A novel picked up over the summer does not.

Room and Board

Room and board qualify only when the student is enrolled at least half-time. Each school sets its own half-time standard, so the credit-hour threshold varies.³

The amount is capped at the school’s published cost-of-attendance allowance for room and board, the figure the school uses for federal financial aid. There is one exception: if the student lives in housing owned or operated by the school and the actual charge is higher than the published allowance, the actual amount can be used instead.³ Off-campus renters are stuck with the published figure. The number is usually available through the financial aid office or the school’s cost-of-attendance page.

Expenses That Do Not Qualify

Overstating qualified expenses puts the excess back on the hook for the 10% penalty, so knowing the boundaries matters as much as knowing what’s in.

Health insurance and medical expenses, including student health fees bundled into a tuition bill.
Transportation, commuting costs, parking passes, and gas.
Room and board for a student enrolled less than half-time.
Personal or non-educational items, entertainment software, and electronics not used primarily for coursework.

These exclusions follow the broader framework the IRS applies to education tax benefits.⁴ If the school does not require it for enrollment or attendance, it probably doesn’t qualify.

Whose Expenses You Can Pay

Under 26 U.S.C. § 72(t)(7), the qualifying beneficiaries are the IRA owner, the owner’s spouse, and any child or grandchild of the owner or the owner’s spouse. “Child” follows 26 U.S.C. § 152(f)(1), which covers biological children, stepchildren, adopted children, and foster children placed with you by an authorized placement agency or court order.⁵ The beneficiary does not have to be your tax dependent. A 30-year-old child going back to school qualifies just as easily as an 18-year-old freshman.

Which Schools Qualify

The student must attend an institution that participates in federal student aid programs administered by the Department of Education under Title IV of the Higher Education Act of 1965.⁶ That covers most accredited colleges, universities, community colleges, vocational schools, and trade programs, along with many for-profit schools that hold Title IV certification. If a school accepts federal financial aid, it almost certainly qualifies. The Department of Education maintains a searchable database of eligible institutions.

The Exception Applies to IRAs Only

The education exception applies to traditional IRAs, SEP-IRAs, and SIMPLE IRAs. It does not apply to 401(k) plans, 403(b) plans, or other employer-sponsored qualified retirement plans.⁷ Pulling money directly from a 401(k) for tuition triggers the 10% penalty regardless of how it’s spent. The workaround is rolling the 401(k) balance into a traditional IRA first, then taking the distribution from the IRA — the rollover must be complete before the education withdrawal.

How Much of the Withdrawal Is Actually Penalty-Free

Qualified expenses have to be reduced by tax-free educational assistance the student received during the year before you compare them to the withdrawal. The offsets you subtract include:

Tax-free scholarships and fellowships.
Pell grants.
Employer-provided educational assistance.
Veterans’ educational assistance.
Any other tax-free payment received as educational assistance, other than gifts and inheritances.

Gifts and inheritances are specifically excluded from the reduction. A $5,000 tuition gift from a grandparent does not shrink your penalty-free withdrawal.¹

Tax-free distributions from 529 plans and Coverdell Education Savings Accounts have to be subtracted too. If a 529 already covered $10,000 of $25,000 in qualified expenses, the penalty-free IRA withdrawal is limited to $15,000. Applying the same expense to both a 529 distribution and an IRA withdrawal is double-dipping, and the overlap gets hit with the penalty.¹

Timing: Same Tax Year

The distribution and the expenses have to fall in the same tax year. Publication 590-B measures the penalty-free amount against “qualified higher education expenses for the year,” pairing 2026 expenses with a 2026 distribution.¹ A spring semester bill paid in December for January classes counts in the December year. If the tuition bill and the IRA withdrawal land in different calendar years, the withdrawal loses its cover and the 10% penalty applies to that portion.

Keep the Paperwork

The IRS does not ask for proof at filing, but the numbers have to hold up in an audit. Hold onto Form 1098-T from the school, receipts and canceled checks for tuition, books, supplies, equipment, and room and board, enrollment records showing at least half-time status if room and board is claimed, documentation of scholarships and grants used in the offset calculation, and the school’s published cost-of-attendance figure for the relevant year.⁴ The audit problem is rarely the exception itself; it’s the math connecting the withdrawal amount to net qualified expenses after offsets. Any gap between the two owes the 10% penalty.

1
Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements
2
Cornell Law Institute. 26 USC 529(e)(3) – Qualified Higher Education Expenses
3
Office of the Law Revision Counsel. 26 USC 529 – Qualified Tuition Programs
4
Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
5
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
6
eCFR. 34 CFR Part 668 Subpart B – Standards for Participation in Title IV, HEA Programs
7
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions