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postsecondary institutions meet this definition. The edu- cational institution should be able to tell you if it is an eligi- ble educational institution. An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in a student aid program ad- ministered by the U.S. Department of Education. Half-time student. A student is enrolled “at least half-time” if the student is enrolled for at least half the full-time academic workload for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that isn't sub- ject to the 10% additional tax, first figure your AQEE. You do this by reducing your total qualified education expen- ses by any tax-free educational assistance, which in- cludes: • Expenses used to figure the tax-free portion of distri- butions from a Coverdell education savings account (ESA) (see Distributions in chapter 6); • The tax-free part of scholarships and fellowship grants (see Tax-Free Scholarships and Fellowship Grants in chapter 1); • The tax-free part of Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chap- ter 1); • Veterans' educational assistance (see Veterans' Ben- efits in chapter 1); • Employer-provided educational assistance (see chap- ter 10); and • Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assis- tance. Don't reduce the qualified education expenses by amounts paid with funds the student receives as: • Payment for services, such as wages; • A loan; • A gift; • An inheritance given to either the student or the indi- vidual making the withdrawal; or • A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). If your IRA distribution is equal to or less than your AQEE, you aren't subject to the 10% additional tax. Example 1. In 2022, a teacher (age 32) took a year off from teaching to attend graduate school full-time. They paid $5,800 of qualified education expenses from the fol- lowing sources. Employer-provided educational assistance (tax free) . . . . . . . . . . . . . . . . . . . . . . . . . . $5,000 Early distribution from IRA (taxable part is $500) . . . . . . . . . . . . . . . . . . 3,200 Before the teacher can determine if they must pay the 10% additional tax on their IRA distribution, they must re- duce their total qualified education expenses. Total qualified education expenses . . . . . . . . . $5,800 Minus: Tax-free educational assistance . . . . . .− 5,000 Equals: AQEE $ 800 Because the teacher’s AQEE ($800) is more than the taxable part of their IRA distribution ($500), they don't have to pay the 10% additional tax on any part of this dis- tribution. However, they must include the $500 taxable earnings in their gross income subject to income tax. Example 2. Assume the same facts as in Example 1, except that the teacher deducted some of the contribu- tions to their IRA, so the taxable part of their early distribu- tion is $1,000. This must be included in their income sub- ject to income tax. The taxable part of the teacher's IRA distribution ($1,000) is larger than their $800 AQEE. Therefore, they must pay the 10% additional tax on $200, the taxable part of their distribution ($1,000) that is more than their AQEE ($800). The teacher doesn't have to pay the 10% addi- tional tax on the remaining $800 of their taxable distribu- tion. Reporting Early Distributions By January 31, 2023, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pen- sions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. The information on this form will help you determine how much of your distribution is taxa- ble for income tax purposes and how much is subject to the 10% additional tax. If you received an early distribution from your IRA, you must report the taxable part of the distribution on Form 1040, 1040-SR, or 1040-NR, line 4b. Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. See the instructions for Form 5329, Part I, for help in complet- ing the form and entering the results on Schedule 2 (Form 1040), line 8. There are many other situations in which Form 5329 is required. If, during 2022, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the in- structions for Schedule 2 (Form 1040), line 8, to determine if you must file Form 5329. Chapter 8 Education Exception to Additional Tax on Early IRA Distributions Page 55