This account allows a maximum tax-deductible annual contribution of the lessor of $5,500 per individual or $11,000 per couple, or 100% of taxable compensation for the taxable year of 2016.
Earnings are tax-deferred.
Does not involve employer contributions and, thus, is not a plan qualified by ERISA.
Distributions may be in lump sum or periodic payments.
Penalty tax of 6% for excess contributions.
Penalty tax of 10% for early withdrawals.
Penalty tax of 50% for insufficient withdrawals after 70 ½.
Can take a distribution from IRAs without imposition of a tax penalty as long as it is made in payment of higher education costs (tuition, fees, books, supplies, and equipment)