If you are looking for some education money for yourself or your spouse, or your children or your grandchildren, and you have not reached age 59½, consider a withdrawal from either your traditional IRA or your Roth IRA, without having to pay the 10% additional tax penalty on the withdrawal.

While you will still owe applicable federal income taxes on the withdrawal distributions, this is an often overlooked method of paying for eligible educational expenses.

According to the IRS, "an eligible educational institution is any college, university, vocational school, or other post-secondary educational institute eligible to participate in a student aid program administered by the Department of Education." Undergraduate and graduate courses are both eligible. Even some foreign schools qualify. If you have any doubt as to whether a school qualifies, it's best to contact the school.

Qualified expenses for a student who is at least "half-time" are: (1) tuition, (2) fees, books, supplies, and (3) equipment required for enrollment or attendance at an eligible educational institution.

A Word of Warning: Be careful of equipment as a qualified expense. It might be useful to have a laptop computer, but check to see if it's actually "required" for enrollment or attendance. The IRS has disallowed such expenses in the past.

Room and board can also be a qualified expense, but not more than the greater of actual amounts charged for residing in housing owned or operated by the school or allowance for room and board that was included in the cost of attendance.

To determine expenses that are not subject to the 10% penalty requires some calculations on your part. In essence, you must calculate your "adjusted qualified educational expenses." You do this by reducing your total "qualified education expenses" by any "tax-free educational expenses." Tax free educational expenses include such things as distributions from Coverdell educational savings accounts, tax-free scholarships and fellowships, pell grants, veterans educational assistance, and employer provide educational assistance.

If you receive any gifts or inheritances, these do not reduce your qualified educational expenses.

You are not subject to the 10% penalty if your IRA distributions are equal to or less than your adjusted qualified educational expenses.

As you might expect, the IRS wants you to file Form 5329 to record your early distributions. The instructions to file this form are on Part 1.

Before we leave this subject, there's a couple things to remember about Roth IRAs. Earnings from your Roth IRA can be withdrawn tax-free if left in the account for five years. If the earnings are withdrawn prior to five years, they are included as income on your return.

You should also note that a withdrawal from an IRA generally increases your income for that year and may affect your eligibility for financial aid in the future.

Lastly, remember that any withdrawal from an IRA is eating into your retirement savings. This is often not in your best interest.

For these reasons, you probably should explore other ways of funding college expenses before opting for this method. You may also want to discuss your personal financial situation with a tax advisor.