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Form 5329 Exception Code 08: Higher Education Expenses

Updated October 17, 2026. Quick answer: Exception code 08 on Form 5329 is for IRA distributions made for qualified higher education expenses. Publication 590-B says whose education counts, which expenses qualify, and which payments do not count. You enter the amount on line 2 and write 08 in the space provided.

What code 08 says

Form 5329 Part I is where the additional tax on early distributions is figured, and line 2 is where you show the part of an early distribution that is not subject to it. The instructions list each reason as a numbered exception, and qualified higher education expenses is number 08. Part I itself opens by saying “You may also have to complete this part to indicate that you qualify for an exception to the additional tax on early distributions”.

The instructions describe exception 08 in one sentence: “IRA distributions made for qualified higher education expenses.”

The rule in Publication 590-B

Publication 590-B gives the rule in full: “Even if you are under age 59 1/2, if you paid expenses for higher education during the year, part (or all) of any distribution may not be subject to the 10% additional tax.”

The limit is the expense itself: “generally the amount that isn’t more than the qualified higher education expenses (defined next) for the year for education furnished at an eligible educational institution (defined below).”

On whose education counts, it says “The education must be for you, your spouse, or the children or grandchildren of you or your spouse.”

Which expenses qualify

The definition reads: “Qualified education expenses, eligible for the exception to the 10% additional tax for early distributions from IRAs, are tuition, fees, books, supplies, and equipment (including computer equipment and related services) required for the enrollment or attendance at an eligible educational institution, including those expenses incurred in connection with a recognized postsecondary credential program.”

“They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance at an eligible educational institution.”

The Publication adds a list for younger students: “Qualified higher education expenses include the following expenses in connection with the enrollment or attendance at an elementary or secondary public, private, or religious school:”

  • “Tuition.”
  • “Curriculum and curricular materials.”
  • “Books or other instructional materials.”
  • “Online education materials.”
  • “Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor meets certain requirements.”
  • “Fees for dual enrollment in an institution of higher education.”

The Publication also lists fees for standardized tests and educational therapies for students with disabilities; read the full list in Publication 590-B. On tutors, it says “Tutors or teachers tutoring or providing educational classes outside of the home must not be related to the student and meet the following requirements.” The three alternatives are: “They must be licensed as a teacher in any state”; “They must have taught at an eligible educational institution”; or “They must be a subject matter expert in the relevant subject.”

Which school counts

“This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in the student aid programs administered by the U.S. Department of Education.” The Publication continues “The educational institution should be able to tell you if it is an eligible educational institution.”

What paid the expenses

Publication 590-B separates the funds. It says “When determining the amount of the distribution that isn’t subject to the 10% additional tax, include qualified higher education expenses paid with any of the following funds.”

  • “Payment for services, such as wages.”
  • “A withdrawal from personal savings (including savings from a qualified tuition program).”

The Publication’s list continues with other funds; read the full list in the Publication before you total your expenses.

“Don’t include expenses paid with any of the following funds.”

  • “Tax-free part of scholarships and fellowships.”
  • “Pell grants.”
  • “Veterans’ educational assistance.”

The same second list also includes “Employer-provided educational assistance.” Read the whole list in the Publication.

How to claim it on Form 5329

The instructions for line 2 begin: “Enter on line 2 the amount that you can exclude.” They continue: “In the space provided, enter the applicable exception number”. For this page the number is 08. If you have several reasons, the instructions say “If more than one exception applies, enter 99.” That case is covered on exception code 99.

Report the early distribution on line 1 first. Publication 590-B points to “chapter 8 of Pub. 970” for more on eligible institutions.

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Where it goes next

Line 2 feeds the lines below it. The form’s caption for line 3 reads “Amount subject to additional tax. Subtract line 2 from line 1”. The caption for line 4 reads “Enter 10% (0.10) of line 3. Include this amount on Schedule 2 (Form 1040), line 8”. So whatever you exclude on line 2 comes out of the amount that line 4 multiplies. The whole of Part I is walked through on the Part I lines 1 to 4 page.

If you are married and both of you must file the form, the instructions say “If both you and your spouse are required to file Form 5329, complete a separate form for each of you.” They add “Include the combined tax on Schedule 2 (Form 1040), line 8.”

Edition and line numbers

This page reads the 2025 Form 5329 and its 2025 instructions, and the 2025 returns edition of each IRS Publication it cites. They are the current files irs.gov served on 2026-10-17, for the tax year 2025 return filed in 2026. Check the tax year printed on the form you are filling in and use the line numbers and exception numbers on that year’s form, because a different year’s form can number or word them differently. For the wider picture, see Form 5329 explained and the overview of early withdrawal penalty exceptions.

Common mistakes

  • Using code 08 for money that did not come from an IRA. The instructions describe it as “IRA distributions made for qualified higher education expenses.”
  • Counting expenses paid by a scholarship or grant. Publication 590-B says not to include expenses paid with “Pell grants.” or with “Tax-free part of scholarships and fellowships.”
  • Using the exception for someone outside the listed family. Publication 590-B says “The education must be for you, your spouse, or the children or grandchildren of you or your spouse.”

Related: Form 5329 explained, Early withdrawal penalty exceptions, 1099-R box 7 codes, and Form 8606.

Sources

Read from the IRS documents linked above on October 17, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.

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