Tuition payments to a qualified educational institution are exempt from the gift tax rules. This means that you, a grandparent, or anyone can gift a child $14,000 and also pay their college tuition. You are required to make the check out to the institution.
For example, you make payments to a school for your two grandchildren’s tuition. These would qualify for the unlimited gift tax exclusion for qualifying tuition payments. The payments qualify as gifts but not part of the annual exclusion. The payments would not be includable in your taxable estate.
Gifts to 529 Plans may provide favorable federal estate and gift tax provisions, which may help you reduce the taxable value of your estate. For example, if you contribute $14,000 ($28,000 for married contributors), to a 529 Plan per beneficiary during the year, you may qualify for an annual federal gift tax exclusion.
If contributions exceed the annual federal gift tax exclusion, you may elect to treat up to $70,000 of the contributions, or $140,000 for joint filers, as having been made over a period of up to five years for federal gift tax exclusion.
However, if you and your spouse gift $140,000, you will not be able to give any gifts to the same individual during the five year period without incurring gift tax or using up a part of your lifetime exclusion.
Henssler Financial Believes You Should Live Ready. That means knowing how gifting money for education may affect your taxes. If you have any questions, contact the Experts at Henssler Financial: experts@henssler.com or 770-429-9166.
Disclosures
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
