Are you a grandparent who wants to help pay for a grandchild’s college education? You’ll find several ways to do this, each with its own limitations and tax consequences.
GIFTS . The simplest way is to make an outright cash gift to your grandchild each year. In 2014, you can give up to $14,000 without any gift tax liability. If your spouse joins in the gift, you can jointly give each grandchild up to $28,000 each year.
DIRECT PAYMENTS. You can give unlimited amounts without gift tax consequences if you make the payments directly to a qualified education institution on behalf of your grandchild. Payments can only be for tuition, not for dorm fees, meals, books, etc.
EDUCATION ACCOUNTS. You could set up a Coverdell education savings account or a Section 529 plan for your grandchild. These plans offer tax-free growth of amounts you contribute to them. Age, income, and contribution limits apply, however.
To discuss the options best suited to your circumstances, contact our office at 913-338-3500.