Grandparents Can Help With College Costs

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.