Are your parents wanting to help pay for your children’s education? There are several ways to do this, each with its own limitations and tax consequences.
GIFTS- The simplest way is to have grandparents make an outright cash gift to your child each year. In 2014, you can give up to $14,000 without any gift tax liability. Even better, if grandma and grandpa both want to give, they can give jointly to each of their grandchildren, up to $28,000 per year.
DIRECT PAYMENTS- Unlimited amounts without gift tax consequences are available if payments are made directly to a qualified education institution on behalf of the child. Payments can only be for tuition. Dorm fees, meals, books, etc do not apply.
EDUCATION ACCOUNTS- Grandparents may elect to set up a Coverdell education savings account or a Section 529 plan for your child. These plans offer tax-free growth of amounts you contribute to them. Age, income, and contribution limits do apply.
To discuss te options best suited to your circumstances, speak with an expert today 910-323-3100
McFadyen & Sumner, CPAs PA 