529 plan contributions above the $16,000 annual limit will count against your GST lifetime exemption. This is why its such a big deal that the rules are changing. Utah: The contributor can claim a 4.85% tax credit per beneficiary on contributions up to $2,130 (for individual filers) or . Contributions to a 529 plan qualify as a gift, according to the IRS, which could trigger the need to file a gift tax return and potentially pay tax on the amount youve contributed. "Setting Every Community Up for Retirement Enhancement Act of 2019. But, the financial aid process can change dramatically at any time, Vasconcelos warns. At the same time, grandparents are often eager to help out financially. Learn about scholarship opportunities for college freshmen and where you can find them. Any Indiana taxpayer who contributes to a CollegeChoice 529 Plan is eligible to receive the tax credit. Please note that some states offer tax deductions, while some offer tax credits. Meet the experts behind Schwab's investing insights. You can take it and itemize or claim the standard deduction, too. You can save in a 529 plan no matter your income. Tax Breaks for Generous Grandparents with 529 Plans | Kiplinger "529 Plans. A 529 plan is a smart investment that can set your grandchild up for future success. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation. Michigan is the home state of the MI 529 Advisor Plan (MAP). All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. Tip. Ryan Eichler holds a B.S.B.A with a concentration in Finance from Boston University. Vasconcelos says cash support from grandparents will likely still have an impact. Line 17 is for the Michigan Education Savings Program and MI 529 Advisor Plan, and Line 18 is for the Michigan Education Trust. Virginia grandparents who want a big tax break . 529 plan gift contributions may qualify for a state income tax benefit. You might be using an unsupported or outdated browser. You have been successfully subscribed to our email list. For example, married grandparents who contribute $32,000 to a grandchild would not include the amount in their taxable estate. When a baby is born, parents face a whole host of new expenses. Hence, delaying distributions from nonparent-owned accounts until the final two years of a childs college career can help sidestep this potential pitfall. Grandparents looking to contribute funds to cover their grandchild's college costs often turn to a 529 plan, a type of account that provides tax benefits for education savings. Instructions for Form 709 (2019) Schedule A. Computation of Taxable Gifts: Line B. The greatest benefit of 529 plans is their tax advantages. A 529 plan is a tax-advantaged savings/investment plan designed to encourage saving for the future expenses of a designated beneficiary (typically one's child or grandchild). Parents, grandparents, aunts, uncles, step-parents, spouses, and friends are all allowed to contribute on behalf of a beneficiary. 4 Even if a Michigan resident contributes large amounts on behalf of multiple beneficiaries, they can only deduct a maximum of $5,000 for a single return, or $10,000 for a joint return each year. Grandparents | NY 529 Direct Plan All expressions of opinion are subject to change without notice in reaction to shifting market conditions. What Would You Sacrifice for the College Experience? See our take on investing, personal finance, and more.