AFAIK, if the gift is under the annual threshold from any one person, its not subject to federal tax. But, it is an asset that the student would have to report on their FAFSA
Gifts are never taxable to the recipient, and rarely taxed to the giver at the time of the gift. If the gift is over the ‘limit’ (which isn’t a limit at all) the donor has to fill out a tax form to keep track of it for estate tax purposes.
All the grandmother has to do is give the money to the parent(s), and the parents can pay the tuition. No reporting on FAFSA.
I see what you mean. However, OP’s assets are too high to qualify for SNAP or TANF which would result in a simplified needs test on FAFSA. I don’t know if it is possible to qualify for free school lunch without consideration of assets, but I’m presuming that even if that were the case it would only be useful for the first year of college since it would not apply to the FAFSA for the second year onward.
Right- if the grandparent gives it to the parent as a gift, and the parent pays tuition, then its not a direct gift to the student. But, if its in a 529, and its in the grandparents name (but with the grandchild as the beneficiary) and is used to pay the students’ tuition, its an asset. zthats hy some suggest the grandparents 529, if there is one, should be used to pay senior year college costs. But then there are those pesky first 3 years…
If the grandparents put the money in a 529 and she didn’t need all of it, can the grandparents remove the extra for their own care? Is there a penalty?
They can change the beneficiary and use extra funds for another grandkid’s educational expenses. But if its taken out for something other than educational expenses, I believe it is subject to a penalty.
If the grands plan to give this at some point…really, it does NOT have to be in a 529. Anything in a grandparent owned 529 does NOT get listed on the FAFSA. The benefit of a 529 owned by a student is that it’s counted as a parent asset for FAFSA purposes…but grandparent owned? Doesn’t get listed on a FAFSA at all.
But as noted…payments to the college will be listed on the following year FAFSA as money paid on behalf of the student.
They might be better off putting it in a dedicated savings…and gifting to the parents annually. Parents can then pay the college bills.
In fact it makes no sense for the grandparent to put money into the 529 unless there is a tax benefit to the grandparent. Usually that tax benefit is on the state tax return. If grandmother also lives in Florida, no state taxes, no tax benefit.
Have been looking into this… including what happens if the 529 is owned by the grandparents and something happens to them? There is a very small tax benefit if we open an account for our grandchild in our state but there are too many drawbacks that make this not worthwhile. We will gift $ to our s and DIL for them to open the 529. Time to plan ahead… granddaughter is closing in on being almost 4 weeks old. 
@jym626 4 weeks? You need to get a move on it!
And Congrats!
We are hurrying! Ah, the benefit of compound interest 
And she isn’t 4 weeks yet. I shouldn’t rush her.
@jym626 She’s probably advanced for almost 4 weeks. Plotting her first rollover.
She did smile a few times (that we saw on facetime/video/photos). It was probably gas.
^^ I think she’s ready for her first SAT…just a baseline. 
The OP’s info is confusing. In one post she says that $45k is after tax income. In another post, she says it’s AGI. Which is it? @pamelamk
@pamelamk
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from bright futures here in FL with her stats she will qualify for almost a full ride, if not 100%, but she doesn’t want to stay in FL, she wants to go out of state in the NE, I was hoping she could get some merit aid, and some money from scholarships she’s been applying here and there, and we can help with the rest, between 25k and 30K hoping thats what its left to pay including room and board.
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The beauty of living in a big state like FL is that one can go to college in another part of the state and it’s far enough away that it’s almost like going OOS…different culture, different surroundings, different people.
When kids say that they want the NE, they generally are talking about NE privates that they’ve heard about, like Northeastern, Boston Univ, Tufts, the Ivys, and so forth. Those are CSS Profile schools and they won’t care that your income is modest, they’re going to be looking at all those assets.
And, both FASFA and CSS schools will take into account that your mom is paying 10s of thousands of dollars towards college.
We are a UMass Dartmouth family. It was what we could afford for child one. The aid was just not enough to justify to price. Child two is an over achiever and is looking at top tier schools. Even with a 36 ACT I will still have her apply to UMass Amherst and UF. If she wants to try for others ok but it will come to money. There was an online calculator that helped my first realign his thoughts. You typed in college cost, initial pay upon grad ect and it would tell you the amount you needed to make to pay back. Eye opening for all.
@FoxWarrior the online calculator was the one for each school? or an independent website?
Grandma doesn’t live in the US, and she does have money, she already paid for my older daughter’s MBA at a private university.
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Grandma doesn’t live in the US, and she does have money, she already paid for my older daughter’s MBA at a private university.
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You’d still have to include her contributions on your DDs FA apps.
@Sybylla no its not, my financial advisor mentioned to put half in annuity, which doesn’t generate a 1099, but its too late, also how much of a difference is that gonna make if I can’t touch it until Im 60, Im 50 now and my husband is 57, (but this is under my name) he didn’t recommend that vehicle for me. I wish I could know if only reporting half how much of a difference would it make…