At dinner last night with my in laws I mentioned my D and I were going to tour a college during spring break. My MIL told us in front of my D that they would cover any college she wanted. She’s said this before but I didn’t really think it would be a meaningful amount of money maybe help cover some restaurant food trips or travel costs as they pop up. But it feels different now. My H believes they are serious. I’ve been running NPCs at the private LACs for a solid “B” student CTCL types and they show about $15-20k/yr over what I feel comfortable paying to not take out loans and about $10-15k if D takes the federal.
My question is would the school or government consider the $15k grandparent contribution as income and/or reduce the portion that says aid grant? My gut is saying my D will really like UofPuget Sound above all the others and doing ED for a music major would save her from auditioning multiple places. I haven’t really considered her EDing anywhere so we could compare offers.
That is an interesting question. I have wondered that myself since we were also on the grandparent plan but I had always concluded that our assets were too high to qualify for any federal aid or additional merit aid. BTW UPS likes to spread the money around to everyone but gives excellent talent scholarships to music majors. I’m sure they’d give you a merit pre-read if you are serious about ED.
Interesting about the preread! I’ll be sure to ask since I believe they’ll set up a full day for D to shadow and have a lesson. We aren’t full pay but somewhere in the make too much but not able to afford more than NJ publics. Plus I can and plan to work more when she starts college.
Effective with 2024-25, gifts to the student - including tuition paid by grandparents - is no longer reported on the FAFSA. That means that the gift won’t affect aid. That was not the case in the past, and 2024-25 is the first year for this change.
The lifetime gift allowance is in the millions of dollars. So it is very likely the grands can contribute more than $17,000 each per year. They just need to complete a form. There are NO tax ramifications at all from this.
If the grandparents pay the school directly, this is not considered a reportable gift for IRS purposes, no matter how high the amount. The same is true for medical expenses paid directly to providers.
You need to check your info. Annual giving is capped at the numbers I noted. I can’t give a lifetime cap all in one or in excess of the annual amount without triggering a tax burden for that year.
I’m not sure if this is true. Nevertheless, it’s a different issue but I have a feeling it opens other cans of worms with respect to financial aid. If you don’t need aid, then it’s a non-issue with respect to the school.
While it “might” have implications for financial aid at some schools that use the Profile, it does not have implications at the vast majority of schools (which only use FAFSA). As I mentioned earlier, beginning with the 2024-25 financial aid year, money given to a student - including tuition paid on behalf of the student by a grandparent - is NOT reported on the FAFSA. Schools will not reduce aid if they receive payment from a grandparent.
@BelknapPoint please explain why this isn’t accurate.
We gifted a kid in excess of $34,000 one year, and all we had to do was complete a form indicating this. There was no tax implication at all for anyone. Of course, if our total in our lifetime exceeds the MILLIONS of dollars allowed, yes, there would be an issue.
But for most people, they will never reach the lifetime cap on gifts.
It’s understandable that you (or any rational person) might not want to automatically take as a matter of faith information put out by a random person on an internet forum, in particular when money and taxes are being discussed. However, before you come back with a doubting reply, I suggest that you do an online search, especially when verifying (or debunking) what has been posted can be done so easily in this case.
Here is some information from the best source, the IRS (see the third FAQ here, “What can be excluded from gifts?”):
Wrong, and not so simple. Any gift or combination of gifts from one person to another in a particular tax year generally cannot exceed the annual gift tax exclusion ($17k in 2023) without triggering an IRS reporting requirement. Spouses can double up on the annual exclusion amount so that in 2023 together they could gift $34k to another person without facing the reporting requirement. But needing to report a gift over the annual exclusion amount on IRS Form 709 in almost every case will not mean that there is a tax burden (obligation to make a tax payment). In order to actually owe tax for making a gift, the gift-giver would need to exceed the lifetime exemption amount, which currently is $12.92 million. So, a grandparent could give $1 million to a grandchild this coming Tuesday for a Halloween gift, and while this would require the grandparent to file IRS Form 709 to report the gift (since it’s over the 2023 annual exclusion amount of $17k), there would be no additional tax owed by the grandparent, unless the grandparent had already exceeded or with this gift was exceeding the $12.92 million lifetime exemption for all previous gifts given that were above the annual exclusion in effect during the year of previous gifts.