<p>Because I do not know how much they are giving you it is hard to give a strategy. So lets say you get $12000 I would use all of that to pay tuition, books, room and board, and such and delay the FAFSA to until you have paid your spring semester fees(so it is all or mostly gone) If you are getting $24,000 I would take it in 2 installments and spend it the same way. If you are getting a lot more than that you will have other issue to contend with which include gift taxes and ultimately will probably have to report some of it to FAFSA simply because you cant spend it all in a year. Of course you could buy a car, loan it to some one, put it offshore, there are endless possibilities.</p>
<p>You only report what you have the day you fill out your FAFSA. However, if it is so much that you had to pay taxes on it you will end up reporting it as gift income. So your tax return will reflex it. I believe currently you can receive $12000 a year in gifts without reporting it legally, and much more as a college student because we are small fish. I mean who is really going to know if granny crams a roll of 100s in your hand. Those taxes are generally geared to prevent people from transferring dynastic wealth with out paying taxes. </p>
<p>Ok, I have 2 other ideas.</p>
<p>You could just borrow all of the money using student loans then after you graduate have your family give you the money to pay off the loans. This would really maximize your financial aid.</p>
<p>Or if it is so large you can not spend it she could put it in a 529 and it is assessed at a lower rate in the FAFSA computation. </p>
<p>@2017girl
Thanks for explaining. I will qualify for the blue and gold program since my mom makes under 80k a year and use the cal grant and other scholarships or grants from that to pay for tuition and school fees. I am thinking my grandma will give me somewhere from 8-10k per year for my final two years in school that I will then use for living expenses (rent, utilities, food, etc). The way you made it sound is that it will not make a difference whether she transfers the money to my or my parents account since the only thing that will be reported to fafsa is the amount I have left in my account on the day that I apply. Is this correct? Thank you for all of your help. I really appreciate it.</p>
<p>SoCalDad you are correct, there are many nuances to gifting. I did a poor job in my explanation and should have been much more specific. The life time limit for 2014 is $5.34 million and any amount over $14,000 in 2014 goes against that lifetime limit and after that amount is exceeded it is taxed at a 40% tax rate (or something like that)</p>
<p>Of course you can give an unlimited amount of money towards education as long as it is paid directly to the institution. </p>
<p>And you are correct the giver pays the tax. But the receiver i believe has to report sizable gifts to ensure the taxes were paid or that it goes against the life time cap. I had to look that one up. </p>
<p>I doubt if that is true, since the gift still benefits the recipient.</p>
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<p>I don’t think the donee has to report anything. If the gift is over $14,000 per donee, the donor is supposed to file a gift tax return for the excess, but there is no penalty for not filing the return.</p>
<p>26 U.S. Code § 2503 - Taxable gifts
Section 2503(e)(2) of the Internal Revenue Code excludes from the definition of a “gift” subject to tax "any amount paid on behalf of an individual (A) as tuition to an educational organization described in section 170(b)(1)(A)(ii) for the education or training of such individual
170(b)(1)(A)(ii)
an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on</p>
<p>As far as reporting I again failed to explain my self sorry, the form 709 is filled out by the giver but includes the receiver of the gifts name and info. No you are right no penalty to the receiver. I am familiar with an instance where income was earned on the gift and thus I had to report it on my taxes. I misunderstood the reason I had to report the gift. Sorry (had to call my dad to figure out the answer to that one) </p>
<p>Any cash given from grandparents to kids should be reported as income:
Report any other cash support to child on Fafsa 45j/CSS SI-160G and Verification Worksheets</p>
<p>45j. Money received. Enter the amount of any cash support you received from a friend or relative (other than your parents, if you are a dependent student). This includes money that you received from a non-custodial parent that is not part of a legal child support agreement. Cash support includes payments made on your behalf. For instance, if your aunt pays your rent or utility bill that you would otherwise be obligated to pay yourself, you must report those payments here.</p>
<p>Any cash given to your parents should be reported on Fafsa 94i/ and somewhere on CSS Profile.</p>
<p>94i. Other untaxed income and benefits. Enter your parents’ untaxed income or benefits not reported in items 94a through 94h, such as worker’s compensation or disability benefits, interest income on educational IRAs, untaxed portions of railroad retirement benefits, black lung benefits, the untaxed portion of capital gains, and foreign income that wasn’t taxed by any government. Also include the untaxed portions of health savings accounts from IRS Form 1040—line 25.</p>
<p>You could not report it, but you would be lying, and it would be illegal.</p>
<p>The are 2 legal ways to do it.
Grandparents loan the money @ prime + 1%, and forgive later
Students take out loans now, grandparent pays it off later. (has the disadvantage that grandparents could change their mind )</p>
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