- I don't think you have a clear understanding of the federal gift and estate tax. You can potentially put much more than $70k in a 529 without any gift tax implications. And any gifts that exceed the annual exclusion amount (or, in the case of 529 contributions, the 5 year aggregate rule) in all likelihood won't "incur" gift tax. The excess amount will simply reduce the lifetime estate tax exemption, which is currently more than $5 million.
- There may very well be times when it makes sense to have 529 distributions made payable to the school or the 529 account owner, as opposed to the beneficiary.
Student loans used to pay QHEE could be paid off with 529 money except that 529 distributions have to be taken in the same tax year as the expenses are incurred so it’s not very practical. You can’t use 529 distributions for loans that paid QHEE in a prior tax year.
Amounts paid on behalf of another for tuition, regardless of the source and only tuition, not books/supplies, R&B, are excluded from gift tax considerations. So you could withdraw to yourself up to that amount + $14K for an individual or $28k for a two parent household.
@annoyingdad - Yes you can withdraw to yourself, but I do not see any benefit. Since if you withdraw to student, even books/supplies, R&B, are excluded from gift tax considerations.
@MiddKid86 - You are right, i do not understand gift tax over $70K into 529 plan and over $14K/year directly to student. But I do not need to since those numbers are outside my reality as I said in my last sentence of the summary.
@annoyingdad Thanks for the clarification / insight on 529 to pay a student loan if the QHEE were incurred in the same year as the 529 withdrawal.
When you write a summary of what you have learned and you include the sentence “You can put up to $70K into a 529 plan without incurring gift tax,” the implication is that putting more than $70k into a 529 account will incur gift tax, which almost certainly will not be the case for most people.
Summaries can be helpful, but not if they contain misinformation or bad advice.
The sentence “You can put up to $70K into a 529 plan without incurring gift tax” is correct, and my last sentence in my summary said that anything above that, I do not know.
Since you admittedly don’t have a good understanding of the federal gift tax, I can see why you think that sentence might be correct. The problem is that your lack of comprehension may cause others to get bad information, which would be unfortunate.
are you saying there is a case where I put less than $70K into a 529 plan, and still incur gift tax?
^^^
Yes, that is a possibility, but a very remote one, and it’s not the most obvious bad conclusion that someone with limited or no knowledge of the gift tax might draw from your statement. As I said earlier, the biggest problem with the sentence is the implication that putting more than $70k into a 529 will incur gift tax.
Without a clear understanding of how the federal gift tax works, it’s easy to make erroneous or confusing statements about the gift tax, as you have done throughout this thread.
alright, fine, we are in a disagreement loop. Lets end the discussion.
Did anyone mention that paying tuition directly to the college would result in NO gift tax regardless of the amount of tuition paid?
Here’s some good, basic information on the unified federal estate and gift tax:
http://www.nolo.com/legal-encyclopedia/the-federal-gift-tax.html
And here’s some information on allowing a single larger contribution to a 529 plan to be spread over five years for the purpose of taking advantage of five years worth of annual exclusions:
http://www.savingforcollege.com/questions-answers/article.php?article_id=14
@rhandco I mentioned that in Post #50
This may be of interest:
http://blog.taxact.com/gift-tax-do-i-have-to-pay-gift-tax-when-someone-gives-me-money/
I was wondering about this, because my elderly relatives will either help pay for my son’s college or I would help pay their medical bills. Both are considered no gift tax - paying college tuition directly or paying medical bills directly for someone other than yourself.