Contributing to a College-Savings Account When You're Not the Parent

Rules for tax deductions and the effect on financial aid can be tricky.

I'd like to contribute to a 529 account for my niece. Will I get an income tax break for my contributions, and how will the account affect her financial aid prospects when she goes to college?

Among the 34 states (and the District of Columbia) that offer an income tax deduction for contributions to 529 college-savings accounts, some permit anyone who contributes to a 529 to take a tax deduction, but others let you deduct your contributions only if you are the account owner—regardless of whether you're the parent, uncle, aunt, grandparent or anyone else. Most states require you to contribute to your own state's plan to get the break, although Arizona, Kansas, Maine, Missouri and Pennsylvania allow deductions for contributions to any state's plan. See for details about each state's rules. Also see our Find the Best 529 Plan for You map.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.