How to Help Pay a Grandchild's Tuition

Learn what you can pay for and what will get taxed.

(Image credit: Copyright 2006, Mike Watson Images Limited.)
Kimberly Lankford
By Kimberly Lankford
published

I plan to pay my grandson’s college tuition by making payments directly to the university. Are these payments subject to limits or gift taxes? - R.V., Waco, Texas

Ordinarily, you’d need to file a gift-tax return if you were to give more than $15,000 in 2018 to any individual (couples may give up to $30,000), but any money you pay directly to the college for your grandson’s tuition isn’t subject to those limits. (Money that goes toward room and board is subject to the limits, however.)

You can also transfer money out of your estate by contributing up to five times the gift-tax limit to a 529 college-savings plan in one year (for a total of $75,000 in 2018) without suffering any gift-tax consequences. (You won’t be able to give your grandson any more money for five years.) Distributions from a grandparent-owned 529, though, could reduce the amount of your grandson’s financial aid award.

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Topics
Ask Kim Paying For College
Kimberly Lankford
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.