topic My uncle wants to make a donation to our kid's college fund. What's the maximum allowed per year (tax-free) and how many years can be combined on a single donation? in Deductions & credits

My uncle wants to make a donation to our kid's college fund. What's the maximum allowed per year (tax-free) and how many years can be combined on a single donation?

pabloam1976 — Mon, 03 Jun 2019 20:41:21 GMT

Is it a 529 plan? Which state is the fund established in?

SweetieJean — Mon, 03 Jun 2019 20:41:23 GMT

Is it a 529 plan? Which state is the fund established in?

We are currently evaluating what's the best option. The 5...

pabloam1976 — Mon, 03 Jun 2019 20:41:24 GMT

We are currently evaluating what's the best option. The 529 is established in IL. We understand, he can contribute up to $70,00 (prorated over a 5 year period) without incurring into the gift tax, but how about the recipient? If he was to make a contribution to an alternative savings account, will he (or us) be subject to the $14K max annually? I understand for those alternative options, you can't combine multiple options without being taxed. Appreciate your help!

No. Neither the beneficiary of the account (the child) or...

Hal_Al — Mon, 03 Jun 2019 20:41:25 GMT

No. Neither the beneficiary of the account (the child) or his parents report anything about the uncle's contribution/gift on their tax return. Gift recipients do not file a gift tax return; only the giver.
The Uncles gift does not affect the parents ability to contribute to other accounts or even the same 529 that the Uncle gives to.. The $14,000/$70,000 limit is per individual giver

Essentially, there is no federal IRS limit to the amount....

Hal_Al — Mon, 03 Jun 2019 20:41:27 GMT

Essentially, there is no federal IRS limit to the amount. It can all be done in one year or multiple years. There is no federal deduction for making a contribution. States may have a limit ($300,000) and most states allow a deduction for a contribution and the Uncle gets the deduction even though the child is not his dependent. The state deduction is limited (see http://www.savingforcollege.com/compare_529_plans/index.php?page=compare_plan_questions&plan_question_ids[]=437&order_by=plan_question_437 ) but there is usually a roll over provision.

In a sense there is a federal limit of $70,000 to avoid a gift tax return. But, "Gift Tax" is somewhat of a misnomer. Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.
See https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html

Reference: https://us.axa.com/goals/saving-for-college/articles/529-plans-contributions-withdrawls.html

Hal_Al, thank you for the thorough response! In either ca...

pabloam1976 — Mon, 03 Jun 2019 20:41:28 GMT

Hal_Al, thank you for the thorough response! In either case, do we "as recipients" have to declare this gift as "income" if it is not under a 529 plan?

Gifts are not income and are not reported on the recipien...

Hal_Al — Mon, 03 Jun 2019 20:41:29 GMT

Gifts are not income and are not reported on the recipient's income tax return. You (the parents) are not the recipient of a gift; the child is.