529 gift limits

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airahcaz
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529 gift limits

Post by airahcaz » Fri Jan 27, 2017 11:53 pm

Why would a grandparent opening a 529 in his own name with a grandchild as beneficiary, be subject to the $14,000 annual gift tax exclusion limit?

Meaning it's his own funds in just a different account type and the contributions have not and will not go to the beneficiary till the grandchild is ready for college...
1) Invest you must 2) Time is your friend 3) Impulse is your enemy 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course. (Plagiarized, but worth stealing)

mcraepat9
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Re: 529 gift limits

Post by mcraepat9 » Sat Jan 28, 2017 12:39 am

airahcaz wrote:Why would a grandparent opening a 529 in his own name with a grandchild as beneficiary, be subject to the $14,000 annual gift tax exclusion limit?

Meaning it's his own funds in just a different account type and the contributions have not and will not go to the beneficiary till the grandchild is ready for college...
Contributions to 529 accounts are treated as completed gifts to the beneficiary for federal gift tax purposes. Amounts contributed to a 529 are removed from the account owner's taxable estate for federal estate tax purposes, even though the contributions can be withdrawn back to the account owner.
Amateur investors are not cool-headed logicians.

airahcaz
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Re: 529 gift limits

Post by airahcaz » Sat Jan 28, 2017 7:52 am

mcraepat9 wrote:
airahcaz wrote:Why would a grandparent opening a 529 in his own name with a grandchild as beneficiary, be subject to the $14,000 annual gift tax exclusion limit?

Meaning it's his own funds in just a different account type and the contributions have not and will not go to the beneficiary till the grandchild is ready for college...
Contributions to 529 accounts are treated as completed gifts to the beneficiary for federal gift tax purposes. Amounts contributed to a 529 are removed from the account owner's taxable estate for federal estate tax purposes, even though the contributions can be withdrawn back to the account owner.
Oh ok, thank you
1) Invest you must 2) Time is your friend 3) Impulse is your enemy 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course. (Plagiarized, but worth stealing)

likegarden
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Re: 529 gift limits

Post by likegarden » Sat Jan 28, 2017 10:04 am

Lets assume that a son opened a 529 for his son, the grandson. Each of the grandparents moved $14k into this account last year and this year. As I understand IRS taxing gifts is that you only have to pay a tax on this gift, if the total amount over your life time exceeds $5,400,000. per person, and the grandparents will never be able to do that. Therefore, when grandparents gift another 2 x $14k into this account this year, they only will have to fill out an IRS form for these gifts exceeding the gift limit of $14k this year, but do not have to pay any tax. The son also does not have to pay any taxes. Filling out the IRS form will lead the IRS to start a gift counter for each grandparent.

Jack FFR1846
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Re: 529 gift limits

Post by Jack FFR1846 » Sat Jan 28, 2017 10:13 am

I don't believe any form needs to be filled out for $14k. It's only over $14k per person per year that requires reporting.

On the other end, when the beneficiary uses the funds, they get a 1099-Q showing the basis and total amount. The school sends the student a 1098-T showing school costs.
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EddyB
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Re: 529 gift limits

Post by EddyB » Sat Jan 28, 2017 10:40 am

mcraepat9 wrote:
airahcaz wrote:Why would a grandparent opening a 529 in his own name with a grandchild as beneficiary, be subject to the $14,000 annual gift tax exclusion limit?

Meaning it's his own funds in just a different account type and the contributions have not and will not go to the beneficiary till the grandchild is ready for college...
Contributions to 529 accounts are treated as completed gifts to the beneficiary for federal gift tax purposes. Amounts contributed to a 529 are removed from the account owner's taxable estate for federal estate tax purposes, even though the contributions can be withdrawn back to the account owner.
The gift giver may also elect to make a single gift up to five times the annual exclusion and treat it as spaced over five years, as discussed, among other places, in Part III here: https://www.irs.gov/irb/2008-09_IRB/ar17.html

airahcaz
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Re: 529 gift limits

Post by airahcaz » Fri Jan 12, 2018 12:14 pm

so to be clear, 2 folks here stated that a form needs to be filled for any contributions per person over $14K? which starts a gift counter (up to the $5.4M)?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course. (Plagiarized, but worth stealing)

PatrickA5
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Re: 529 gift limits

Post by PatrickA5 » Fri Jan 12, 2018 12:43 pm

Jack FFR1846 wrote:
Sat Jan 28, 2017 10:13 am

On the other end, when the beneficiary uses the funds, they get a 1099-Q showing the basis and total amount. The school sends the student a 1098-T showing school costs.
When I pay for my son's college and then request a 529 reimbursement, the 1099Q is made out to me, not the beneficiary. Not that it really matters who gets the 1099Q on a Qualified Withdrawal.

CppCoder
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Re: 529 gift limits

Post by CppCoder » Fri Jan 12, 2018 12:48 pm

airahcaz wrote:
Fri Jan 12, 2018 12:14 pm
so to be clear, 2 folks here stated that a form needs to be filled for any contributions per person over $14K? which starts a gift counter (up to the $5.4M)?
Yes, Form 709. This form is also needed for "superfunding" (making up to a five year gift at once without being subjected to the "counter"). Note that the new tax law changed the estate tax exclusion, but, at least for now, that new limit is temporary.

airahcaz
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Re: 529 gift limits

Post by airahcaz » Fri Jan 12, 2018 12:58 pm

So $14K or under annually, no paperwork?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course. (Plagiarized, but worth stealing)

PatrickA5
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Re: 529 gift limits

Post by PatrickA5 » Fri Jan 12, 2018 1:01 pm

I believe it's up the 15K for 2018 gifts

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ray.james
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Re: 529 gift limits

Post by ray.james » Fri Jan 12, 2018 1:03 pm

15k is the limit from this year; since the limit is raised for 2018. It is also per person/gift-giver. So 15K from grandma, 15K from grandpa.

Regarding super-funding, others have explained and there is wiki which explains it better. There is a potential 150K gift "out of estate taxes" if both grandma and grandpa do super-funding.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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