A growing number of grandparents are helping raise their grandchildren. Grandparents are giving their time and money, helping with the cost of toys, clothing, education and extracurricular activities. This can add up to thousands of dollars. Many millennials indicate they could not afford their lifestyle if it were not for the help their parents provide. (This is a topic for another day…learning to live within your means while still saving….)
While helping to support grandchildren may improve the quality of life for the grandparents, it’s critical they build their own financial security first. One way for grandparents to benefit their grandchildren while protecting their own finances is contributing to a college plan. This provides a potential tax break while preparing their grandchildren for an education their parents might not be able to afford on their own. Be sure that the grandparents fund a college plan in the state of their residency for the state tax deduction. It matters not what state the money is funded into, it will be able to pay for any accredited school anywhere in the country and several outside the country. The state tax deduction is only available if you file in the state for which you are funding a college plan.
If you would like more information on tax breaks associated with education plans, give us a call.