Grandparents now have a great way to help fund a grandchild's higher education.
Grandparents have the option to start a 529 college plan that grows over time and benefits their grandchild. When the grandchild attends college, the child can take tax-free money out of the 529 to pay for it. Until the 2024-2025 academic year, this useful way to pay for college had one drawback: It could reduce the student's financial aid package, since the rules treated the money as untaxed student income.
Not so anymore.
Now grandparents have a loophole, and their 529 plan will not count as student income.
Meanwhile, grandparents who own such a plan might be eligible to claim a tax deduction, available in 30 states.
What happens if grandparents contribute faithfully to the plan over the course of 15 years, but the grandchild does not go to college? Then the grandparents can roll the 529 into the IRA to benefit the child's retirement.
