Grandparents paying tuition

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amother

Ruby

Sun, Aug 06 2017, 10:41 pm

Can someone explain to me how this can be done while still be a donation for tax purposes? TIA

amother

Seagreen

Sun, Aug 06 2017, 10:43 pm

It can't. Grandparents cannot earmark donations and get a tax deduction. It is not legal. Just like you don't get a tax deduction for your tuition either.

amother

Papaya

Sun, Aug 06 2017, 11:32 pm

Some accountants have said it was legitimate. You can donate money into a fund to be used for scholarships for needy students or students whose name begins with Q.

Since the grandparent does not have an obligation, it could be considered a donation.

But my accountant now says it's not worthwhile to do it because it might end up in court, or in the news, so he'd rather err on the side of extreme caution.

amother

Mauve

Mon, Aug 07 2017, 9:22 am

in high school my economics teacher said that it was ok for grandparents to do it since they aren't responsible but parents can't since they are the ones responsible for paying. May be the law has changed but don't think so.

amother

Orchid

Mon, Aug 07 2017, 9:27 am

OP - the answer to your question is to ask the school if they do it, and how they'd like you to proceed. Its up to the school to determine if they will give grandparents a donation acknowledgement letter and at the same time give your children zero tuition bill.

amother

Rose

Mon, Aug 07 2017, 9:32 am

It's a grey area. I don't think it's illegal.

amother

Orchid

Mon, Aug 07 2017, 9:36 am

amother wrote:

here is the law. if the donation is a substitute for tuition, its not deductible.

So the work-around is GP donate to a general fund (or specified fund) and parents get a full scholarship from that fund. However....please read up on tax avoidance.

BabsB

Tue, Aug 08 2017, 2:23 am

Donations to a 501(c)(3) are deductible, but only if they are to the organization as a whole, they absolutely cannot be for a specific individual. The tax code is very specific about this.

Also, private school tuition, even for a religious organization, is not considered a charitable donation as there is a value denominated return. For example, if I donate $20 to an auction, but no matter what get I toaster in return that is worth $20, no donation has been made. (Seriously, the IRS code uses toasters in their examples of both gifts from banks and raffle auctions.)

Grandparents may NOT deduct tuition paid. They can deduct anything paid above and beyond what's on the tuition bill (usually).

Amarante

Tue, Aug 08 2017, 8:33 am

Of course it's not legal anymore than tuition for anyone is. That the person has no legal obligation to do so is besides the point and if there is subterfuge by contributing as a charity and having the charity earmark for certain people, again, it's not a deduction. Charity given to an individual is NOT deductible. I can give to an organization that supports homeless and it's a deduction but if I give to a person on the street begging, it's not a deduction.

People can take a deduction and hope they aren't audited by the IRS. Most people aren't audited who make less than a certain amount unless they do something that is an obvious trigger because the IRS tends to audit higher income people because that's where the money will be found whereas auditing someone who makes a more moderate income - especially if income is derived for regular salary generally will not yield much lost revenue.

Last edited by Amarante on Tue, Aug 08 2017, 9:31 am; edited 1 time in total

L K

Tue, Aug 08 2017, 8:44 am

Amarante wrote:

Of course it's not legal anymore than tuition for anyone is. That the person has no legal obligation to do so is besides the point and if there is subterfuge by contributing as a charity and having the charity earmark for certain people, again, it's not a deduction. Charity given to an individual is NOT deductible. I can give to an organization that supports homeless and it's a deduction but if I give to a person on the street begging, it's not a deduction.

People can take a deduction and hope they aren't audited by the IRS. Most people aren't audited who make less than a certain item unless they do something that is an obvious trigger because the IRS tends to audit higher income people because that's where the money will be found whereas auditing someone who makes a more moderate income - especially if income is derived for regular salary generally will not yield much lost revenue.

How do then nonprofits who help individuals operate? I mean, how do they claim assistance distributed to individuals for clothing, shoes, tuition etc? Or is it that a private person/giver can't have such donation deducted but an org just keeps a record of distributions to individuals and it's ok?

amother

Bisque

Tue, Aug 08 2017, 9:13 am

My kids school allows it. My inlaws usually give us $1,000 a year. It goes into the scholarship fund as a donation. We are already on a scholarship, so my bill just gets an adjustment.

Amarante

Tue, Aug 08 2017, 9:29 am

L K wrote:

You give to an organization which has a stated mission I.e. Helping homeless.

The organization then determines how it fulfills that mission. It can give individual handouts, build shelters etc.

An individual can't give money to another individual and claim a charitable deduction. Can you imagine all the fraud that would potentially occur?

And just because a school is accepting earmarked donations doesn't make it kosher in terms of tax law. it just means they haven't been caught just as any tax cheat goes on in the expectation that it won't be caught by the IRS. But if the school was audited, and the direct correlation was made that it was just a disguised tuition payment, the IRS would take action.

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