529 account
Hi Terry, both my husband and I are retired and collect social security. We have two granddaughters, one has a 529 account that her parents started. For her 1st birthday I would like our gift to be a contribution to her 529 account. How do we go about doing this and is the 529 contribution tax deduction on our 2026 joint filing?
Granddaughter #2 is 3 and lives in Colorado and does not have a 529 account. Can I, her grandmother, open an account for her and how will this affect our joint tax filings going forward?
I know you always instruct people go the BrightStar website but any other information you can provide would be most appreciated.
Thank you,
Terry Says
First, read this recent column about how these plans work:
https://www.terrysavage.com/the-gift-of-college-529-plans/
The gifts are NOT a deduction from Federal income taxes, no matter who is custodian of the plan.
For the grandchild that already has a plan set up, ask the parents for info on making a deposit into the plan. They probably have a coupon you can send in to the custodial firm with your check. Or they can give you a link to the account website to deposit money.
For the grandchild that does NOT already have a plan, it would probably be best if the parents set up the account. They can find their state plan at www.SavingforCollege.com. Or they can just to Vanguard.com to open a plan. That plan is low-cost and highly rated — and you do not have to be invested in your state’s plan. (That’s where I opened plans for my granddaughters.)
Illinois is a top rated plan, and if you are a resident, you can deduct up to $10,000 in contributions each year from your ILLINOIS STATE TAXES – but not federal. The website for that is Brightstart.com.
