Watch the Timing: Sooner is Better
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A taxpayer can give $12,000 to any number of individuals tax-free, double that amount if a married couple is doing the giving. For donations to a college 529 fund only, a parent, grandparent or anyone else can give $60,000 in one year to one person, but nothing more for the next four, so it averages out to $12,000 a year over five years. The amount grows to $120,000 in one year if both parents or grandparents donate, but it has to be averaged over five years to avoid gift taxes.
Those planning a gift should consider doing it earlier next year so that more of the income from the gift for that tax year is in the hands of the recipient -- who is presumably younger and has less income, and therefore will be taxed at a lower rate.
