Yahoo Finance
As college costs increase, students have been forced to take on a growing amount of debt.
In fact, 47% of student borrowers with a bachelor's degree (1) owe more than $25,000 — and the averagestudent loanbalance among households with student debt is $52,138.
Getting family help covering the cost of a degree can reduce or even eliminate borrowing.
But there are some things to think about, including how a financial gift can impact tax bills.
Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 —here are 5 ways to build wealth like a landlord without actually being one Robert Kiyosaki saysthis 1 asset will surge 400% in a yearand begs investors not to miss this 'explosion' Millionaires under 43 hold only 25% of their wealth in stocks.Here's where their money is actually going Say, for example, that Ellen has $50,000 in appreciated stock that she paid $25,000 for years ago.
She wants to give the money to her grandson to help pay for college, but she's worried that her gift could end up sticking him with a big tax bill, as she has $25,000 in unrealized gains.
What are Ellen's options in this situation to help her grandson without the IRS taking a big cut? One of the easiest ways for Ellen to help her grandson avoid a tax bill would be to just sell the stock herself.
"If the genuine goal is to help a grandchild pay for college and not burden them with the tax bill, the cleanest solution is to gross up the proceeds so they can cover the expected tax on the sale," Brando Reyna (2), CFA and founder of Reyna Capital Advisors, told Moneywise.
If Ellen takes this approach, the taxes may not be as big of an issue as she thinks.
"Long-term capital gains tax starts at a year and a day.
Less than that, the grandmother will pay ordinary income tax," explained Aaron Ulrich (3), owner of Integra Financial Planning, LLC to Moneywise.
Ellen has owned the stock for a long time and capital gains are taxed at a lower rate than ordinary income, although, as Ulrich explained, they're progressive based on income.
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