If my employer agrees to help contribute to my kid’s 529 college savings account and the money goes directly into his account (e.g. not to me and then I deposit it), is this considered taxable income for me? My CFO is telling me that it’s considered taxable income, but this makes no sense to me if my employer agrees to give the money directly to my kid via their 529 account. And would it have to be $19,000 or less?
My boss contributes to my kid’s 529 plan, is this taxable?
byu/CameraSad3422 inpersonalfinance
Posted by CameraSad3422
7 Comments
IANAL (or a tax accountant), but I believe the account is still yours, the kid is the beneficiary (which you can change at any time as the owner)
Thus they are giving the money to you, not your kid.
Would your boss be doing it if you weren’t their employee?
If not, your CFO is correct. It’s part of your taxable compensation.
If your boss is legit doing it as a gift from their own personal money due to your personal friendship, then it’s a non taxable gift. The fact that your CFO knows about it though suggests it’s being paid from a business account and is part of your compensation.
All money going into a 529 is taxed. Some states offer tax breaks but it is always taxed federally before going in.
The way you need to look at this is that it is no different from:
* You getting paid some extra income
* You then putting that extra income into a 529 (for your child).
The 19K or less thing is not relevant since this is not a gift. The 19K thing is the reporting threshold for gifts. Since this is not a gift, the 19K thing does not matter.
financial boundaries are useless if they can be bypassed in secret especially when it involves depleting life savings for a third party
Why doesn’t it make sense. They’re paying you more income.
It is taxable at the federal level and in most states. Some states do offer tax advantages for employers contributing to a 529