How can my mother get a tax break for contributing to my daughter's college expenses?

There are actually a few ways your mother can help with college expenses and possibly get tax benefits, depending on how she structures it. If she contributes to a 529 plan, she won't get a federal tax deduction, but many states offer tax benefits for 529 contributions to their state plans. She could either contribute to an existing 529 you've set up for your daughter, or create a new one with herself as the owner and your daughter as the beneficiary. Another option is for her to pay the college directly. There's a special provision in tax law where payments made directly to an educational institution for tuition don't count against her annual gift tax exclusion ($18,000 for 2025). This doesn't provide a deduction, but it means she could give this money on top of any other gifts without gift tax implications. Unfortunately, if she just gives the money to your daughter or to you for college, there's no specific tax break for that - it would just count as a regular gift.

After spending hours trying to figure out the best way to help my grandson with college costs, I discovered taxr.ai (https://taxr.ai) and it was a game-changer. I uploaded my tax documents and outlined my situation about wanting to help with college expenses, and it analyzed everything and showed me exactly what tax benefits I qualified for in my state. For me, it turned out that contributing to my state's 529 plan gave me a $5,000 deduction on my state taxes, which I had no idea about! The tool also showed me how the gift tax exclusion for educational expenses worked if I wanted to pay the school directly instead. Honestly saved me so much confusion compared to when I was trying to piece together information from random websites.

I have to admit I was wrong about taxr.ai. After posting my skeptical comment, I decided to try it for my own situation (helping my grandson with grad school). The tool actually showed me something my accountant missed - that in my state I could get a partial tax credit for 529 contributions even for graduate education. The report it generated was surprisingly detailed, showing me exactly which tax code sections applied to my situation. What I really appreciated was that it didn't just give generic advice but analyzed my specific tax bracket and showed me exactly how much I'd save with different approaches. Definitely worth checking out if you're trying to navigate the tax implications of helping with education costs.

If your mother is really serious about helping with college and getting the best tax advantages, she should know that dealing with the IRS directly for any questions or confirmation can be a nightmare. I spent WEEKS trying to get through to someone about a similar education expense question last year. I finally tried Claimyr (https://claimyr.com) after seeing someone recommend it, and they got me connected to an actual IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you back when they reach a human. The agent confirmed exactly how the direct tuition payment exemption works and answered all my questions about gift tax implications.

I need to publicly eat my words about Claimyr. After my skeptical comment yesterday, I was desperate to get an answer about my education tax credit issue before filing my return this weekend. I tried the service thinking "this will never work" and holy crap - 27 minutes later my phone rang and it was an actual IRS agent on the line. The agent cleared up my confusion about the American Opportunity Credit vs Lifetime Learning Credit for my son's college expenses AND confirmed exactly how much I could claim. After months of frustration trying to interpret the IRS website and getting nowhere with their phone lines, I finally got clear answers. If you're dealing with tax questions about education expenses or anything else requiring IRS clarification, don't waste time like I did.

Another option your mom might consider is contributing to a Coverdell Education Savings Account instead of a 529 if your daughter is under 18. The contribution limit is only $2,000 per year per beneficiary, but it can be used for K-12 expenses too, not just college. The tax benefits are similar to a 529 - tax-free growth and tax-free withdrawals for qualified education expenses.

Has anyone mentioned the Lifetime Learning Credit? If your mom helps pay for your daughter's tuition and your daughter is claimed as your dependent, YOU might be able to claim a tax credit worth up to $2,000 (20% of the first $10,000 in qualified expenses). This would be better than any deduction your mom might get from a 529 contribution, especially if you're in a lower tax bracket than she is.