Are you the parent of a child headed to college in the fall? With college bills pending, you may be looking at your options for helping your child meet expenses.

Liquidating College Savings Accounts

Money that you’ve saved in a 529 plan or Coverdell Education Savings Account for your child will probably be your first source of cash, if available. Withdrawals for eligible expenses are tax free.

Selling Securities

If you plan to sell securities, consider whether you’ll come out ahead by giving the securities to your child and having your child sell them as needed. Assuming your child is at least age 18 in the year the securities are sold, any gains will be taxed at your child’s tax rate, which is likely to be lower than your own. Gift taxes won’t be an issue if you limit your annual gifts to your child to $12,000 ($24,000 for you and your spouse).

Withdrawing from an IRA

Taking money from your individual retirement account (IRA) may be another option you’re considering. As long as the withdrawals are for qualified higher education expenses, you won’t have to pay the 10% penalty tax on early withdrawals, even if you haven’t reached age 59½. However, you’ll still owe regular income taxes if your withdrawal is from a traditional IRA. In contrast, withdrawals of Roth IRA contributions are tax free, as are withdrawals of Roth account earnings if you’ve met certain tax law requirements.

Borrowing the Money