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wade moore
07-21-2011, 08:25 AM
Wasn't sure how to title this without it being a mile long..

Anyway, here's the scenario I need help on.

My wife just recently started a doctoral program. My in-laws have generously offered to pay for the cost of schooling. We hope to pay them back, but it's not specifically a loan.

My concern is what the tax implications are.

We made the first set of payments by them cutting us a check, us depositing it, and then paying the school directly. That amount is just a bit under the gift giving limit that I've found online ($13k is what I see online).

The next payment is coming due, which would put us over that $13k limit. I thought I'd heard that you can pay for schooling for an adult child and not only not take a tax hit, but be able to claim it on your taxes. However, I have been unable to confirm this in google searches.

Anyone have some knowledge or experience in this area?
Suburban Rhythm
07-21-2011, 11:00 AM
You can receive up to $52K a year.

MIL and FIL each can gift $13K to both you and your wife.

Pub 950 includes information re: tuition exclusion

http://www.irs.gov/pub/irs-pdf/p950.pdf

Example 2.
You pay the $15,000 college tuition of your friend directly to his college. Because the paymentqualifies for the educational exclusion, the gift is not a taxable gift.
knolysis
07-21-2011, 11:12 AM
According to this: http://www.irs.gov/businesses/small/article/0,,id=108139,00.html Tuition the donor pays is excluded from being considered a gift. It would appear that as long as the amounts received by you correspond with tuition amounts paid by you, nobody owes any tax.
RPI-Fan
07-21-2011, 09:52 PM
I am not a lawyer and this is not legal advice.

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Whatever you come up with, you or your accountant (especially if you receive the money as a gift) might want to research the Lifetime Learning Credit, which depending on your income level and amount of tuition, can be a credit worth up to $2,000 per year.
wade moore
07-22-2011, 07:07 AM
According to this: http://www.irs.gov/businesses/small/article/0,,id=108139,00.html Tuition the donor pays is excluded from being considered a gift. It would appear that as long as the amounts received by you correspond with tuition amounts paid by you, nobody owes any tax.
Awesome, thanks guys. Exactly what I was looking for.


I am not a lawyer and this is not legal advice.

-----------

Whatever you come up with, you or your accountant (especially if you receive the money as a gift) might want to research the Lifetime Learning Credit, which depending on your income level and amount of tuition, can be a credit worth up to $2,000 per year.
I do our taxes, so I'll look into this - thanks!