Ask the Taxgirl: Educational Expenses
Taxpayer asks: My son’s grandmother has offered to pay his tuition for graduate school this year. Can she get a tax deduction for this? Does my school have to report this as income?
Taxgirl asks: First of all, as someone with a slew of student loans for graduate school, tell your son that he’s very lucky and should run out and give his grandmother a big smooch.
Second, this is not a taxable event for your son. What his grandmother is doing is making a gift to him - and there are no income tax consequences as a result.
Third, this is a taxable event for your son’s grandmother - maybe. There is no income tax deduction for paying someone else’s tuition - this makes sense as paying your own tuition would not be deductible. However, for federal gift tax purposes, this would be a taxable gift if the amount in question is more than $12,000. Of course, depending on the size of your son’s grandmother’s estate, this may not matter to her. The easiest way to avoid what could be a complicated answer is to advise the grandmother to write the tuition check out directly to the university. Checks for educational expenses written directly to the educational institution (and not to the student) fall under an exception and are exempt from gift tax.
[And yes, like all of my questions, this was a genuine Ask the Taxgirl question. But it does sound a little like Emily Gilmore from the Gilmore Girls, no? And yes, ravenous Gilmore Girls fans, I realize that the tuition to Yale was a loan, not a gift, but Rory’s private school tuition was a gift. And yes, ravenous tax fans, I realize that Rory’s private school tuition was a gift with strings. Sheesh!]
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Tags: gift-tax, graduate-school, income, tax, tuitionRelated Stories
POSTED IN: estate & gift, individual
2 opinions for Ask the Taxgirl: Educational Expenses
Tax lawyer from FL
Oct 12, 2007 at 11:32 pm
Good answer. Grandma could also fund a 529 plan now for future years and possibly transfer the growth tax free.
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Dec 10, 2007 at 8:05 pm
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