Gift tax college tuition
What does this mean?
Under the dia gift shop agreement the donor entered into with the school, he acknowledged that there may be future tuition increases, which he or the children's parents would pay, and that the pre- paid tuition was not refundable and did not guarantee enrollment for the grandchildren.One issue, on which there appears to be no guidance, concerns institutions such as boarding schools which do not break out their fees between teaching expenses and room and board and instead charge one tuition fee.Section 170(b 1 A ii) defines an educational organization as one that normally maintains a regular faculty and curriculum and has a regularly enrolled body of students in attendance at the place where the educational activities are being carried.Can I prepay several years of tuition?For several years, the taxpayer in this ruling had paid private school tuition for two grandchildren, both for the current year and for several future years.Another day care program was found not to have educational activities as its primary purpose, where its function was more custodial in nature.Payment for individual classes or other activities would not.Exclusion Limits on Gifts, the IRS allows you to gift a certain amount of money or property to someone before the gift tax kicks.In Revenue Ruling 83-140, 1983-2.Neither parent can claim the write-off, however, if your parents file married-but-separate returns.Other providers of educational activities that have been found to qualify as educational organizations include a martial arts school, an instruction academy for yoga and a wilderness camping and survival program.
From a parents perspective, both events can be financially draining, especially if youre shouldering some of the cost of tuition or forking over a sizable amount of cash as a graduation present.
The tuition exclusion doesn't covers books, board and other expenses.
The education expense exclusion is limited to tuition.
It would be permissible to negotiate with a school or college to apply unused tuition to another child or grandchild, or toward tuition at another school, should the child or grandchild to whom the tuition was applied drop out or transfer.
What Are Payments that Qualify for the Educational Exclusion?
High-end preschools can be nearly as bad.There have been occasional proposals to legislate the heet trust out of existence by making any gifts to the trust generation-skipping transfers.The IRS ruled that the payments qualified for the exclusion under 2503(e) as long as they were not subject to refund.Navigating your way around the gift tax can be tricky and you may want to seek professional advice before you hand over the cash.Married couples also have the advantage of being able to split their gifts.Also from The Balance Team, the Balance is part of the Dotdash publishing family.She is an expert in investing, retirement and home buying topics.See IRC 2503(e 2 A).Can I pay tuition or a doctor's bill for a child or other relative by giving that person the money?Based on this ruling, payments for certain types of summer camps, such as music, art or computer camps, also might qualify.The gray area, addressed in IRS rulings, concerns nursery or pre-schools, and schools in other instructional areas.What the Gift Tax Is, the gift tax is a special tax that applies when one person transfers property or money to someone else without receiving anything in return or receiving less than the gifts full value.The heet trust attempts to avoid this result by including a named charity as a beneficiary.In the situation that was the subject of the ruling, the payments to the school would be forfeited if the grandchildren ceased to attend the school.