Is upkeep money for a child (over 18) in college taxable as gift ??

January 8th, 2009
  • Are parents liable for gift tax when they give (or gift) their college-age kid (over 18) money to pay for rent, food, clothing, and whatever that's for their basic upkeep? I understand that when I write the tuition check directly to the university, then it is not gift-taxable under the educational exclusion. But what about other money that are for this child's upkeep while he attends school? Because of the location of this university, we are expected to give him more than $10,000 each year for the basics like rent, food, books, and winter clothing, not to mention other necessities like computer and travels. So, am I liable for gift tax when all the money I give him throughout the year totals more than $10,000? Can I reduce the "gift" by writing checks directly to the landload and such?


  • Thanks to jack_of_few_trades in enlighten me to the fact that "we" do have double the allowance for gift tax. That is a relief, for now. I guess I was cought up at the moment and could not think straight. There is this example given at the IRS website on gift tax and it just scares me. The example says that the parent who gives a 25-year-old son $25,000 is liable for gift tax on the amount over $10,000. From that reading, my imagination took off. Even though we now have a $20,000 cushion to avoid gift tax, we're not out of the woods yet. Sooner or later, "we" will have to buy him a car and that might just push the total amount we put into the upkeep of this child more than $20,000 for whenever that time comes. I would like to think that there's no limit to how much or even how long parents can support (or gift) their grown-up children for their upkeep as long as needed. But I don't want to get in trouble with any tax issues. We will be claiming this college bound child a dependent for as long as he's in college. Is that enough to avoid gift tax ??


  • You're right in thinking that the answer is related to your legal obligation of support. Please let us know what US state you live in - - that might make a difference. Richard-ga


  • Yes, Richard. We live in the state of Oklahoma. Hope this helps your research. And thanks for taking an interest to this question.


  • Hello and thank you for your question. Strictly speaking, the answer to your question is yes, upkeep money for a child (over 18) in college is taxable as gift. On the other hand you could well be the first parent ever to report such expenses, paid on behalf of a dependent child, on a gift tax return. Clearly the direct payment of tuition bills, plus $22,000 from the two of you (the former $10,000 present interest gift exclusion is now $11,000) is gift-tax free. It seems to be an informal rule that education costs, including room and board, etc., are not looked at as gifts when the parent is paying them and is claiming the child as a dependent. But you won't find that in the actual law. One indication that education payments are properly subject to gift tax is that Section 529 plan contributions do count as gifts (they do qualify as present interest gifts and one can elect to make 10-years' gifts at once, but that shows they are taxable). http://www.irs.gov/instructions/i709/ch01.html#d0e280 And Oklahoma is one of a minority of states that will not require a parent, after a divorce, to support a child beyond age 18 unless there's an agreement to that effect. "Oklahoma Title 10 Section 16 Where a child, after attaining majority, continues to serve and to be supported by the parent, neither party is entitled to compensation in the absence of an agreement therefor." http://oklegal.onenet.net/statutes.basic.html That Oklahoma law represents further evidence that the payments should properly be considered gifts. [Unless you can distinguish that statute as only applying to noncustodial parents or in a post-divorce contect.] Of course the good news is you can make $1.5 million of taxable gifts ($3 million for the two of you) before you need to pay a penny of gift tax. http://www.irs.gov/pub/irs-pdf/p950.pdf That doesn't make it a non-gift, nor does it technically mean you shouldn't report the gift on Form 709, but again, I don't think anybody really expects you to. Search terms used: post-secondary oklahoma child support education oklahoma statutes post-secondary "title 10" dependent support "gift tax" education "qualified tuition program" "form 709" instructions site:irs.gov unified credit gift 2005 site:irs.gov Thanks again for letting us help Richard-ga







    • #If you have any other info about this subject , Please add it free.#
    Your name:
    E-mail:
    Telphone:

    Your comments:


    If you have any other info about Is upkeep money for a child (over 18) in college taxable as gift ?? , Please add it free.

    Posted in freedeadaim.com | edit