Avoiding the Gift Tax via Direct Tuition or Medical Payments

Written by Nickel - 3 Comments

This morning while exercising I was listening to the Fidelity podcast when I learned something interesting… As you may or may not know, the current gift tax exclusion (i.e., the amount that you can give to an individual recipient in a single year without triggering the gift tax) is $12,000/year.

However, direct payments of tuition or medical expenses on behalf of another person (whether or not that person is related to you) are not treated as gifts for tax purposes — and you don’t even have to file IRS From 709, which covers gifts and generation-skipping transfers. Just be sure that the payment is made directly to the school or medical provider, and not to the person receiving the benefits.

Keep in mind that payments for books, school supplies, room and board, etc. don’t fall under the exception. Also note that allowable medical expenses include anything that would otherwise qualify as a deductible medical expense.

Published on June 5th, 2007 - 3 Comments
Filed under: Taxes
email this article email this article - add to tip'd - stumble it - digg it - bookmark it

About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

Related articles...

» From the Archives (June 1st - June 7th)
» The Best of June 2007
» What is a 529 Plan?
» Erroneous Medical Bill Update
» Quarterly Taxes Due Friday, June 15th
» Money Poll #21: Gift Cards
» Gift Card Poll Results
» Tuition Bills and Indentured Servitude

Was this article useful? Please sign up to receive our content via e-mail:

You will receive only the daily updates, and can unsubscribe at anytime.

Comments (scroll down to add your own):

  1. I wonder how it applies to prepaid tuition accounts like 529’s?

    Comment by geo — Jun 5th 2007 @ 2:34 pm
  2. Good to know, I didn’t realize you could do that.

    Comment by Blaine Moore — Jun 5th 2007 @ 3:13 pm
  3. Good post.

    Comment by Wayne — Jun 6th 2007 @ 10:34 am

Leave a comment

Subscribe without commenting

Get free updates...

Articles via e-mail:

(Or get articles via Twitter)

Search this site...

Sponsors...



Great deals...

Readers’ choice...

Recent articles...

Recent comments...

  • mark fleming: good blog …………. We would like the...
  • Kevin@OutOfYourRut: Regarding the different price policies between cash and...
  • Lindsay: by the way…i also pay rent to my parents, and have a new car i...
  • Lindsay: ok, i am really dumb when it comes to this stuff.i dont even...
  • Chris: So if I understand the conversation here, at merchants where there is...
  • SavingEverything: What happens if customer makes a return? Does the retailer...
  • Chuck: I used to comment on this subject but I have become too busy helping...
  • William: m I not entitled to my opinhion? Wait until you reach 75 years of...

Most talked about...

Disclaimer...

    The terms of third-party offers referenced on this website are subject to change without notice. While we strive to maintain timely and accurate information, offer details may be out of date. Visitors should thus verify the terms of any such offers prior to participating in them. Please see our terms of service for additional details.