Private School Tuition: Contribute without Triggering Gift Tax Limits
It’s not often that you come across something that triggers one’s “why doesn’t everybody know this?”
But, I did ask myself that question after my interview with Mike Szydlowski, Woodberry Forest School, financial aid director and independent tax preparer.
I asked Mike about tax implications of grandparent, or anyone’s, gift contributions toward private school tuition and learned something completely new to me.
BF: Many families now have grandparents contributing toward a grandchild’s private school tuition. Are there any rules of which they need to be aware?
MS: Yes, a current feature of the tax code allows a grandparent (or anyone) to sidestep the $14,000 annual gift exclusion when paying tuition (tuition only, not room and board) or medical expenses for a grandchild.
The grandparent can pay the tuition directly to the school and not trigger the $14,000 exclusion amount or the need to file a gift tax return (IRS Form 709).
An important reminder: if Grandparents take advantage of this direct payment of tuition, they cannot claim a charitable deduction…they are not making a gift to the school; they are paying tuition.
Disclaimer: This is general information in reply to these questions. Each family’s situation is unique. You need to check with your tax preparer when working through these questions on your own.