Paying off children's student loans

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What are the tax ramifications of paying off some of a dependent child's student loans? Is it a gift? Do they have to declare it as income? Etc.

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Will you be my parent?
I think it is income since it is for a debt they owe.

It would be a gift.

If in doubt, give them the money and have them pay off loan with it so def a gift.

Give them the limit for the gift tax exclusion each year, until the loans are paid off. It may be cheaper to pay interest on the remaining loan balance than it is to pay tax on a lump sum gift.

For married couples the limit under the gift splitting rule is $24000 (year 2008).

RedCelicaGT said: Give them the limit for the gift tax exclusion each year, until the loans are paid off. It may be cheaper to pay interest on the remaining loan balance than it is to pay tax on a lump sum gift.

For married couples the limit under the gift splitting rule is $24000 (year 2008).

And if your child is married, you can give that much to the child's spouse as well (who can then give it to your child with no gift tax worries).

jdmetz said: RedCelicaGT said: Give them the limit for the gift tax exclusion each year, until the loans are paid off. It may be cheaper to pay interest on the remaining loan balance than it is to pay tax on a lump sum gift.

For married couples the limit under the gift splitting rule is $24000 (year 2008).

And if your child is married, you can give that much to the child's spouse as well (who can then give it to your child with no gift tax worries).
Or we get another FW Thread called 'My Spouse stole my tax shelter money!'

What can be excluded from gifts?
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

Gifts that are not more than the annual exclusion for the calendar year.
Tuition or medical expenses you pay for someone (the educational and medical exclusions).
Gifts to your spouse.
Gifts to a political organization for its use.
In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.


http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

Quick Google Query would've gotten the answer...

tazzy531 said: What can be excluded from gifts?
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

Gifts that are not more than the annual exclusion for the calendar year.
Tuition or medical expenses you pay for someone (the educational and medical exclusions).
Gifts to your spouse.
Gifts to a political organization for its use.
In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.


http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

Quick Google Query would've gotten the answer...


Tazzy,
Tuition paid directly to the school is exempt. (2nd bullet on page 6) I'm not thinking paying off the student loans is exempt.

EDIT:
Maybe OP could use the lifetime exclusion?

dookie1949 said: What are the tax ramifications of paying off some of a dependent child's student loans? Is it a gift? Do they have to declare it as income? Etc.

If your child is still your dependent, (full time student,5 months of the year, under 24) then you are claiming him/her on your return. You have the right to claim tuition expenses, and write off interest paid on the student loan. No gift return necessary.

there is article in WSJ about using loans to transfer money to children, maybe u can use that advice...its in todays Sat edition



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