Dear Liz: I have been paying college tuition for my grandson: $20,000 per semester for the last three years. He has used the university’s online option to pay the tuition by transferring the money from my bank checking account. Am I entitled to a tax exemption? How should I claim it when I return my tax return?
Answer: There’s no tax exemption or other direct tax break for paying someone’s tuition. If the money went directly from your account to the school, however, you don’t need to file gift tax returns to report your generosity. The tuition gift tax exclusion allows you to pay an unlimited amount of tuition as long as it’s paid directly to a qualified educational institution. A similar exclusion exists for paying medical bills for someone else, as long as the payments go directly to the medical providers.
If the money went from your account to his and then to the school, however, you would be required to report the amounts you gave above each year’s annual gift tax exclusion amount using IRS Form 709. (The exclusion amount was $17,000 in 2023, $18,000 in $2024 and $19,000 in 2025 and 2026.) If that’s the case, contact a tax pro for help in catching up on this paperwork. You won’t owe gift taxes until the amount you give away above those annual limits exceeds your lifetime gift and estate tax exemption amount, which is $15 million in 2026.