Yes. The general rule for gifts is that any gift over the annual federal gift tax exclusion amount ($14,000 for individual gifts and $28,000 for joint gifts in 2016) is subject to federal gift tax and generation-skipping transfer tax (GSTT).
But an exception to this rule exists for tuition payments made directly to a qualifying educational organization to cover a student's tuition expenses. Such payments are exempt from federal gift tax and GSTT, even if they exceed the annual gift tax exclusion amount. The key is that payments must be made directly to the college. You will not qualify for the exclusion if you gift the money directly to the student with instructions to apply it to tuition. The exclusion does not cover room and board expenses, books, or supplies.
However, keep in mind that direct payments to an educational institution on behalf of a student may result in a reduction in the student's eligibility for need-based financial aid. Also, this type of gift may still be subject to state gift tax and/or GSTT. Consult a tax attorney in your state for more information.
Please be advised that this materials is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transactions(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor.
Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation. Neither AXA Equitable nor any of the data provided by AXA Equitable or its content providers, such as Broadridge Investor Communication Solutions, Inc., shall be liable for any errors or delays in the content, or for the actions taken in reliance therein. By accessing the AXA Equitable website, a user agrees to abide by the terms and conditions of the site including not redistributing the information found therein.
AXA Equitable Life Insurance Company (NY, NY). Securities are offered through AXA Advisors, LLC, NY, NY 212-314-4600 (member FINRA / SIPC). AXA Equitable and AXA Advisors are affiliated companies, do not provide legal or tax advice and are not affiliated with Broadridge Investor Communication Solutions, Inc.
© Copyright 2017 Broadridge Investor Communication Solutions, Inc. All rights reserved.
GE 119578 (10/2016)