Willl $25,000 lump sum to mom to repay college be subjectable to gift tax?

Question

I'm about to receive a small inheritance of about $25,000 from an aunt who recently passed away. From what I understand the taxes on that have already been paid via the estate. However, I wish to give my mother the check for $25,000 because she paid for the cost of my college.

Obviously college cost me a lot more than $25,000 but we do not have an official contract written up since we're family. Will giving her that money be subjectible to a gift tax or is there a way around this since its to reimburse her for the cost of my college tuition?

I realize anything more than $11,000 can be taxed, but I also realize that tuition is something that is exempt to this so I'm not sure how to go about this.

Thanks for your help in advance.

If they check to see where the payments for my college came from they will see that they came from her bank account, so hopefully this will be all the evidence they need.

I had read that the maximum allowable tax exempt gift was raised to $11,000 in 1998 and will be raised to $12,000 in the coming years according to inflation.

Answer 1

Unless you had a formal loan agreement with you mother, the money you give her is a gift. However, you really have no tax problem giving her the money.

It is a common misconception that any gift over $11,000 is taxed. This is not true.

Gift and estate taxes go together. There is a lifetime exclusion currently of $1 million dollars. When you give a gift over $12,000 (this is the current amount, not $11,000) to any individual in one year, you have to file Form 709. This is to allow the IRS to keep a record of your lifetime gifts, which are subtracted from your lifetime exclusion.

Any gifts to an individual under $12,000 in one year are not counted for purposes of the gift and estate tax, and there is no reporting requirement. If you want, give your mother the money over more than one year, and you will have no reporting requirement.

If you give her the entire amount in one year, file Form 709, but no tax will be paid.

Answer 2

If your parents are still together, just give $12,000 to mom & $12,000 to dad & the remaining $1000 next year.

Or just have your mom give you a rock and give her a check for $25,000 and say that she sold you a $25k rock. I mean, alot of people when they buy a car from a family member report the sale of the car as $1 so this is really no different.

Either way, I'm not advocating the whole $25k rock sale but the IRS doesn't go through bank records seeing how much you gave your mom this year. If you just wrote her a check for $25,000 and she cashed it, the government really has no way of knowing of the gift anyways. Though personally instead of writing 1 big check out, I'd pay in installments as banks keep records of checks issued exceeding a certain dollar amount (which I cannot recall).

Answer 3

The gift exemption amount is $12,000 and since there was no consideration at the time of the gift from your mother there was not contract and you can not repay her with a single payment without tax liabilities.
You are way to young to waste exemptions amounts so there may be several ways around this. 1. if your parents are married you can give each of them $12,000 2. if you are married and your wife agrees to gift split you each can give your mother $12,000.

The other $1000 can be used to pay an accountant or attorney to file the correct paperwork.

Answer 4

The amount you can give in both 2006 and 2007 is $12,000 per year... not $10,000... not $11,000.

A gift, according to federal definition, is a transfer of property for less than its full value. It could be argued that you are not "gifting" the money to your mother but that you are "reimbursing her for the value of the education that she provided." Your desire to reimburse her need not be drafted in a contract. The fact is she GAVE you an education... and you are attempting to pay her back.

Even if that argument were to fail (and I don't believe that it would) during your lifetime you may exceed the annual exclusion by $1,000,000 and still not incur a gift tax. In other words, even if the full $25,000 were considered a gift that would reduce your lifetime exclusion by $13,000 ($25,000 - $12,000)... you still would have a $987,000 lifetime exclusion left. (This lifetime exclusion is also used to reduce your taxable estate upon death. If you have a large estate then instead of being able to exclude the first $1,000,000 in arriving at a taxable value for the estate you would only be able to exclude $987,000.)

If the fact that "it might" be considered a gift causes you to loose sleep then divide the payments up over 2 years. Give her $12,000 this year and $13,000 next year. That way you are only using $1,000 of your lifetime exclusion.

Answer 5

it incredibly isn't any longer a cutting-edge. it is elementary repayment. it is going to likely be taxed the comparable as your wages once you record your tax return. besides the fact that, the taxes withheld would be bigger. there is not any thank you to dodge this. As you're in TX, the withholding could desire to be 30.sixty 5%. So, you may desire to receive tremendously much $seven hundred.

Answer 6

You have a lucky mom. Endorse the check over to her and quit worrying. As it is for repayment of a loan it is not taxable to her.

Answer 7

If u had a contact it woud have been easier....anyone can give anyone the 10,000$ so can u give her 10k, then next year 10k? or give it to her in smaller amounts so that her bank deposits dont raise red flags....nice to see someone paying a parent back....didnt i loan you some money ;)

Answer 8

it is 10,000. If you write on the check repayment of college loan it should be ok.
Can she prove that she paid for college?