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Gift Taxes and Paying for College

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Gifts to a Uniform Transfer to Minors Account (UTMA) or the older Uniform Gifts to Minors Act (UGMA; now available just in South Carolina) qualify for the federal gift tax annual exclusion. In 2016, the exclusion amount is $14,000 per recipient or $28,000 per recipient if a married couple splits the gift.

This series on options to tax-efficiently pay for college expenses assumes that a student’s parents are not required to pay for their child’s educational expenses beyond age 18. However, in states where parents are obligated beyond age 18, the parent’s payments will not be subject to federal gift tax, even if they do not fall under the exemptions described.