Someone else paying tuition - does it affect us?

amother

Mon, Aug 26 2013, 1:18 am

DH's college tuition is being paid by a relative. We are a totally separate household, not dependents of anyone. Do we report this as income or what? Does it go on our tax return as anything? Do we report it and will it affect our eligibility for medicaid or food stamps? Anyone know or know where I should ask?

mosma

Mon, Aug 26 2013, 6:57 am

I think it depends how they're paying. if they're giving it as a tax deductible "donation", then the school puts it towards your tuition, you don't declare anything.
if they put your child's name on the check and they are going to put it in their taxes and money spent on your tuition, then you have to.

cookiecutter

Mon, Aug 26 2013, 9:55 am

amother wrote:

They are paying the college directly on their credit card. They will probably want to claim it as a tax deduction but I don't know how. It's not charity, it's tuition. We're talking about college, not some money laundering operation.

College and "money laundering" are not mutually exclusive. It's possible that they can claim a deduction for paying tuition for a needy relative. I agree with the posters above that it's probably gift income for your filing purposes.

m in Israel

Mon, Aug 26 2013, 9:58 am

You should speak to an accountant, but I also think it is probably under the gift category, which is exempt from taxes up to a certain amount (about $10,000 per person per year, but there are lifetime limits involved,too). But I don't know how it works if they are trying to claim some sort of tax deduction for the money -- that may change things.

amother

Mon, Aug 26 2013, 10:07 am

I am more concerned about disqualifying for medicaid and food stamps. Taxes I'm pretty sure we will be fine in any case, both because this is a gift (and will be less than 10k) and because we're in a low enough income bracket I suppose. But if it will count against our income for medicaid and food stamps then we are in trouble because our income can't cover our needs.

goodmorning

Mon, Aug 26 2013, 11:02 am

You didn't mention where you live, but here's what NY Medicaid, for example, says:

Quote:

Undergraduate educational grants, scholarships, or work-study are not considered as income. The portion of a graduate student's education grant, fellowship or scholarship used for educational purposes only is not considered as income; stipends for living expenses, housing, food, etc., are counted. Neither graduate nor undergraduate student loans are considered as income.

(http://www.health.ny.gov/health_care/family_health_plus/faq.htm#grants)

I would imagine that food stamps would work the same way, but I don't know.

Tova

Mon, Aug 26 2013, 11:15 am

amother wrote:

It's a gift - the donor has potential gift tax return requirements but it does not hit your tax return. I have never filled out an application for gov't programs so I don't know if they ask for gifts received.

cookiecutter

Mon, Aug 26 2013, 11:36 am

goodmorning wrote:

You didn't mention where you live, but here's what NY Medicaid, for example, says:

Quote:

(http://www.health.ny.gov/health_care/family_health_plus/faq.htm#grants)

I would imagine that food stamps would work the same way, but I don't know.

It is possible that it applies only to formal scholarships or grants, etc.

devo1982

Mon, Aug 26 2013, 11:03 pm

m in Israel wrote:

$14,000 from one individual to another in a given tax year, assuming both are paying taxes in the United States (we had to ask a tax attorney about this earlier this year in an effort to figure out how to pay loans off).

FranticFrummie

Mon, Aug 26 2013, 11:09 pm

amother wrote:

I was told by DHSH that any money coming in, for any reason, is considered "income" for their calculations. This includes any gift of any kind, like my grandma helping out with utilities expenses, birthday money, child support that you are entitled to, disability income, interest on investments, ANYTHING.

goodmorning

Mon, Aug 26 2013, 11:26 pm

cookiecutter wrote:

goodmorning wrote:

You didn't mention where you live, but here's what NY Medicaid, for example, says:

Quote:

(http://www.health.ny.gov/health_care/family_health_plus/faq.htm#grants)

I would imagine that food stamps would work the same way, but I don't know.

It is possible that it applies only to formal scholarships or grants, etc.

Possibly, but from the way that it is phrased, it seems more likely that they are only concerned about disposable income that can be used towards living expenses. OP doesn't even get the money; it goes straight to the college.

But I'm not a Medicaid eligibility worker and OP should probably find one to ask.

Peanut2

Mon, Aug 26 2013, 11:36 pm

I'm not an accountant and I don't know anything, but clearly this is as true (or more so) for everyone else posting, so...

AFAIK, and I know nothing, the person receiving a gift doesn't pay taxes on them. You don't have to "report" a gift you get AFAIK. Gifts over a certain amount are taxed, but the person giving them is taxed.

Paying tuition for someone else doesn't count as a gift, otherwise every parent paying tuition would get taxed for that.

More generally, I the person is paying the school directly, and you never see the money, you never even have it in your possession. Again, I know nothing, but my inclination is that in that case that money was never yours anyway, and you wouldn't have to report it anywhere.

Finally, and again, I still know nothing, I'm not sure a one time gift for tuition would count as anything like an income. If someone gave you money every month I could see having to list it, but I'm not sure about this.

Again, I know nothing.

amother

Tue, Aug 27 2013, 1:18 am

If it's not a steady income then you can say it's a gift and you can get several of these gifts without a problem although you may get audited (by social services). This happened to us but everything turned out well. You might need a letter saying it's a gift from the person paying for the tuition.

Tova

Tue, Aug 27 2013, 5:39 am

Peanut2 wrote:

The gift tax rules specifically address paying a college directly. It most certainly is a gift. You can elect, though, to use up the annual exemption for the next 5 years in one year (ie, give up to 5x the annual amount without gift/estate tax repurcussions). Gift tax is on the donor, income tax is on the recipient. Gifts are never taxable to the recipient. This includes monthly support that is not earned income.

Peanut2

Tue, Aug 27 2013, 9:16 am

Tova wrote:

Peanut2 wrote:

I googled this and it said that paying college tuition does not count as a gift. On the IRS website.

If the paying people pay the school directly, it's not any kind of income IMO. I don't see how it can be.

Tova

Tue, Aug 27 2013, 11:20 am

THANK YOU Peanut! You are right. I was totally mixing up paying an tuition to an educational institution with paying towards a child's qualified tuition account (like 529 plan). That's what the 5x annual exclusion relates to because the gov't wants to encourage these program. Thank you again; can't believe I'm rusty on this (have not been actively working in taxes for over a year); should have checked before posting.

Leahh

Tue, Aug 27 2013, 12:31 pm

If the money is never actually given to you but paid directly to the institution it should not effect any of the programs you're applying for. You should not have to report it. They generally ask for earned income and gift receipts. Gift receipts is referring to liquid assets. If someone gifts you a piece of furniture worth $10, 000 you don't report that as a gift when applying for food stamps etc. I would think this is the same. Someone is gifting your husband's education. The money is not yours and is not a liquid asset that is ever in your name.
If its given to you and the you pay the bill it may be different.