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  • I understand that there is a $16,000 limit on gifts to each child, grandchild, etc. by each parent each year.
  • I understand that if a child or grandchild is attending college, paying their tuition does not count as a gift.

First, have I got these two points correct? Are there additional conditions on the second point?

Second, suppose I pay a child's medical or home maintenance bill directly? Is that considered subject to the annual limit?

Third, I understand from another post on this exchange that if my annual giving exceeds $16,000, then the excess is subtracted from my allowed threshold for estate taxes. Is that correct?

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First, have I got these two points correct? Are there additional conditions on the second point?

Yes, there is an important condition: tuition must be paid directly to the institution. I.e.: you don't give a check to your child and say "use this money to pay tuition", you give the check directly to the bursar.

For the first point - there's also "Generation-skipping tax" when dealing with, for example, grandchildren. This is to account for a grandparent giving gifts directly to grandchildren, skipping a generation for gift/estate tax purposes.

Second, suppose I pay a child's medical or home maintenance bill directly? Is that considered subject to the annual limit?

Similarly with medical expenses, which are also exempt if paid directly. Home maintenance or other living expenses, on the other hand, are not exempt.

Third, I understand from another post on this exchange that if my annual giving exceeds $16,000, then the excess is subtracted from my allowed threshold for estate taxes. Is that correct?

No, not the excess. All of it.

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  • The GSST is still only applied to gifts that would otherwise be subject to a gift tax, though, right?
    – chepner
    Feb 22, 2022 at 21:23
  • Yes, if it's below the 16k exemption then no tax applies, similarly if it's a direct payment of educational or medical expenses.
    – littleadv
    Feb 22, 2022 at 21:23
  • Perhaps you could add that the "subtracted from my allowed threshold for estate taxes" is not automatic; the OP needs to file a separate gift tax return (Form 709, not filed as an attachment to Form 1040) claiming that he has given more than $16K but does not owe any gift tax because he wants it counted against his combined lifetime gift and estate tax exclusion (which effectively reduces the CLGET exclusion). Future gifts exceeding $16K can be claimed similarly, but will need the data from previously filed Forms 709, and so copies of Form 709 should be kept forever, and not discarded
    – Dilip Sarwate
    Feb 23, 2022 at 16:10
  • ... after three or seven or nine years, as with tax returns. The executor of the OP's estate will need all these documents for filing the final estate tax return.
    – Dilip Sarwate
    Feb 23, 2022 at 16:13

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