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According to Section 2503 of the Internal Revenue Code of 1986, a payment made directly to an educational institution to pay for the tuition of a student does not count as a gift to the student for gift tax purposes. But when I make a payment for a student, how can I show the payment is for the tuition, not for any other fees like dorm room and dining plan? The school will just apply the payment to the entire bill, which includes tuition and all the other fees. Thanks.

  • Tuition means only related to school fees. Boarding and others aren't included in tuition. – DumbCoder Jul 19 '17 at 12:26
  • Yes @DumbCoder. I've changed the questions now. How do I show the payment is applied to tuition, not other fees like room and board? – Mas Jul 19 '17 at 12:33
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You don't have to show anything. Just make sure the amount you give doesn't exceed the amount of the tuition portion plus the max you can gift per year. For example, suppose the student's yearly breakdown is as follows:

  1. Tuition: $30,000
  2. Room, Board, & Books: $20,000

You can pay for $44,000 without having to file any paperwork. If you are married you can pay the full $50,000 without filing any paperwork since the combination of you and your spouse can gift $28,000 beyond the tuition.

Just make sure to keep all of your receipts in case you are ever audited.

  • Hi @TTT , I just saw your reply to my deleted comment--but can't see it now. Anyway, I think non-residents actually need to file gift taxes. See: ttlc.intuit.com/questions/… – Mas Jul 19 '17 at 18:23
  • @Mas - My understanding is you would have to file form 3520 if you receive more than $100K from foreign persons. I'm finding conflicting information regarding whether a Non-Resident alien as the payer should have to file a gift tax form. Might as well err on the side of caution and have her fill it out. – TTT Jul 19 '17 at 19:33
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Tuition means exactly what it says. From a Wall Street Journal article on the subject:

Two important things to keep in mind: First, tuition is the operative word in the reader's question, experts say. The grandparent's payment must be for tuition at a qualified institution–not room, not board, not books.

  • Thanks @user4556274. I've found that one too, and have changed the question. How do I show the payment is applied to tuition, not other fees like room and board? – Mas Jul 19 '17 at 12:33
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    All the IRS will care about is total tuition and total exclusion claimed, not matching particular payments to particular line items on the tuition statement. If you are paying all school fees, there is nothing to consider. If you and other family members are paying fees, then you will need to agree among yourselves how much each of you is contributing towards tuition and how much towards non-excludable fees so that you don't (for example) both claim to have paid all the tuition and none of the other fees. – user4556274 Jul 19 '17 at 12:57
  • Thanks @user4556274 . So let's say the tuition is 25k, room, board, and other fees are 10k. I pay the entire 35k. So the 25k is excluded for gift-tax purposes, and the other 10k is still within the 14k exclusion limit. Then I don't need to file any form? – Mas Jul 19 '17 at 14:05

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