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  1. #1
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    Mar 2007
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    Does paying off a student loan constitute a gift for income tax purposes?

    What is the name of your state? Michigan

    My boyfriend has offered to pay $20,000 toward my student loan debt, which totals $25,000. If he pays directly to the lender, would this count as a gift and require income tax to be paid on it?What is the name of your state?


  2. #2
    Join Date
    May 2004
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    71,881
    Quote Originally Posted by rygwelskin View Post
    What is the name of your state? Michigan

    My boyfriend has offered to pay $20,000 toward my student loan debt, which totals $25,000. If he pays directly to the lender, would this count as a gift and require income tax to be paid on it?What is the name of your state?
    Yes, it would count as a gift. No there would be no income tax consequences. He will have to file a gift tax return, but there will be no tax due unless he has exceeded his lifetime exclusion of 1 million for gifting.


  3. #3
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    Mar 2007
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    3

    Gift tax for $20,000 student loan payment?

    Quote Originally Posted by LdiJ View Post
    Yes, it would count as a gift. No there would be no income tax consequences. He will have to file a gift tax return, but there will be no tax due unless he has exceeded his lifetime exclusion of 1 million for gifting.
    Thanks for your response, but just to clarify? Does the $12,000 annual limit apply in this case? I have been told that any gift larger than $12,000 requires tax paid by the giver.


  4. #4
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    Sep 2004
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    Quote Originally Posted by rygwelskin View Post
    Does the $12,000 annual limit apply in this case?
    Yes.

    I have been told that any gift larger than $12,000 requires tax paid by the giver.
    You have been told incorrectly. The amount of gifts to any one individual greater than $12.000 in any one year is reportable and requires filing of a gift tax return by the giver. However, as LDiJ said, there is a credit for the tax that would be due on first $1M of lifetime reportable gifts.


  5. #5
    Join Date
    Mar 2007
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    Gift tax.

    Thanks very much for clarifying this for me. You've been most helpful.


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