Does paying off a student loan constitute a gift for income tax purposes?

[rygwelskin]

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?

[LdiJ]

Originally Posted by rygwelskin

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.

[rygwelskin]

Originally Posted by LdiJ

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.

[anteater]

Originally Posted by rygwelskin

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.

[rygwelskin]

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