Okay, I've got some state and federal aid from the FAFSA, but...

Question

I need to know someones opinion. Someone I know of has a lot of money, and they say they want to pay for my first year of college for me. After all the state aid and what not is covered, they will pay for ALL OF the tuition and fees for me. It would be a "gift" or "scholarship". The person is within my family, and to make it even more obvious, has the same last name as me. Please let me know what I should do.....I dont want the IRS to attack me.

Thanks!

Answer 1

The best way to avoid tax consequences of a relative's gift is for your relative to make the payment directly to your school. Give that person your student account number, and have them write a check, made out and sent directly to the bursar's office at your school.

These funds would not be treated as a personal asset of yours, or your parents, and the donor won't have to worry about annual gifting limits unless the amount exceeds $11,000.

Keep in mind that your financial aid was awarded based on your and your parents' ability to pay - if you have a wealthy relative or sponsor who will pick up the rest of your educational need, that's of no "interest" to the school or to the Department of Education.

Your donor should check with his/her tax advisor in order to best manage their own tax liabilities.

I hope that helped - good luck!