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Is paying the college education cost of my son considered a (taxable) gift?


Question:

I am paying for my children's (above 18 years) UK college fees as well as living expenses. Are these expenses considered as gifts? Am I or my children liable to pay any gift tax? We are all Dutch citizens now and we have no 30% ruling.

Answer:

A parent has to take care of his child. This obligation ends on the 21st birthday of the child (in case of study on the 27th birthday). Sometimes financial support is considered to be a gift, sometimes not. Where is the line?

If your child can't pay the study, then your support is in principle not considered to be a gift. Besides that you can already give € 5,277 (amount for 2015) to your child tax free each year without having to declare anything. There is an additional increased tax free gift possible of € 25,322 which can be agreed if the age of the child is between 18 and 40. If the gift is made for a study, the additional increased tax free exemption can even be € 52,752. This increased exemption applies if the study (without costs of living) costs at least € 20,000 per year. These amounts are adjusted annually. You will have to get the agreement with your child registered with a notary. In the document you can define for which study you made the donation and what the expected costs are. The gift will be transferred under the condition that the study is started within 2 years.

The donation is not tax deductible for the parent and not taxable as income for the child (at least under Dutch tax rules).

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