Exceeding IRS gift limits for adult dependent

[HarriedParent]

My 40 year old stepdaughter has no assets and no income. We are her entire support, and give her the maximum $12,000 each, each year to live on (total $24,000). We declare her as an adult dependent, and take the exemption.

She has her own medical insurance, but that never covers all the bills. If we are ever obligated to pay these for her, does that push us over the IRS gift limit? If so, what penalty is there to us or her? What is the penalty if we just increase her support (gift)?

 

[Michael Wechsler]

My 40 year old stepdaughter has no assets and no income. We are her entire support, and give her the maximum $12,000 each, each year to live on (total $24,000). We declare her as an adult dependent, and take the exemption.

She has her own medical insurance, but that never covers all the bills. If we are ever obligated to pay these for her, does that push us over the IRS gift limit? If so, what penalty is there to us or her? What is the penalty if we just increase her support (gift)?

Technically this would seem to be a gift although I'm not a tax specialist. Paying the debt of another is a gift if there is no repayment. Tax specialists can usually give you the best vehicles to provide the most and avoid the challenges of taxes, such as exceeding the annual gift tax limit. There are vehicles such as trusts which may serve some of your purposes better.

 

[dwpgh]

if you look on the IRS website, I think you will find that paying for another person's medical insurance or medical expenses as well as paying for education expenses is not considered a gift. Go to IRS.gov and search under gift tax.