Get Smart About Education Savings by Tara Thompson Popernik, AllianceBerstein Educating your children or grandchildren isn’t just an expense: The Internal Revenue Service sees it as a gift. Fortunately, direct tuition payments to elementary and secondary schools fall under the educational/medical (ed/med) exclusion. You can pay unlimited current tuition expenses, on behalf of one or more beneficiaries, without incurring gift tax. To get the exclusion, however, you must make the payment directly to the school. As a result of the ed/med exclusion, tuition payments do not count against your $14,000 annual exclusion or the $5.43 million lifetime applicable exclusion amount (two ways that individuals can give money to other individuals without paying gift tax). Payments for room and board and other nontuition expenses do not qualify for the ed/med exclusion. There is also a tax-advantaged way to... More