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...we will be footing the bills for the degree, room and board, insurance, and car. Probably $50,000 all-in.

That's a fair chunk of change in a short time. This can run afoul of imputed income to your nephew kinds of things.

How? Nothing in OP's scenario produces taxable income to the nephew under any theory I've heard of.

Also, gifting him the money (your wife and you each doing so brings the annual amounts under your collective gift limits) would alleviate this, too.

It would help for OP to pay the tuition directly to the school. That is gift-tax free and doesn't count against the $13,000 annual exclusion. On top of that OP and spouse could gift $26,000 in a calendar year without incurring any gift tax responsibility other than possibly having to file a gift tax return.

Pub 950 has an overview of gift tax.

Rule Your Retirement Home Fool
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