Also here is what google ai said:
Your logic and math are correct for the 2025 tax year. Under the scenario provided, you would not need to file Form 709. Your strategy utilizes two distinct tax provisions: the Unlimited Educational Exclusion and the Support Obligation for dependents.
Step 1: Apply the Unlimited Educational Exclusion
Under Internal Revenue Code Section 2503(e), payments made directly to a qualifying educational institution for tuition are not considered gifts. This exclusion is unlimited and does not count toward your annual gift tax limit.
- Tuition: $10,000 (Paid directly) = $0 reportable gift.
Step 2: Categorize Support for a Dependent
For a student who qualifies as your dependent, payments for "necessaries" such as food and housing are considered a fulfillment of a legal obligation of support. Because these payments are support and not "gifts," they are generally excluded from gift tax reporting entirely.
- Housing and Food: $15,000 (Support) = $0 reportable gift.
Step 3: Allocate the Scholarship to Remaining Costs
Mandatory fees (unlike tuition) do not qualify for the unlimited educational exclusion. However, your allocation of the unrestricted scholarship effectively reduces the reportable "gift" portion of the expenses to zero.
- Mandatory Fees: $5,000
- Scholarship applied to Fees: -$5,000
- Remaining reportable amount: $0
Answer:
The math holds up. Even if you chose to ignore the "support" argument and treated everything except tuition as a gift, you would still be well within the 2025 individual annual exclusion of $19,000.
Total Potential Gift = (Fees + Housing) - Scholarship
Total Potential Gift = ($5,000 + $15,000) - $5,000 = $15,000
$15,000 < $19,000
Since the total non-exempt amount ($15,000) is less than the $19,000 individual limit, no Form 709 is required.
Key Consideration: Ensure the tuition and fees are paid directly to the school rather than giving the cash to the student. If you give the cash to the student to pay the school themselves, the tuition exclusion is lost, and the entire amount counts against your annual $19,000 limit.
