Paying for a grandchild's education

Every individual can give any other individual $14,000 each year without the amount counting against lifetime gift limitations. But if a grandparent, for example, is inclined to be extra-generous and pay for a grandchild's school or college tuition directly to the educational institution, the amount is not counted against the $14,000 limit. Remember, though, payments for books, room and board and other costs will be treated as gifts and will be limited to $14,000 and count against the annual gift tax exclusion.