You can pay someone else’s medical bills without owing gift tax, no matter how large they are. Payments must be made directly to the hospital, doctor, or other health care provider. If you give your daughter money to pay her hospital bill, the gift tax rules apply.
Similarly, you won’t owe gift tax if you pay another person’s tuition by writing a check directly to the school. There is no limit to this tuition exception but it doesn’t extend to books, room and board, etc. Again, you must follow the rules carefully.
Say your son is going to college this year and the tuition is $20,000. If you write a $20,000 check to your son, so he can pay the school, the gift tax exception for tuition will not apply.
The first $12,000 you give your son is sheltered by the annual gift tax exclusion but excess gifts are taxable. A $1 million lifetime gift tax exemption may help you avoid paying gift tax but these taxable gifts will reduce the estate tax exemption at your death.
