Like a credit card, a line of credit allows homeowners to borrow up to the approved limit with the balance repaid in flexible monthly payments. The benefit of using a second mortgage or home equity line of credit over consumer debt is the tax-deductible nature of interest payments. Specifically, interest paid on debt for a qualified residence is deductible on your personal income tax return up to the statutory limits. Being secured by real estate, the interest rate charged on these loans is also comparatively low. A gift is a transfer of property by an individual in exchange for less than full and adequate consideration.
Gift tax is paid by the donor and applies to all completed lifetime gifts.
There are several tax breaks available, which, if used properly can help fund college costs without the imposition of gift tax. In addition to the annual exclusion, a transfer directly to an educational institution for payment of tuition is not subject to gift tax. The amount of financial aid a student receives is determined by the need of the family. Through a complicated formula, the family s income and assets are reviewed and a reasonable contribution is determined. If the contribution amount is less than the cost of education, the student is eligible for need based aid.