<prompt> Human: Hi, to make a long story short my parents have come into some money and are very generously offering to pay off my entire student loan debt about 80,000.My understanding is that if they were to simply gift me that amount of money I would be liable for federal and possibly state taxes on it. Does that still apply if they are paying off debt I owe they are not cosigners on the loans, theyre solely in my name as well? In other words, the money would never be in my hands, they would just send a check to the student loan company -- is it still considered a taxable gift to me? If so, is there any way to get around it, like setting up a 529 account?Thanks. Im in the USA if it wasnt obvious -- since this is an IRS question Im not going to mention my state  <response>: My understanding is that if they were to simply gift me that amount of money I would be liable for federal and possibly state taxes on it.You understanding is completely wrong in almost every way.The recipient of the gift NEVER pays taxes on it. The giver of the gift does owe taxes. However, it hits against lifetime inheritance tax limits and there is an exemption of 5.45M. The gift would hit against your parents lifetime inheritance number and they wouldnt owe any taxes on it, but they would have to report the gift to the IRS.Also, if the gift amount is less than 14k in a single year, they dont even have to report it to the IRS. Your dad could give you 14k and your mother could give you 14k this year and they wouldnt have to report anything. Then they could do the same next year.Do you think your parents would ever have 5M that they would give out in their will? If not dont even worry about it, just have them gift you the money and when they file taxes make sure they report the gift, but they wont owe anything on it. 