Helping Adult Children Without Risking Your Own Retirement

Tax-Smart Ways to Help Your Adult Children Without Hurting Your Retirement

If you are looking for ways to support an adult child, the good news is that the tax code offers several tools that can make giving more efficient, so more of what you give reaches your child, and less is unnecessarily complicated at tax time. Understanding these tools can also help you give within limits that keep your own retirement plan intact.

How Much Can I Give My Adult Child Without Paying Gift Tax?

For 2026, the IRS annual gift tax exclusion is $19,000 per recipient.¹ A married couple who elects to split gifts can give $38,000 to one recipient in a single year without needing to file a gift tax return. Gifts above that threshold generally do not trigger tax owed right away, since they draw down a lifetime exemption that is $15 million per individual for 2026, but they do typically require filing IRS Form 709.¹

This annual exclusion resets every year and applies per recipient, so a couple with two children could give up to $76,000 combined in a single year without any reporting requirement.

Two Categories of Gifts That Do Not Count Against the Exclusion

Beyond the annual exclusion, the IRS allows unlimited gift-tax-free payments in two specific categories, as long as the payment is made directly to the provider rather than to your child.

Tuition paid directly to an educational institution. This covers tuition only, not room, board, or books.

Medical expenses paid directly to a provider. This can include health insurance premiums or medical bills paid on your child's behalf.

Because these payments go directly to the institution or provider, they do not use any of your annual exclusion or lifetime exemption.

Can I Use Leftover 529 Funds for Something Other Than College?

Maybe your child  received a scholarship, chose a lower-cost school, or decided not to attend college at all. Under Section 126 of the SECURE 2.0 Act, families may roll over up to $35,000 over a beneficiary's lifetime from a 529 plan into a Roth IRA owned by that same beneficiary.²

A few conditions apply. The 529 account must have been open for at least 15 years. Funds contributed within the last five years are not eligible for rollover. The rollover amount in any given year is capped at that year's Roth IRA contribution limit, which is $7,500 for 2026 for those under 50.² The beneficiary must also have earned income at least equal to the amount rolled over that year. Because the money must reach the $35,000 cap gradually, families typically need at least five years to complete the full rollover.²

This provision does not solve every situation, but it is a meaningful option for a 529 that no longer serves its original purpose.

Putting It Together

A few of the most common tax-aware approaches families use:

1. Gifting up to the annual exclusion each year rather than a single large lump sum

2. Paying tuition or medical bills directly to the provider

3. Reviewing whether a 529-to-Roth rollover makes sense for unused education savings

4. Coordinating gifts with a broader estate plan rather than treating each gift as a one-off decision

These strategies work best when reviewed alongside your retirement income plan and your Social Security timing decisions, since gifting decisions rarely exist in isolation from the rest of your plan.

If you would like help thinking through tax-efficient ways to support your family without compromising your retirement, schedule an intro call.

MPM Wealth Advisors is a Registered Investment Adviser. Fee-based. This article is educational and general in nature and does not constitute personalized tax, legal, or financial advice. Please consult a qualified tax or legal professional regarding your individual circumstances.