In some cases, parents paying an adult child's tuition may also be able to claim the child as a dependent for tax purposes and take advantage of educational tax credits like the American Opportunity Tax Credit.
However, not all students meet the IRS definition of a dependent. An adult child who files a joint tax return with a spouse, attends school part-time or earns more than the exemption amount ($3,900 for 2013) would generally not qualify as a dependent.
When giving money to a child, also keep in mind that gift and estate tax rules vary by state. "It's very important that you work with a professional within your state," Peterson says. "There are still a number of states where the estate tax exemption is still as low as $600,000, so it is important that you understand not only the federal implications but the state implications."