When it comes to sending your kids to college, expenses are extremely high. Thanks to recent changes, parents of sophomores need to act before the next tax year to receive college financial aid.
Gaining financial aid can be a complex task in the same way as gaining optimum tax deductions can be. So, it is wise to ensure that tax experts understand the financial aid formulas - this is even truer as many steps to gain aid are opposite to cutting taxes.
Kalman Chany, founder and president of Campus Consultants, suggests using an "expected family contribution" calculator first. Once you have an idea of what you'll need to pay, you can choose which strategies to take. It's worth trying to move any income due in the next tax year into the rest of 2016, because colleges will look at the income you receive during your children's junior and senior years at high school. The higher your income in these years, the less aid you are likely to receive, even if that income is from capital gains.
Another area to watch is investments. If you plan to sell mutual funds, bonds or stocks in 2017, it may be wise to sell them before the end of this year instead, while your children are sophomores. Similarly, filling up IRA and 401(k)s while kids are sophomores is a good idea. Doing this during their college years, however, reduces the taxes you pay and makes it look as if you can afford more education fees.
Seeking advice on potential financial aid and taxes is essential. However, if your kids are currently in their sophomore year, you should act fast to cut future college costs.
Find out quickly at what rate you can refinance your student loan.