It’s hard keeping track of what matters when in the prior-prior year world of the FAFSA and CSS Profile. Here is a table summarizing tax year and asset dates for the next few college years:
|FAFSA/ PROFILE Income Tax Year
|Assets As Of Oct*
|AOTC Tax Year**
To summarize based on where you are in high school:
Sophomores, this year is your first FAFSA income year. This year is your base year for EFC purposes. All future years will be compared to 2020.
Juniors (and seniors), 2020 income will also count for you for FAFSA purposes, but not until your second year of college. Families of juniors should think about what retirement contributions they can make this year and what to do with student summer job earnings to remove assets from the calculation come fall.
* Assets are as of the filing date, which may be as early as October or into the following year depending on the school’s filing date.
** Remember that the AOTC can only be claimed for four tax years, so families should decide whether the fall of freshman year is better than spring of senior year for claiming. With the income limit of $160,000 (married filing joint) or $80,000 (single), some families might not be eligible every year.
Parents may find that different strategies are needed during different years. For example, a family with a student beginning college in fall of 2022 might reduce pre-tax retirement contributions this year (to increase taxes, which are deducted from income on the FAFSA and therefore reduce EFC) and then maximize contributions beginning in 2022 to reduce AGI for AOTC claiming purposes.
Who knew we’d be a week away from the end of the year at this point? Kidding of course. If you’re among the many who want a year-end to do list, here goes! Continue reading What to do now?
Perhaps the most frequently asked question we get is how to balance saving for retirement and college. And I can’t answer that in a blog post because the right way to balance depends on your specific circumstances. We have told clients to pause retirement savings to meet college years cash flow needs, we have told clients to stop funding college and focus exclusively on retirement, and everything in between. What I can do is help you to understand how retirement savings impact college. Continue reading Retirement Contributions and College
The follow-up question to the Oregon College Savings Plan tax change is: Am I better off with the 2020 tax benefit or the 2019 one? The answer, as is so often the case, is “it depends.” Continue reading OR 529 Part 2: Which is Better?
Fellow Oregonians may have received an email today from the Oregon College Savings Plan about changes in the state tax benefit beginning in 2020. These changes create some opportunities for increased tax savings over the next several years. Continue reading Changes to OR 529 Plan Tax Benefits
Divorced parents who share custody of their children often wonder who should fill out the FAFSA. And even in cases where custody is not joint, there may be questions. Continue reading FAFSA Basics: Divorced Parents
Having gone through the FAFSA formula, let’s take a look at how it works with a few scenarios that illustrate how small changes can have big impacts on EFC, or alternatively, how big changes can have small impacts. Our hypothetical family is a family of four with two children, one a high school senior and the other a high school junior. Both parents are 48. Their 2018 household income was $106,800 and they filed married filing joint in 2018. They live in Oregon. To simplify life, let’s assume that all $106,800 is earned income. Neither student has income above the student income protection allowance ($6,840), nor does either have any assets. Continue reading FAFSA Basics: An Example
I’m taking a brief break from the programming I outlined for myself a week or so ago. It’s September and that means that many people are looking seriously at college for the first time. They may be parents of seniors, parents of freshmen, parents at any point who think now is a good time to start investigating this big future step. And after a few google searches or conversations with friends or counselors, they have concluded, “This is overwhelming! Where do I begin?” Continue reading “Where Do I Begin?”
Parent income tends to be overlooked in FAFSA planning, which is unfortunate because for most families it’s the biggest piece– and one that has some real planning opportunities. Continue reading FAFSA Basics: Parent Income
It’s not unusual for different strategies to be more helpful at different points in the college savings/funding process. Retirement contributions are a perfect example. Continue reading AOTC vs EFC