A few days ago, I had a consultation with Amy, a Dix Hills Mom, who’s son was a sophomore at Amherst College.
“I got nothing from the financial aid office last year! Did I do something wrong?”
I looked over her tax returns and other papers she had stuffed into a dog-eared folder.
“No, you didn’t do anything wrong,” I said. “Your income is too high to qualify for need-based financial aid, the only kind offered by Amherst.”
Amy and her husband own a small medical practice, making a nice living – on paper, at least.
“Do they think we’re rich because we’re doctors?” She practically shouted. “Don’t they know what it costs to live around here? Are we supposed to raid our retirement accounts?”
“No, you’re not. But you have other options that non-business owners don’t,” I explained.
“Yeah, I keep hearing that…” she sighed.
Here’s what I told her:
The tax code is full of strategies that pertain to the college years – all kinds of credits and deductions for “regular” W-2 employees and business owners alike.
But self-employed people have additional strategies that not only can lower their taxable income, but also help them qualify for more financial assistance for some of the college – and grad school – years!
Take hiring your child, for example. This is a great strategy, because you can shift income away from the parent – i.e. higher – tax bracket toward the lower, child’s tax bracket.
But did you know that employers can pay their employee’s tuition directly, up to $5,250 per year?
This has two benefits:
1. A deduction for the employer
2. A tax-free benefit to the employee (it doesn’t count as income)
3. A way to pay for tuition with Pre-tax dollars (yes, I know I said two benefits, but I just thought of the last one…)
This is one of my pet, “go-to” strategies. we combined it with two others and started crunching numbers.
The tax savings for Amy’s family: about $7,500 per year. They have three kids, so this turned out to be “real money” for someone who thought that there was no hope!
If you’re facing huge tuition payments but think there’s no hope for you, you could be wrong: schedule a free, 20 minute phone consultation and see how to pay “wholesale” for college!
Visit our main site, AndyLockwood.com for details (cut/paste that if link doesn’t work)