Pay for College Like a Pro: Taxes and the FAFSA
If your child is a sophomore in high school right now, this year is super important for your college funding plan!
To be eligible for financial aid (grants & student loans) for college your child will need to submit your tax return as part of their FAFSA application when applying to colleges in their senior year. The FAFSA uses the Prior-Prior Year income to determine eligibility. So…if your child is a sophomore in high school right now…2024 is the tax year that will be used for financial aid eligibility.
The good news is you still have 9 months (plenty of time!) left in the tax year to make smart moves if you hope to improve your eligibility for financial aid. As you file 2023 taxes, take a moment to think about what you can do to optimize your 2024 tax year especially if you have a child in their sophomore year in high school. In general, you want to take advantage of everything available to you to reduce your income (Do’s) and avoid anything that will increase your income for the year (Don’ts). Below are some ideas but be sure that any adjustments you make are in coordination with your overall financial plan and are the right moves for your family.
| Do’s | Don’ts |
| Increase pre-tax retirement plan contributions if you can. | Realize capital gains from the sale of a home or other investments if you can. |
| Take advantage of other pre-tax employee benefits if it makes sense for your family (HSA, FSA, etc.). | Exercise stock options if possible. |
| Sell bad investments that allow you to have a loss against your income. | Withdraw money from your retirement plan. |
| Delay bonus if possible. |
Paying for college is a major financial goal for you and your family. If you are 0-5 years away from your child starting college, paying for your child’s college is quickly becoming a reality. Build a timeline as your child enters high school so you don’t miss any deadlines to put you in the best position to lower your overall college costs. Now is the time to make a plan that ensures college costs are affordable, financial aid is maximized and use of your cash flow, savings and investments is optimized.
My son Romas is a Senior at UCSB this year, I am sharing this picture of him on decision day when he decided to go there 4 years ago! Our college journey is coming to an end soon, but I have so much to share from my personal experience and professional knowledge to help you make smart decisions on your family’s college journey. It is never too early or late to have a plan!
