Financial Aid Tax Tips and Advice

We want to start with a disclaimer for this page. We are not CPAs or lawyers. There are caveats to just about every section of the Internal Revenue Code. If you have specific questions, you should talk to your financial advisor. If you wish to contact the IRS with a tax-related question, their toll free number is 1-800-829-1040.

Interest on Student Loans

There are many criteria for this deduction that must be met. The main one is that your AGI (adjusted gross income) be under $55,000 if you are single or under $75,000 if you are married. The other criteria are usually met with relative ease. The maximum deduction for student loan interest is $2,500.

Take Advantage of Available 529 Savings Plans

IRC Section 529 is roughly the educational equivalent of the IRA. Letting your money grow tax free is a great investment strategy. Even if it is too late for your high school senior child, this may still be an option for any younger children in the family.

Request that Grandparents Wait Until the Grandchild Graduates High School

Gifts prior to high school graduation can be held against you when filing the FAFSA.

Beware of Trust Funds

Trust funds are largely ineffective at sheltering your money from the needs assessment. They also frequently backfire as well. Proceed with caution on this front and be sure you are receiving expert and trustworthy advice before committing to this strategy.

Choose to Return to School at the Same Time as Your Children

Have you been considering a return to school? The financial aid equation generally awards more money to those families with the most members that are simultaneously in school.

Minimize Your Capital Gains

This is almost always an optimal strategy since realizing capital gains triggers taxes and reduces the investment funds that can continue to compound growth and interest. From a financial aid perspective, it will increase your AGI.

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