This prior prior year business is messing me up in the worst way! I need help to get a grasp on how to calculate what my daughter will have to pay for colleges. I can’t figure out what our real EFC will be for her.
I have a son who will graduate college spring of 2017 and a daughter that will start college fall of 2017. (I know, I know, such poor timing for having kids!) I thought we had this all worked out and knew how to fill in FAFSA and CSS Profile and do our taxes. In fact, I have completed my taxes for this year but have not filled in the FAFSA or Profile yet. I don’t even know how to run the net price calculators now. I KNOW the information will be wrong based on the prior prior year for DD.
Once son graduates at age 22, he will no longer be our dependent for tax purposes, right? At this point, he is not planning on grad school. Our taxes show we have 2 dependents so for planning purposes for DD and running the NPCs, all the info is wrong because we will suddenly be a family of 3 right? Our tax amounts will be wrong and our exemptions will change from 4 to 3 so none of the tax information that the NPCs ask for is right. We also took the AOC so how does that figure into the whole picture?
How will colleges be able to prepare a financial aid package for dd with wrong information? Even if the schools take into account that we have one child in college in the spring and another one starting in the fall, we NEED to know what the net price will be for DD for years 2,3 and 4. It won’t help us to get a price for her fall of freshman year if the following years will be so different as to make a school unaffordable.
I don’t know how to figure it out for myself to make DD’s college list to even come up with a safety school. Even with the worksheet in hand for calculating our EFC, I don’t know how to adjust the numbers.
Please, can someone help me figure out what to do? I will be so grateful and thankful!
PS. Even if I figure all of this out and son does decide to go to grad school, then he remains our dependent but what happens with the taxes/efc then? SO CONFUSED!
The filing for the FAFSA opens on October 1, 2016.
You will fill out the FAFSA for your daughter (2017-2018 academic year) using the DRT (with this years taxes), to do your fafsa. You will still only have one in college (since son is graduating). However if you are providing more that half of his support son will still be part of your household.
The questions are straightforward and just answer them. What is your AGI in 2015? How many in your family (not on your taxes, in your current household)? How many of those will be in college in 2017? Even now you can have household members who aren’t in college, but you get to take a tax deduction for them. It will ask how much you paid in taxes in 2015. That’s the answer, not how much you would have paid had oldest child not been a dependent. That’s the purpose of the new prior prior - no more guessing, just put in the numbers you already have.
The calculators don’t ask for the number of dependents on the tax return, and never did. Many people have extras on their taxes that aren’t household members for FAFSA purposes - grandparents, children who live with another parent, adult children who aren’t in college. The only thing that really changed with using the prior, prior is that the tax number will be available to use and you won’t have to estimate. The other questions- household size, assets, state of residence, displaced worker, qualified for free lunch - all will still be answered as of the date of filing. No change.
You are doing an estimate based on how things are now. If son does decide to go to grad school, things will change and the estimate will change and when you really fill in the FAFSA you use the numbers that are correct. If you do an estimate now and then win the lottery, that estimate will change (assets). If if if…you can only use the numbers you have, and even then it is just an estimate.
The 2015 numbers will be used for 2017-18, but there is no way to know about 2018, 2019, etc. unless you know your taxes, assets, income will not change.
For what tax year? Have you looked at the tax dependency rules? Your son graduates in 2017 at age 22. There’s a good chance you will be able to claim him as a dependent for tax purposes for the 2017 tax year. If your daughter starts college in the fall of 2017, the 2017 tax return will be used to complete FAFSA for your daughter’s junior year (academic year 2019-2020). You’re probably looking at filing taxes with three exemptions instead of four for only one financial aid cycle (your daughter’s senior year).
Thank you, yes I understand that in 2017, when DD starts and DS graduates, we will still have son as a dependent having paid more than 1/2 his support for THAT tax year. I didn’t put it together that we will be still using prior prior for all years, geez. Good thing the kids are smart! I just didn’t get that not only is her freshman year the first year for prior prior but the following years will be too so now it is clear and yes, only her senior year will be impacted by the loss of the additional dependent so that is a big relief.
So if I understand correctly it goes like this:
this years tax return =son’s 2016-2017 aid
this years tax return also=daughter’s aid for 2017-2018
2016 tax return=daughter’s aid for 2018-2019 (son included as dependent, his AOC)
2017 tax return=daughter’s aid for 2019-2020 (son also included as dependent, his AOC used up/DD will start AOC)
and finally 2018 tax return will go for daughter’s aid 2020-2021, whew!
BelknapPoint your post made it so clear and easy for me to follow, thank you!
For running the net price calculators now for DD, just use the current figures and hope it works out knowing that there will be an increase for her senior year. When running the NPC, say 4 in family and one in college but I could run it with 3 in family to get an “idea” or estimate for her final year, right?
Thank you ALL again for your help. Now off to research scholarships!
That’s only one element of the tax dependency test.
If your son has used up all four years of his AOTC eligibility before tax year 2017, make sure you look at other educational tax credits and deductions that might be available for him in 2017. I suggest that you look first at the Lifetime Learning Credit.
Thank you for pointing that out. He started fall of 2013 and at that time, no one was sure if the AOC was going to be continued so we were told to use it for his freshman fall semester. In retrospect, I wish we had waiting because spring costs are always higher. Then we used it again for 2014, 2015 and then next year, his senior year we will be able to use it for his fall semester but out of luck for spring 2017.
Since DD will start fall of 2017 we will be able to use it for her and it looks as if we can use both credits, the AOC and the LLC for two different kids. I will make a note to remind myself when doing those taxes but first, DD has to get into some college!
Is this the information for the tax dependency test? https://www.irs.gov/publications/p17/ch03.html
If so, I’m sure my son would qualify since he would be a full time student until he graduates in May, right? Support doesn’t include grants and away at school doesn’t rule out living with us for more than 1/2 the year.
Thank you again for such helpful posts and good information.
No… you can only use one educational tax incentive per student per tax year. If you hadn’t done anything for fall of his freshman year, you would have been giving up one of five years of incentive eligibility. And it doesn’t matter what the costs are, since, assuming you are maxing out on the credit or deduction, costs are irrelevant. For example, with the AOTC, as long as you have $4,000 of AQEE, it doesn’t matter if the semester cost was $10,000 or $100,000; the most the credit will give you is $2,500.
Yes, the dependency test information can be found there, among other places. And yes, as long as he is a full-time student for part of at least five different calendar months out of the tax year, he is considered a student for tax purposes.