<p>Just double checking before filing taxes. I shouldn't take the $1000 child tax credit for a younger sibling because it raises my EFC? </p>
<p>I realize it's a case of pay now on the tax return or pay later in the EFC but when I do the EFC calculators, it doesn't seem like a dollar for dollar adjustment. </p>
<p>Paying more taxes now lowers the EFC, right? </p>
<p>Thanks in advance for your replies!</p>
<p>It’s not a dollar-for-dollar adjustment. FAFSA assesses <em>at most</em> 47% of “available income”, which is the amount left after subtracting out the “income protection allowance”, FICA taxes, income tax and other things, toward your EFC.</p>
<p>What this means is that for any tax credits or deductions you take, you get less “bang for your buck”, but you do get <em>something</em> (53% at least, more if you’re at a lower income level), so it’s still ALWAYS worth taking the credits/deductions. If you’re in the 15% bracket, your deductions would now be worth at least 7.95% (53% of 15%), in the 25% tax bracket your deductions will still be worth 13.25% in savings. </p>
<p>The $1000 tax credit will cause your EFC to decrease by $470 at most. Since you save $1000 on your tax bill, you come out $530 ahead – so it’s definitely worth taking that credit.</p>
<p>Likewise with extra income - yeah, your EFC will go up, but only by <em>at most</em> 47% of the increased income. It’s still worth having that extra money!</p>
<p><em>**Of course, you need to remember that since the vast majority of schools do NOT meet full need the EFC is often an academic exercise at best and you’ll end up paying quite a bit more. </em></p>
<p>The $1000 tax credit will cause your EFC to decrease by $470 at most. Since you save $1000 on your tax bill, you come out $530 ahead – so it’s definitely worth taking that credit.</p>
<p>Exactly. If taking the tax credit increased your EFC by a 1000 or more, then that would be different, but it won’t. Besides, even if it did, you’d have to look at the potential FA pkg and merit and still determine whether you’d come out ahead. COAs are often padded so, having a little higher EFC may mean little to nothing in the end.</p>
<p>Keep in mind, though, that the OP is looking at Cal Grant eligibility, which appears very black and white. If family income exceeds X, then the family is ineligible. Given that circumstance, might there not be good reason to forego the credit if one is close to the cutoff?</p>
<p>I thought Cal Grant was by income, not tax paid or EFC. I’m not an expert and don’t know if it’s by AGI but a credit doesn’t reduce AGI, it just reduces taxes paid. Need to check the fine print I guess.</p>
<p>Thank you all! I just did the calculations with and without the tax credit. If we take the credit, our EFC goes up $442.</p>
<p>Our modified AGI is below the Cal Grant limit as long as it is true that I am supposed to use Box 1 of the w2 for income earned at work.</p>
<p>IF I am supposed to use box 5 of the W-2, I am in deep trouble because DH has state retirement in lieu of Social Security and that is where it shows up-in Box 5. We are over the Cal Grant and Blue and Gold limit by $1000 so what do I do?</p>
<p>Why do so many places on the internet say use Box 5 for the income when the directions for the FAFSA clearly say use box1?</p>
<p>Am I missing something important?</p>
<p>Never mind, I have it figured out. Thank you all once again!</p>
<p>OOPS - my post above should have read “The $1000 tax credit will cause your EFC to INCREASE by $470 at most”, not decrease. Duh.</p>
<p>I plead insufficient caffeine in my system earlier today!</p>
<p>Thank you Momcat2, I knew what you meant and it really helped. You were so close too, it went up 442 which is a lot better than paying an extra $1000 in taxes right now. Thanks again for your reply!</p>