College board Net Price Calculator

Paying for College
1

Hello, I am in process of determining Net Price for my daughter’s education at Georgetown for undergrad education. I looked at

https://finaid.georgetown.edu/net-price-calc

And have question regarding how to report following:

  1. How much did your parents earn in wages, salaries, and tips in the most recent tax year?
  2. How much did parent 1 earn from work?
    Parent 2 has 0 income.
  3. How much did your parents receive in other tax credits and benefits? See Help (?) for a complete list of items to include.

For example, if Parent 1 made $100,000 in salaries and plan to invest $8000 out of that in Traditional IRA, do I need to report following?

  1. $100,000
  2. $100,000
  3. $8,000 ?
    With above numbers, it seems total eligible income is being calculated as $108,000 instead of $100,000. This doesn’t seem right.

Or should this be

  1. $92,000
  2. $92,000
  3. $8,000 ?
    This does seems to calculate total eligible income as $100,000 correctly. But seems to contradict with “Help” information that is reported on that web page.

Can you please respond as soon as possible?

Hope someone can answer, Thanks for your help.

2

Unfortunately, it is how FA awards are calculated.
Any $$ that is intended or is actually put in an IRA’, is "added back " to total income before deductions, for their FA calculations. They dont care if you have to save for retirement.
Its a bitch. Welcome to the world of College Financial Aid …

3

Thank you so much menloparkmom for your response! The issue is total income is only $100,000 in this case and out of that $8,000 is being invested in Traditional IRA. In case 1 above, even though $8,000 is part of $100,000, $8,000 is again being added to that and $108,000 is being used to determine EFC. Does this sound logical? Or should it be as listed in case 2 above? Thanks.

4

It seems if we put money in Traditional IRA, eligible income for EFC is “Income before IRA Deduction” ($100,000 in above case) + Traditional IRA distribution. So IRA is being calculated twice. Should it be that way? If so, it may be better in invest in Roth IRA since that does not go in other tax credits and benefits. Would appreciate further clarification.

5

The amount that was contributed to a traditional IRA and claimed as a tax deduction does not get reported under the question “How much did your parents receive in other tax credits and benefits?” It gets reported under the question “How much were your parents’ total income adjustments?”

Edited to add: this $8,000 contribution to a traditional IRA is either going to two IRAs, one for each spouse, or it’s being divided up between two different contribution years, right (or maybe both)? Because the maximum IRA contribution for one year for one person is $6,500.

6

has your DD already been accepted? If so-
did you not run the NPC before she applied?
At this point you should wait to see what the FA office actually offers.

If NOT then yes # 2

re this statement" If so, it may be better in invest in Roth IRA since that does not go in other tax credits and benefits. "
Georgetown states:
"annual contributions are considered untaxed income and must be reported; they are discretionary payments that reflect your ability to pay for college. "

so regardless of whether you put the $$ in a Roth or an IRA, you will have to report it.

https://finaid.georgetown.edu/faqs#IRA_plan

7

If your daughter has been acceoted at Georgetown, just patiently wait for her financial aid award to come. Then you will have your answer about the cost.

If your daughter is a junior and is thinking about applying to Georgetown…the net price calculator is currently set for students entering college fall 2016. It could change between now and when your daughter applies.

8

Thank you BelknapPoint! My bad. I guess Traditional IRA goes in

“How much did your parents contribute to non-taxable retirement plans and/or receive in untaxed income and benefits, such as child support for the most recent tax year? See Help (?) for a complete list of items to include.”

?

And putting Traditional IRA in that column also makes eligible income for EFC to double count amount of traditional - for total income as $108,000 in above case. Anything else that I am doing wrong?

Thanks

Here is the help from that page:

How much were your parents’ total income adjustments? (Not their income or Adjusted Gross Income (AGI).)
These adjustments are reported on your parents’ tax return and may include moving expenses, student loan interest deductions, and tuition and fee deductions. They are found on IRS Form 1040, line 36 or IRS Form 1040A, line 20. If your parents did not file a 1040 or 1040A or there were no adjustments to income, enter “0” (zero).

Although adjustments to income are subtracted from your parents’ income on their tax return, they should be reported here as a positive number.

How much did your parents contribute to non-taxable retirement plans and/or receive in untaxed income and benefits, such as child support for the most recent tax year? See Help (?) for a complete list of items to include.
The answer to this question is the total of the following items made or received during the most recent tax year:
Deductible IRA and/or Keogh payments made (IRS Form 1040, lines 28 and 32 or 1040A, line 17)
Payments made to tax-deferred pension plans
Child support received for all children (not amounts paid)
Untaxed portions of IRA distributions or pensions, excluding “rollovers” received (IRS Form 1040, lines 15a minus 15b and lines 16a minus 16b or 1040A, lines 11a minus 11b and lines 12a minus 12b)
Tax-exempt interest income received (IRS Form 1040, line 8b or 1040A, line 8b)
Health savings account (HSA) deduction (IRS Form 1040 line 25)
Housing, food, and other living allowances received, excluding on-base housing or basic military housing allowances
Veterans noneducation benefits such as Disability, Death pension, or DIC and VA Educational Work-Study allowances.
All other untaxed income not reported elsewhere in this calculator.

If no untaxed income or benefits were received, enter “0” (zero).

9

When will your daughter start college?

10

Thanks thumper1. She is already in college - 1st year. I generally put money in Roth IRA and have not faced this situation. Was considering Tradition IRA for this year and looking at NPC, it seems they double calculate Traditional IRA in income.

11

Well…did you do your FAFSA for this year? Your Profile? How much different than last year is this year?

Also…the net price calculators are really set up for incoming freshmen, not returning students.

Im not sure what you mean by the IRA counting twice. No it doesn’t. @BelknapPoint is probably better at explaining this…but it’s not included in your wages…but it is included elsewhere. So…just once.

12

Wouldnt it be an adjusment to income? Those get deducted from your income and then iras get added back in as a non taxable retirement account.

That should work for someone who is self employed (where there are all sorts of adjustments in taxes that self employed pay, not sure if it will works for a W2 person doing a traditional ira

It is a good question, I have always been putting the full amount including the 401k amount in the calculator, not sure if that is correct but I doubt it will be double counted, there has to be a mechanism for not doing that.

13

Ok…putting together all the information and in particular what BelknapPoint wrote, I think Traditional IRA goes in

How much were your parents’ total income adjustments? (Not their income or Adjusted Gross Income (AGI).)

as well as

How much did your parents contribute to non-taxable retirement plans and/or receive in untaxed income and benefits, such as child support for the most recent tax year? See Help (?) for a complete list of items to include.

And then numbers look better and make sense.

Thank you everyone for your help!

So total wages, salaries in “How much did your parents earn in wages, salaries, and tips in the most recent tax year?” but Traditional IRA goes in two places in NPC. Does that look right?