So I have been using the college board EFC calculator to figure out if schools might be affordable and I have run into some issues. I filled out the information on the college board site and, for example, Williams college is an expected price of $3,400. I then filled out a calculator on Williams’ site (which had much much less information) and got an expected price of $11,000 and low of $5,000. I can probably afford $6,000 tops so this is an issue. What should I trust going into this?
Financial Info - $70,000 income last year though $10,000 was a one time gift from former supporters (we were missionaries)
My dad owns a home inspecting business that generates most of our income (my Mom works but no for great pay). Income completely relies on the housing market and we made no money during December and a couple hundred in January. I have a younger brother who is a sophomore this year.
Use the net price calculator on the college website. That will be better…and more likely to be accurate.
BUT your dad is self employed, and owns his business. You may find that some schools net price calculators won’t be particularly accurate.
Also. At some colleges, there are business deductions allowed by the IRS for tax purposes that are added back in as income for financial aid purposes.
Is that EFC or NPC? It is typical to have higher cost than EFC if the school is not need met.
Williams is a meets-full-need school. It’s not unusual that different EFC calculators would give different results.
Because your father is self-employed, neither calculator will be able to accurately assess your situation
@thumper1 @billcsho @BelknapPoint @sybbie719 Thanks, I am visiting Williams in a few days and will be talking with a financial person there so I will get a better idea then. I just wanted to have an idea of what it would cost going into it.
Where your father is self-employed, if you want to safely run a net price calculator and get a conservative view of your aid (before speaking with the people at Williams) use the income on your taxes and then add back in the deductions. In other words, if he deducts things like cell phones and auto expenses, put those back, using line 7 on schedule C rather than 31.
It gives you a decent starting point, a worst-case scenario. Schools like Williams will also give you an opportunity to let them know about extenuating circumstances, like that one-time gift. Time of year that you earn doesn’t matter. Also, is your brother a sophomore in college or high school? If he’s in high school, his existence will have much less impact on your financial aid than if he’s in college.
@Pheebers My Dad’s business is very small right now, besides himself he has one part-time employee and I don’t believe we have any deductions as our car/phones are paid for. My brother is in high school. I’m just hoping his business makes a big difference as well because taxes on his business are insane (40% range I believe).
Also, I didn’t mention that the Collegeboard calculator had an option to put in a business, what it is worth, etc. The Williams one did not.
If your father’s business is being taxed in the 40% range, there is a LOT of money being made.
Well then it’s not that, I could be completely wrong as this is going off of memory from a while ago. $70,000 is before tax (and plus $10,000 gift) and I do remember him talking about being taxed a lot as a small business owner. How he said it I think is that he gets taxed as both the owner and an employee so we have to pay a lot extra.
What is your parent gross income?
He is likely paying both sides of social security for himself. That is probably what he is talking about.
Or his business is structured so that he pays taxes for the business as well as his individual taxes.
The $10,000 gift received is not taxable, and if it was given to a parent, it would probably not be reported as untaxed income (certainly not on FAFSA) for financial aid purposes. Being taxed in the 40% range on $60,000 of gross income makes no sense, even if you consider various types of business structures and the possibility of paying both sides of the FICA contribution.
Owning a business is only a factor if it’s a large business. For example, Bill Gates could choose to give himself no salary, but his wealth would still increase every year. Colleges are savvy to these tricks. If your father has “pass-through” income, meaning whatever his company earns after expenses is his income, it won’t impact the bottom line.
He’s paying both parts of FICA, which amounts to around 14%, plus federal and state income taxes. I guarantee he is taking business deductions - that would be expenses related to the use of his car (most likely mileage at about 50c per mile) and the cost of maintaining a phone for business use (not paying for the phone, but for the service), as well as any supplies he uses (any office equipment, paper to print any reports…). If he isn’t taking those deductions, he’s doing things wrong, and is paying higher taxes than he should.
Every business owner I’ve ever worked with says they pay high taxes and talks about paying double if they’ve got employees, etc, etc.
We can’t really tell from this conversation what kind of income that 70k is…the only thing that would be completely clear is the tax form, and in general parents don’t share that with their kids. It’s confusing for adults, let alone for students who haven’t had to deal with money and/or financial aid before. For example, @DashtiBarchi , you say your cell phones are paid for…by whom?
We’re really just saying that colleges know what to look for. I remember sitting in a financial aid seminar at Smith when my daughters were looking there…I’m paraphrasing, but the FA head basically said “We have a department full of attorneys and we know how to read your taxes better than you do. You’re not going to be able to hide anything. Things like travel and second homes are not legitimate deductions to us.”
@Pheebers Yeah so I’m actually gonna take all of our tax forms (like a book of them) when I go to Williams so I can get the most accurate info possible. That $70,000 is total income before any taxes (73 my dad said today). He also corrected me and said that some of our phone bills and house payment stuff is in the business as he works out of home. When I said paid for I meant we aren’t making payments on brand new phones or anything. He couldn’t remember the exact number but he said we ended up taking home some income in the low 50s so more like 30% than 40% tax.
I’ve also talked with my dad quite a bit more about finances and feel a lot better about it though I will be taking all the forms I can to Williams to get the most accurate info I can.
Before you pack up and schlep all the tax forms to Williamstown, confirm with the Williams College financial aid office that they will do a FA pre-read for you. Some schools by policy will not do a pre-read. I don’t know if Williams has such a policy.
@BelknapPoint I do have an appointment to talk with a financial person there that I have already scheduled. I am not sure exactly how detailed the meeting will be or if it is technically a pre-read but better safe than sorry I’m thinking.