<p>But thumper1, op shouldn’t be deducting the utilities of his house on his income taxes. He could deduct for a prorated fraction if part of his home is his business office. Presumably, he would not have the same home utility costs if that space were not being used during his business day.</p>
<p>If he heats his house, and his business is in his house, wouldn’t he have to heat the house regardless? During the day, you don’t need as many lights so if your business was located in your house, how would you prorate that electric bill…and most people still have electric bills for daytime use.</p>
<p>Just saying that this is how some colleges might view these types of expenses.</p>
<p>If the office space is 1/10 of the total floor space, then all you’re allowed to deduct is 1/10 of the total heating bill.</p>
<p>If the office space is 1/10 of the total floor space, then all you’re allowed to deduct is 1/10 of the total heating bill.</p>
<p>What you’re allowed for tax purposes may not be the same for a CSS school. while I understand that calculation, we don’t know what a CSS school might do. They may default to what you’ve described or they may adopt Thumper’s position.</p>
<p>Does anyone know what some/all CSS schools do with the FICA contributions for the self-employed? I remember someone complaining about that. Someone whose child was going to Conn College (I think).</p>
<p>I don’t think CSS gets into such minutia on the application form. At what point does the college (whichever college) get into the dollar-by-dollar minutia?</p>
<p>If a school uses IDOC, they most likely will request all of your tax returns including any schedules you complete.</p>
<p>^^^</p>
<p>Yep. A parent of an ED Columbia student was very upset last year when the school greatly reduced their projected aid pkg once they looked at the family’s tax returns which included lots of deductions from the mom’s Realtor business. Columbia added back in many of the deductions and suddenly the family was expected to pay about $20k more than they first thought. </p>
<p>I guess when the ED FA pkg came in, it was just based on simple numbers provided by the family. But the devil was in the details. :(</p>
<p>I always get the sense in these threads that some posters really want the school(s) to make it as bad as possible for any applicant/family with their own business or rental properties, etc. OP, I would just ask the school you are interested in about specifics. And assume the worst case scenario from the getgo. If your income is this high, your children need to be looking for in-state options and merit possibilities.</p>
<p>always get the sense in these threads that some posters really want the school(s) to make it as bad as possible for any applicant/family with their own business or rental properties, etc</p>
<p>since I’m very pro-business, particularly pro-small business, I have no desire to have these folks take it on the chin. That said, the truth is that some people are deducting expenses that do have a 20%-50% personal use aspect. </p>
<p>The purpose of these posts is to serve as a “heads up”. The NPCs won’t be accurate for them. They can get a false sense of what aid they’d get, submit apps, and then sadly learn in the spring that they’re not getting the aid that they need.</p>
<p>You can get very creative on your taxes to create paper losses…I imagine those are the types of things that may get added back in and most likely a good sized chunk of the OP’s $300,000 loss is paper loss like depreciation, expenses, etc. Thumper’s example of 10% of the heating bill is a perfect example. You need to heat the entire house whether or not your business is located there. The government lets you allocate some of those reclassifications of household expenses as business expenses but some colleges might not allow that. If I had an office in my home that took 10% of the space i’d probably use 10% of my heat, 10% of my electric, 10% of my garbage and so on and so forth to offset business income in a heartbeat. I’d track every single penny I spent and allocate an acceptable portion of every acceptable expense and depreciate every single piece of equipment, etc., that I could legally get by with as “business related.”</p>
<p>There’s a world of difference what a private college can do with the financial information you give them when you are looking for a financial handout and what you can do with our federal government when you are looking for a reduction in your tax bill. The two aren’t comparable. Doesn’t make anyone "anti-business’ as mom2 points out.</p>
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When you say “expenses” what are you referring to other than the depreciation, and as you have pointed out, things like heating your house which you might deduct a portion of for tax purposes?</p>
<p>Obviously, schools can do whatever they want with their money. I just completed the Profile myself and certainly expect the 2 schools requiring it to place our “expected contribution” above the cost of educating half their freshman class. I don’t even know why we were required to fill it out, as we should just be able to say “we have a lot of bucks, you aren’t going to give us more, have a nice day”. </p>
<p>IMHO, posters such as op who DO have substantial businesses or rentals (i.e. gross proceeds exceed COA of the school) should just assume they will not get aid. If they might qualify for merit, or if they think there is a chance they could make full pay, then go ahead and apply. Otherwise go somewhere else and save the hassle. Suffice it to say the schools themselves won’t care.</p>
<p>I understand that the deductions seem high but they are all legitimate in a construction company with this economy! The bids are for pennies and it’s little return investment. I have hardly any depreciation deduction actually, no self employed health insurance deduction…simply real expenses such as office supplies, taxes, licenses, utilities (not my house), telephone, insurance, and automobile expense! These are directly related to business and I would NOT have any of these expenses without a business. I understand that home office space scenario and automobiles used for personal use etc but they should have some standard of reasoning. Obviously some companies require particular expenses that others don’t. In my opinion, making 100k adjusted gross income, with hardly any business assets, another D in college, and over 400k in capital losses is hardly unqualified for some sort of need based aid.</p>
<p>In other words obviously a self employed construction company with 7 employees is going to have ALOT more expenses than a single man self employed company running from ones own home</p>
<p>^I don’t think they sound unreasonable - ours were actually a similar percentage.</p>
<p>I’ve been following this thread but I am still confused on the “losses”. What sort of “capital losses” are you referring to, Damond? Are these included in the expenses you are discussing? Is the bottom line that the business generates approx. $100k personal income to your personal tax return? </p>
<p>What about the value of the business as an asset on the CSS? Have you ever had an appraisal done of your business value? Does this business hold a cash account and/or investments?</p>
<p>Some of the things that probably get added back in are car expenses (lease, registration, insurance, gas, repairs/maintenance). The assumption is that the person needs a car anyway and must pay insurance. So, if the car lease/payments, registration, and insurance are added back in, that could be about $8k per year right there. </p>
<p>The deductions for gas, repairs and maintenace may be proportioned (60% business/40% personal)</p>
<p>I’m not sure how it all works, but some business owners think their income is their net. There have been people posting statements like, “My business takes in $150k, but after all costs (including their taxes, FICA, etc), we’re living on $50k per year.” those people are thinking that their net income is what FA will be based on.</p>
<p>Capital losses are reported on Schedule D - are you saying you sold stocks or other investments at a loss of $400,000?</p>
<p>Business expenses/deductions are not capital in nature</p>
<p>^^ Construction can get complicated, especially if you have spec homes in addition to contracted business. Sometimes spec home are characterized as investments and so are handled as investments on the taxes. It’s entirely possible to have both business expenses and losses and investment expenses and losses all tied to the same person and that person’s business. The OP has not given the level of detail, not needs to give the level of detail to analyze his losses. None of it is our business or necessarily pertinent to the initial post.</p>
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If the car(s) in question are used only for the business activities, then op would not need them in the absence of the business. Presumably, he has another car for his personal use.<br>
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<p>yeah but… you could turn the heat for the whole house way down during the day if no one were working there, and probably save 10%… Similarly less electricity use during the day, and so on, if you weren’t actually in your home and working through the day.</p>
<p>I have to say that I don’t think my DS’s school added back much from my DH’s business expenses as our payment ended up being close to what we expected. But his business has a pretty low expense to income ratio, so that may have an impact. He does deduct business use of the home for his home office.</p>