<p>My daughter is a sophomore in high school, and my understanding is that on the FAFSA and other financial aide applications, it is basically the junior year that counts, so that is the year to be sure you have all your ducks in a row.<br>
We know we have some major purchases coming up soon anyway, and it would seem wise to time them so that the funds we will need to spend would also get reported as cash assets. Do we need to make those purchases before Jan 1 so that it is before the next tax year?</p>
<p>No, you don’t have to “spend down assets” by Jan 1 and there is no deadline. For both the FAFSA and the CSS Profile, you enter the value of the assets on the day you submit the applications.</p>
<p>When you fill out FAFSA and Profile, they will ask you to report your assets as of the day you submit. For a current soph, she will be applying for colleges in the fall of 2014, so you will want to spend down assets by Oct 2014 or later for Profile and Jan 2015 or later for FAFSA. </p>
<p>It is your 2014 tax year that is important for other parts of FAFSA/Profile. With early fr FA deadlines, you will likely file FA forms with estimates which you correct later when your taxes are finalized.</p>
<p>x-posted w/dukedad</p>
<p>Your asset balances are reported as of the date you file your FAFSA and Profile forms.</p>
<p>If it were me, I would run a couple of net price calculators on the college websites that your kiddo might be considering. Run the numbers both with the assets as they are and with them spent down. See this REALLY makes a difference. It might not!</p>
<p>Your family contribution is largely based on your income…not your assets. You may find that you are doing spending gymnastics that actually don’t net you much gain. Remember also, that for FAFSA purposes, some of your assets are actually protected. Only assets above the protection amount are included in the formula, and then at only 5.6% of their value.</p>
<p>If you find you have income fluctuations you can time, you would want those to hit before you have to show your tax return for financial aid</p>
<p>There is one thing you might want to consider though, before January 1st. Where is the money now - how is it invested? If it is in a bank account, you’re fine. If it’s invested in stocks, and you’re likely to have a capital gain, you will want to sell before January of her Junior year, so it does not increase your income when you’re ready to file FAFSA. On the other hand, if it’s likely to produce a Capital loss, you may want to hold onto it until the loss can be reported in a year that benefits you.</p>
<p>Unlike spending down assets, managing capital gains could have a much greater impact on EFC, because they are income.</p>
<p>If you sell stocks, and have a capital gain of $10,000, and use that money to replace windows siding and roof on your house, and thus reduce your assets by $50,000, you would see an increase of about $5000 to your EFC from the capital gains, and a reduction of about $2500 from the reduction in assets - so a net INCREASE.</p>
<p>Google EFC formula 2014, and print out the PDF for tha FAFSA formula itself. Then work through it on paper using different scenarios. The formula changes a bit from year to year, but this will give you a reasonable estimate for your FAFSA results.</p>