<p>I just added to my work schedule so I could put more money away for my daughter, who's a junior. I'm worried that the extra 12 or 15K I can save will simply evaporate when it shows up on our tax return/EFC. Does anyone know if I can expect to retain at least some of this benefit, or will it all vanish? I have other kids, my husband works long hours, and the extra time I'm away is pretty stressful for all of us. I've tried to run the EFC different ways but I am not so hot at estimating what the tax burden is going to look like.</p>
<p>It depends on what your family income was before you add the extra $12 or 15K. In some cases, it won’t make any difference at all. In others, it can make a difference in aid. Some examples: If it puts you well over PELL eligibility then you can lose PELL. But PELL range is poverty line, and anyone there should not be avoiding making that kind of money just to get PELL. It doesn’t go from $5K to nothing in awards either. If you are in state that has an income cut off for aid, that can also be an issue and it depends on how steep of a cliff the drop off is. </p>
<p>Usually, it will not much matter if you lower or raise your EFC much because the simple truth is that most colleges do not meet need. That our EFC is $10K or $20K doesn’t mean much most of the time because the school is not likely to throw in more than a few thousand anyways and your student might get some of the loans subsidized and some work study money but then the work hours for that could take away from those he was intending to use towards the EFC. It is rare that you get full need met. And when you do, the way it usually works is that it is a % of your income that goes towards the EFC, and rare that the whole thing will go. Most of the time the more you can make, the more flexibility you have.</p>
<p>For the taxes, you have to figure out what marginal tax bracket you’re in without the 12-15k. The 12-15k will be taxed at that rate unless it bumps you to the next bracket all other things being equal. That’s for federal and state if your state has an income tax. The amount of the extra you save will be counted at about 5.6% for fafsa toward your efc. Schools will treat it as they like.</p>
<p>Seldom can you count on FA replacing extra income dollar for dollar. I think most here think the extra income is the better choice rather than counting on FA. Having the extra money gives you more flexibility if nothing else, especially if some other non-college related expense comes up.</p>
<p>Here’s a link to the 2013 federal tax brackets:</p>
<p><a href=“http://www.forbes.com/sites/kellyphillipserb/2013/01/15/irs-announces-2013-tax-rates-standard-deduction-amounts-and-more/[/url]”>http://www.forbes.com/sites/kellyphillipserb/2013/01/15/irs-announces-2013-tax-rates-standard-deduction-amounts-and-more/</a></p>
<p>I am not an expert, but I imagine it depends a lot on where you are in the spectrum and what type of schools your kid wants or can get into. A better way might be to buy a tax program (if you have not already done so) and run the number. Then go to some colleges websites that are of interest to your kids and are in range or types of schools you want to attend and run their net price calculators with 2 different set of scenarios. You get some ball park figures and then go from there. EFC alone is not a good way to gauge how much college cost or Financial Aid help is going to be.</p>
<p>There is also the issue of base year. I don’t know how much that comes into play for each school, but your first year financial info might be very important in some cases and can cost you a lot of aid, so you might want to research the schools that you are interested in on the subject.</p>
<p>Both EFC and taxes are going to depend greatly on your individual situation. If you have a moderately low income, and you get the earned income credit as part of your tax refund, it is likely to lower the amount of your credit, as well as being taxed at your marginal rate. If you are higher income ($100,000+ family income) it could cause you to lose certain tax credits, like the child tax credit (if you have children under 17), and could impact some of your deductions. At the high end $10,000 of extra income could increase your EFC by almost $3500</p>
<p>What types of schools are you looker at for your daughter? Some of the more selective schools do meet need, and that is where you would see the biggest impact if your EFC were to change that much. In such a case, with a higher household income, your $10,000 extra earning could translate to $2500 in federal taxes (or more with lost credits - CTC phaseout starts at $110,000 for married filing joint return), maybe another $500 in state taxes, $750 in payroll taxes, leaving you with about $6250 in take home pay, and an EFC based on $7000 more income or about $3500 increase, leaving you a net increase of less than $3000. </p>
<p>If your need isn’t going to be met anyway, it could mean $6250 less in loans (or if merit scholarships are likely to drop the cost below your need). </p>
<p>One other thing to consider, depending on where she will apply. Some schools will give an “affordability guarantee” which means in most cases the aid won’t be decreased after the first year if you decide to work more. Not many schools, but just another thing to consider.</p>
<p>Our AGI was 110,000 last year, so maybe this isn’t such a good idea. Ah me.</p>
<p>^^^</p>
<p>Well, what kind of schools will your D be applying to? If they aren’t the type to meet need anyway, or they will already expect your family to pay near/full freight, then the extra money will be necessary.</p>
<p>With an AGI of 110K, your EFC is going to be such that the only guaranteed money in the picture are the Staffords loans, some of which may be subsidized, $3500 at most. Schools that use FAFSA only are not highly likely to meet the EFC, unless your student is one of the top in the applicant pool. Better you have the money to pay.</p>
<p>If your student has the stats (test scores and gpa) for some of the schools that do tend to meet full need,it is likely at that AGI for schools that cost in the upper limits, your student will get financial aid money if admitted to such schools. But, I believe you were on another thread stating that there is a family business in teh picture. If that is so, since PROFILE does gather info about such businesses and PROFILE schools tend to add back business deduction and evaluate the business, the chances for aid diminish.</p>
<p>The main advantage of you earning an extra $12-15 K is that it brings about half of that on the table to pay towards your child’s college colst. If you can come up with $15K total out of current earning towards the cost of college, an borrow, say $10K, you are half way there. Your student with earnings, working summers/part time and loans can come up with another $10K a year. That puts a lot of public schools and those with lower sticker prices on the reachable list. With some merit money–do check out the catholic school, the possibiliities widen.</p>
<p>Our estimated EFC (highly, highly estimated, since I now discover that private practice income is not properly handled by EFC calculator) is on the lines of 10-20 per year since we have one in college.</p>
<p>*Our estimated EFC (highly, highly estimated, since I now discover that private practice income is not properly handled by EFC calculator) is on the lines of 10-20 per year since we have one in college.
*</p>
<p>are you talking about CSS school calculators? If so, you’re likely going to find that your EFC will be higher if you have a private practice. </p>
<p>With an AGI of $110k, I think your EFC will be higher than $10k per child ($20k total)…more likely it will be about $13k per child…or more if some of your deductions get added back in by CSS schools.</p>
<p>Demeron, for those schools that require PROFILE as well as FAFSA, they will come up with their own parental required contributions that usually does not match the FAFSA EFC. The EFC is generated by government formula and is needed for government funds such as Stafford loans, PLUS (parent loans), work study, and states use that figure too for any programs they might have. </p>
<p>Schools that require PROFILE, will use their own formulas, and we don’t know what those are. NPCs on the web site are just general estimators and give average results. In your case, with a business, it depends on the individual PROFILE school how they are going to assess that business. Schools will calculate their own required contributions from you in terms of the money they will pay out from their own coffers.</p>
<p>My gripe would be that they can give more accurate assessment if they want to, right? If so, why not then provide the tool that gives more exact calculation. We are talking about so much money and probably one of the biggest expense in our entire lives. Why does it have to be crossing fingers not knowing what to do and anxiously waiting until we get all the numbers from all the places we apply to. And then quickly negotiate or scramble before the deadlines to figure out what to do?</p>
<p>In your bracket, the extra taxes and reduced EFC from the extra income will eat up around 2/3 of the income, meaning you theoretically only pocket 1/3 for other uses.</p>
<p>The thing is, though, that since very few schools meet full need without a lot of loans, the real effect of having a higher EFC may be essentially nothing.</p>
<p>Forget the calculators. You can figure out exactly what your EFC will be by downloading the formula guide and working through it yourself:</p>
<p><a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf</a></p>
<p>It’s not rocket science, give it a shot.</p>