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Connecticut CPA
September/October 2016
Estimating Expected Family Contribution
As you know, there is an array of tax
deductions and credits for paying for
college that they may not be aware of.
If either parent is a business owner
and you have the ability to help them
control their income from the business
(think about how a C corporation could
work here), your help could make a
huge difference in the amount of need-
based aid the family might receive.
What to Do if You Have a Client
with a High EFC
First, urge the parent(s) to file the FAFSA
regardless of whether or not they think
they're eligible for need-based aid. If
they want their student to have some
investment in the cost of their college
education in the form of a student loan,
they have to file the FAFSA in order to
access federal loan programs.
Since income and assets in the stu-
dent's name matter less here, this is
the group for which your tax planning
skills can really shine:
Even with the so-called "kiddie tax,"
gifting appreciated assets for even-
tual sale by the child could allow
for the child to claim an American
Opportunity Tax Credit, where the
parents' high income would not
offer that option.
Consider situations where the child
can earn income from a family busi-
ness, and then use those earnings
to defray some of the college bill.
Rather than paying for on-campus
housing, it may make sense to pur-
chase off-campus housing and per-
haps even be a landlord to others.
In Conclusion
We've talked a lot about financial hur-
dles your clients are facing, but make
no mistake this is a highly emotional
time in their lives as well.
Your intervention at this time to help
stem the tide of dollars leaving the
household can only help solidify your
relationship with them well into their
retirement years.
John F. Pearson, CPA, CASL is a financial advisor and financial services executive at Barnum
Financial Group in Shelton. You can reach him at
Metropolitan Life Insurance Company (MLIC), New York, NY 10166. Securities products and investment
advisory services offered by MetLife Securities, Inc. (MSI) (member FINRA/SIPC) and a registered
investment advisor, 225 High Ridge Road, Stamford CT 06905 | 203-658-1951. MLIC and MSI are
MetLife companies.
MetLife, its agents, and representatives do not provide tax and/or legal advice. Any discussion of taxes is for
general informational purposes only, does not purport to be complete or cover every situation, and should
not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and
accounting advisors as appropriate. L0516467251[exp1216][CT]
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