Consider repositioning your income-generating assets to assets that have tax-deferred growth, such as annuities, life insurance, Qualified Tuition Plans plans, growth stocks, or tax-efficient funds. This will lower your income and allow some control over when the gains are realized.

Specific Details

Tom and Susan had investments that were resulting in $1,000 of taxable interest and dividends each year. Combining some tax planning with planning for college, the parents decided to transfer their current investments to a Qualified Tuition plan. Tom and Susan no longer show the $1,000 of interest and dividends on their tax return, resulting in a lower tax bill and an increase of $470 (47% x $1,000) in financial aid eligibility.

Potential Savings

If you are in a financial aid income assessment rate of 47%, you could increase your financial aid eligibility up to $470 for every $1,000 of income reduction by avoiding withdrawals from retirement accounts.