The following is a reference guide of education cost-cutting strategies for families of all income levels. These strategies were created by some of the top minds in educational funding and can provide families with financial opportunities to help fund tuition costs. They include:
- Significant income and estate tax savings are achieved by outright gifts to a child or grandchild. However, control of gifted assets will be lost immediately.
- Alimony deductions can shift income from the higher to the lower tax bracket spouse. All types of insurance, mortgage, property tax, utilities, college expense and other payments made on behalf of a separated or ex-spouse are considered alimony.
- All or partial personal exemptions phase-out once an income level is reached. There is no tax benefit from a child’s personal exemption. If a child proves that parents do not provide over half of support, the child can claim the personal tax exemption.
- Families receive tax benefits when employing a child who receives “earned” income and is not subject to “kiddie tax,” even if under 14 years old.
- Family businesses can offer tax deductible benefits (e.g. company car), taxable to a child/employee, causing an income-shifting effect. A medical reimbursement type benefit is deductible by the business but not taxable to the child/employee, thus applying the tax savings toward college.
*Please be advised that most families will need to consult their CPA or financial advisor to implement these strategies!