Tax deduction or tax credit? Which one will net you more financial aid for college?April 12, 2007 -- Research for a new book on college funding has turned up some surprising strategies that could lower your federal tax bill and increase your eligibility for college financial aid. According to Troy Onink (pronounced ‘On – ink’), the author of the new book Strategy & Simplicity – for Private School and College Funding, if you make less than $50,000 a year and you have two or more children, for financial aid purposes you may be better off claiming the less-popular Tuition and Fees Tax Deduction on your tax return instead of the usual Hope Scholarship Tax Credit.
Onink explains that the way that eligibility for college aid is calculated, using the Tuition and Fees Deduction actually results in a lower expected contribution toward the cost of college which translates into greater eligibility for college aid for families.
The average net difference in the amount of taxes paid and the increase in aid eligibility is about $500 per year for families making less than $50,000. Onink said that the advantage swings back in favor of the Hope Credit for incomes between $50,000 and $93,000. Unexpectedly, not only does the Tuition Deduction advantage show up again between $94,000 and $114,000, the net advantage climbs to almost $1,500 per year.
According to the US Census Bureau there are over eight million married couple households that make less than $50,000 per year and have children under the age of eighteen. If 25% of those households (two million) sends just one child to college armed with this $500 strategy it will equate to a billion dollars in increased aid eligibility for those families per year.
The book is called Strategy & Simplicity – for Private School and College Funding, and it offers an innovative and clear-cut approach to defining Your Best Strategy® to help pay for private school and college, while ultimately having more money for retirement. While the particular strategy that was previously discussed applies to low and middle – income families, the book covers advanced wealth strategies for affluent families as well. For more information about the book you can visit
www.strategyandsimplicity.com .
