Reporting Monetary Gifts
Q.
My husband received a monetary gift of $20,000 from his father. We were told by our tax people that, since it was a one-time gift, we do not need to claim it on our taxes. So this money will not show up in our taxes. Do we need to report this income on my son’s Fafsa? The gift was to my husband, not my son.— Mary
A.
The annual gift tax exclusion was $13,000 in 2012 and will be $14,000 in 2013. The amount your husband’s father gave him exceeds this amount. However, it can be treated as a joint gift from your husband’s father and mother; couples can give up to twice the gift tax exclusion without incurring gift taxes. In any event, gift taxes are paid by the person giving the gift, not the recipient. The one-time nature of the gift is irrelevant to the tax status of the gift.The gift should not be reported on the Fafsa because it was given to your husband and not your son. Cash support to the student must be reported as untaxed income on the Fafsa. Cash support to the student’s parents is not reported on the Fafsa.
Cash support includes money, gifts and loans. It also includes food, clothing, housing, car payments, medical and dental care, insurance and college costs, as well as money paid to someone else on behalf of the student (i.e., money paid for expenses the student would otherwise be obligated to pay).
529 College Savings Plans
Q.
If a 529 college savings plan is held in a parent’s name with the child listed as the beneficiary, is the savings plan considered on the Fafsa as student savings (of which they are expected to use at a higher percent) or as a parent asset?— Victoria Hamilton
A.
The reporting of a 529 college savings plan as an asset on the Fafsa is based on the account owner, not the beneficiary.The College Cost Reduction and Access Act of 2007 changed the treatment of 529 college savings plans starting with the 2009-10 award year. Any 529 plan that is owned by a dependent student or the dependent student’s parent is reported as a parent asset on the Fafsa. This includes the 529 plans for siblings.
Any 529 plans that is owned by an independent student or the independent student’s parent is reported as a student asset on the Fafsa.
Distributions from such 529 plans are not reported as income on the Fafsa.
Any 529 plan that is owned by someone else is not reported as an asset on the Fafsa, but any distributions from such a 529 plan are treated as income to the beneficiary.
If the parents are divorced and the 529 plan is owned by the noncustodial parent, the 529 plan is not reported as an asset, if the student is dependent. Distributions from such a 529 plan are treated as income to the beneficiary. If the student is independent, it is reported as a student asset and the distributions are ignored.
Financial Aid Planning for High School Freshmen
Q.
What can parents of a freshman do now to make the entire process easier when the time comes, and to make our child get the financial aid she needs?— PB
A.
It is never too soon to start preparing for college costs. Every dollar you save is about a dollar less you’ll have to borrow. The sooner you start saving for college, the more time there will be for the savings to grow from compounding interest.Try to minimize income starting Jan. 1 of the junior year in high school. For example, avoid realizing capital gains, or offset them with capital losses. Need-based financial aid assessments are based on income during the previous tax year, so having higher income during that year may reduce eligibility for need-based financial aid.
It is also a good idea to start learning about financial aid. While financial aid rules change every year, it can help to familiarize yourself with the concepts and language of financial aid. That way you will not be intimidated by the alphabet soup of acronyms like Fafsa, E.F.C. (expected family contribution), S.A.R. (student aid report), and I.B.R. (income-based repayment).
You might also search for scholarships for high school students in younger grades. Fastweb.com, Zinch.com the College Board are just a few of the scholarship matching services available online. FinAid also provides a list of scholarships for children under age 13.
Federal Aid for International Students?
Q.
My child was born in Canada and has been living in California for 13 years with an H-4 Visa. Is my child eligible for any financial aid?— Linda
A.
Individuals with an H-4 visa are not eligible for federal student aid in the United States. They are considered to be international students.Some colleges provide student financial aid to international students, but the funds are limited and there is a lot of competition. It might be best to see if your child is eligible for Canadian bursaries. There are many excellent Canadian colleges and universities.
Alternately, community colleges offer a low-cost education that may be affordable despite the lack of financial aid.
Updating the CSS/Financial Aid PROFILE
Q.
We completed and submitted the CSS/Financial Aid PROFILE in December in order to obtain a financial aid estimate from a school my son considered for early decision. He decided to apply regular decision. We know we want to send the CSS to several other schools. Some of our financial information has changed. How do we update the CSS? Should we also send the updated information to the first school?— Laura
A.
You cannot update the data on the CSS/Financial Aid PROFILE form for colleges that have already received the data. You should print out a copy of the PROFILE acknowledgment, mark corrections on this printout and send a copy of it to the colleges that have the old data.When you add new colleges to the PROFILE form, you will have an opportunity to update the data on your PROFILE application. The updated data will be sent to only the new schools.
No comments:
Post a Comment