As any parent knows, raising children can be challenging at times, not to mention expensive. At first there are expenditures for formula, diapers and daycare (or reduced income to stay home if you’re fortunate enough to have the option). When the last child begins kindergarten, there is a temporary feeling of freedom as daycare expenses drop. But soon you find yourself following music lessons, sports and other activities, perhaps even parochial school. After that, driving lessons, cars and insurance. In a blink of an eye, your child is 18 and a freshman in college. It’s an exciting time…not so much when the bill arrives. Are you ready?
There are many things that you can do to prepare. Below are some suggestions.
EDVEST - Contribute to a Wisconsin Edvest college savings account. Encourage grandparents, aunts and uncles to do the same. Annual contributions up to $3,000 per taxpayer (or per married couple) are deductible from Wisconsin income for each child. The funds grow tax free and are not taxable to the Wisconsin resident student when withdrawn for qualifying education expenses. The account can be transferred tax-free to another member of the family if the account beneficiary chooses to not go to college.
COMMUNITY INVOLVEMENT - Throughout your child’s middle and high school years, encourage him or her to be involved in the community. Keep track of these activities to refer to when completing college and scholarship applications. Did your child participate in middle school sports? Perhaps when in high school, he or she would like to be an assistant coach to the younger students. Often times these types of activities can help your child qualify for a scholarship.
FINANCIAL AID - By the beginning of your child’s high school senior year, be familiar with the financial aid process. Your high school may offer an informational training session, and has guidance counselors to assist you. Beginning January 1st of senior year, you can begin to complete the financial aid form (FAFSA) online at www.fafsa.gov (NOT www.fafsa.com). The first step is to obtain personal identification numbers (PINs) for yourself and each college-bound student through the Department of Education at www.pin.ed.gov. Remember these numbers, as you will refer to them often. It is also important to have your income tax returns prepared as early as possible in order to complete the financial aid application.
TAX BENEFITS - Once your student begins college, keep in mind when preparing your tax returns, that there are various tax credits and deductions available. If your income exceeds the allowable limits for these benefits, you may want to forgo claiming your student as a dependent, so that he or she can claim the credits. Make sure to inform your tax preparer when your child begins college.
Call us to discuss which tax benefits are best for you. In this case, it really does “pay” to be knowledgeable of the services and benefits that are available in financing your child’s education.