Step 2: Realize Capital Gains
Parents of high-school sophomores (class of 2020) should take brokerage investment account gains now (prior to the end of 2017) because FAFSA uses 2018 as the “base year.” The FAFSA calculation adds a family’s adjusted gross income to untaxed income (pre-tax retirement contributions) to calculate total income in your child’s base year (junior high school year). If you need to take investment gains in their junior year, try to offset them with losses to reduce the impact on financial aid.
Look for the next steps from this article in our coming blog posts. Please attend one of our free seminars for more strategies for paying for college.