Consider participating in a flexible spending account if offered by your employer. These accounts allow you to reduce you taxable wages through a pre-tax contribution to a special spending account that you can then use for medical, day care or other expenses.
Specific Details
Shelly, is an employee of XYZ Inc., and earns $70,000 per year in wages. She has 2 children and currently spends $5,000 a year for daycare. Shellys employer offers a flexible spending account. Shelly decides to participate and elects to have $4,000 a year pre-tax deducted from her wages for the flexible spending account. As Shellys incurs the day care expenses, she submitts an expense report to her employer and the employer reimburses her tax-free for daycare expenses until she reaches the $4,000 that she put into the account. Shelly increases her child’s financial aid eligibility by $1,880 ($4,000 x 47% = $1,880)
Potential Savings
If your income is assessed at the financial aid rate of 47%, you could increase your child’s financial aid eligibility up to $470 for every $1,000 of wages that you contribute to one of these accounts.