FAFSA - 'Best Guesstimate'

Not sure about capital gains, and never heard of a K-1 but I do know from past experiences you only have to do the initial fileing of the FAFSA by your deadline. (different states have different dates)You can come back and fill in the blanks at a later date so don't wait sending in the info as you know it now.

congress changed the rules a couple of years ago and basically he will be taxed at your rate. No more different rates for kids.

Krak: There are CPA's on the site who will give you better answers, but a K-1 is a form that shows a partner's proportionate share of income and losses/expenses for the particular partnership or investment vehicle other than a corporation. While I've only prepared one FAFSA so far, I believe if you use the information provided on the 1099 they send you, your FAFSA form will be fairly accurate.

Of course, you should consult your tax advisor; take only as directed; your results may vary; the author is not licensed to do much of anything in any state, and is barely licensed to post on this website; etc, etc.

Krak,

With regard to the FAFSA forms. Check the box for 2008 tax returns that indicates "Will File" then using your best guesstimate complete the questionare. You can even use the numbers from your 2007 tax return or if you have a good idea for 2008 use those. Then submit the FAFSA form ASAP. That will get your son in line "early" for any potentional aid/financing available (many are first come, first serve). Once you have completed your 2008 tax returns go back to the FAFSA site and "Make Corrections" changing the tax return status to "Have Filed" and adjust the numbers as necessary then "Submit." You will get a reply regarding any adjustments to your EFC (estimated family contribution).

I hope this info. helps. Don't delay in getting the FAFSA filed ASAP. Consult your professional tax advisor regarding the other issues. For a quick answer TurboTax online may be helpful. You can fill out a return by answering questions and get an idea of how the Tax software handles the info. by viewing your potentional return. You only pay if you print or efile a return. Don't forget to check out the "Hope Tax Credit" available for college students(parents) in the 1st or 2nd year of school.

Thank you all! Your answers are filled with puzzle-solving information which is much appreciated!

Krak:

Good news, when they turn 18, they are no longer taxed at your rate. They must file their own return, you can still take them as an exemption.

As to the tax rate, take the sale price, less your basis (what you paid for the fund) and apply a 15% capital gains rate.

If you have been buying the fund over time, make sure that you use the highest cost, this will reduce the gain and hence the tax.

For FAFSA purposes this will do, this does not constitute tax planning or any other personal tax advice.

Yes, I am a CPA.