Lower your income before college-aid years
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Federal college financial aid is based on your tax return from two years before each school year. A child starting college in fall 2028 is judged on your 2026 income. That makes the years before and during college a planning window.
Lowering income in those years, by timing a sale, a bonus or business deductions, can raise the aid your children qualify for. The rules are specific, though, and some moves that save tax don't help with aid.
How it works
Federal college aid uses your tax return from two years before each school year. Lowering that year’s income (bigger retirement contributions, timing a sale or a bonus, accelerating business deductions) can raise the aid your children qualify for.
What makes it hold up
- Which tax years the FAFSA will look at for each child
- Planned income in those years, including capital gains
- Retirement contributions, which the FAFSA adds back if they were voluntary
Risks
Low, but the rules are specific. The FAFSA adds back many voluntary retirement contributions and now counts small business assets. Many private colleges use their own form (the CSS Profile), which looks deeper.
Questions to ask your CPA
- Which years matter for each of my children?
- What moves lower our aid income without just shifting it?
- Do our target schools use the CSS Profile?
Common questions
Which years matter?
For each school year, the FAFSA uses the tax year two years earlier. With more than one child, the window can stretch across many years.
Do retirement contributions lower my aid income?
Not much. The FAFSA adds back many voluntary retirement contributions, so they lower your tax without necessarily raising aid.
Does my business count?
Since the FAFSA was redesigned, small business assets count, so the value of your company can affect aid even when income is low.
What about private colleges?
Many private colleges use their own form, the CSS Profile, which looks more deeply at assets and business income. Check which form each target school uses.
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Education, not advice. Tax law changes and every situation is different, so confirm the details with your CPA or tax advisor before acting. This page was last checked against tax law as of October 2026, including the 2025 tax law, in October 2026.