Do you own a real estate investment or a business? Have you been considering buying rental property or starting a business? Are the kids going to college in a few years? If you’re already planning for your kids to go to college, it’s never too late to start planning effective and efficient ways to increase savings, lower your taxes, and improve your chances of receiving student financial aid.

Let’s say you already provide an allowance for your children. You are already paying out of pocket and you are not getting any tax benefits. With a few changes, you can turn that cash outflow into a tax-deductible expense that can even help your kids save for college. Consider hiring them to work on your business or on the rental property you own.

By paying them a reasonable salary for services like gardening, cleaning, painting, shoveling snow, or doing clerical work like filing, stuffing envelopes, or printing marketing brochures, you have an additional deductible expense that reduces your net income or increases your net loss on your money. business or property.

And for children who earn income from the family business, there is no payroll tax requirement. And if you keep the amount of “earned” income below certain limits, you also won’t risk paying any “child” taxes. (The “child” tax limits are adjusted for inflation each year). In effect, you have transferred income from a taxpayer with a higher tax rate to a child who pays low or no income taxes.

Now have your child open a Roth IRA with the money you pay them and they have the added benefit of tax-free savings for college, as Roth IRAs can be used for college tuition without paying a penalty, as long as the Roth is open for a minimum of five years (restrictions apply).

By reducing your income, you can also lower your Expected Family Contribution (EFC), which is the critical number used to determine the amount and type of student financial aid your child can get for college. The EFC is calculated using a number of things, including the amount and type of the parents’ assets, as well as their reported income. The EFC is recalculated each time a financial aid form is submitted and is based on assets and income from the previous year.

So to improve your chances of receiving financial aid, one strategy is to lower your reported income. By employing your child to reduce income from your business or rental property, you may be able to lower your EFC and improve the amount of help your child receives.