How much income parents have when their child is in the junior year of high school can be crucial in determining eligibility for financial aid. That’s because the calendar year that begins in the middle of the junior year is the base year for determining the parents’ income on college financial aid forms.

Strategies to minimize income during the base year and to maximize financial aid…

Don’t convert a traditional IRA to a Roth IRA that year because the converted amount may count as income.

Defer workplace bonuses.

Avoid selling highly appreciated assets such as stocks that would generate capital gains. Also avoid cashing in US savings bonds that would generate income (unless you’ve been paying taxes on the interest each year as it was generated).

Postpone distributions that you are not required to take from retirement plans such as 401(k)s.

If you own a business, make capital investments in the business during the base year. Time your invoices so that as much income as possible arrives during the prior year rather than the base year.

If you have dependent children other than the college-bound high school junior and those children have taxable investment income, file separate tax returns for them. That keeps those kids’ investment income off your tax return and out of the college-aid equation.

Avoid taking on significant margin debt—borrowings secured by stocks or bonds. College-aid formulas won’t allow you to subtract the interest expense from your investment income when calculating your income.

Source: Kalman A. Chany, founder and president of Campus Consultants, Inc., a New York City–based company founded in 1984 that has helped thousands of families maximize their financial aid. He is author of Paying for College Without Going Broke (Princeton Review). www.CampusConsultants.com