Reporting Income & Assets on the FAFSA
What income information does the FAFSA ask for?
The FAFSA asks applicants to report federal Adjusted Gross Income (AGI) plus various forms of untaxed income listed in questions 45 & 94 as follows:
Question 45 – STUDENT UNTAXED INCOME:
- Payments to tax-deferred pension and retirement accounts – including those shown on W-2 box 12 – codes D,E,F,G,H and S.
- IRA, SEP, SIMPLE, Keogh and other accounts shown on lines 28 and 32 of IRS form 1040, and line 17 form 1040A.
- Child support received for any of your children.
- Tax-exempt interest income on line 8(b) of form 1040 or 1040A.
- Untaxed portions of IRA distributions line 15a minus 15b – IRS form 1040 and line 11a minus 11b form 1040A. DON’T INCLUDE ROLLOVERS
- Untaxed portions of Pension distributions line 16a minus 16b – IRS form 1040 and line 12a minus 12b form 1040A. DON’T INCLUDE ROLLOVERS
- Housing, food and other allowances paid to members of the military, clergy and others. Don’t include the value of on-base military housing or the value of a basis military allowance for housing.
- Veterans non-education benefits, such as Disability, Death, Pension, or Dependency & Indemnity Compensation (DIC) and/or VA education work-study.
- Other untaxed income not reported above such as workers compensation, disability benefits, etc. Include the untaxed portion of HSA’s shwon on line 25 of IRS form 1040.
- Money received OR Paid on your behalf for your legal bills.
- DO NOT INCLUDE:
- Foster Care Benefits
- Student Financial Aid
- Earned Income Credit or Additional Child Tax Credit
- Welfare Payements, Untaxed Social Security benefits or SSI
- Combat Pay or military housing allowance
- Cafeteria Plan benefits
- Foreign income exclusion
Question 94 – PARENT(S) UNTAXED INCOME:
- Payments to tax-deferred pension and retirement accounts – including those shown on W-2 box 12 – codes D,E,F,G,H and S.
- IRA, SEP, SIMPLE, Keogh and other accounts shown on lines 28 and 32 of IRS form 1040, and line 17 form 1040A.
- Child support received for any of your children.
- Tax-exempt interest income on line 8(b) of form 1040 or 1040A.
- Untaxed portions of IRA distributions line 15a minus 15b – IRS form 1040 and line 11a minus 11b form 1040A. DON’T INCLUDE ROLLOVERS
- Untaxed portions of Pension distributions line 16a minus 16b – IRS form 1040 and line 12a minus 12b form 1040A. DON’T INCLUDE ROLLOVERS
- Housing, food and other allowances paid to members of the military, clergy and others. Don’t include the value of on-base military housing or the value of a basis military allowance for housing.
- Veterans non-education benefits, such as Disability, Death, Pension, or Dependency & Indemnity Compensation (DIC) and/or VA education work-study.
- Other untaxed income not reported above such as workers compensation, disability benefits, etc. Include the untaxed portion of HSA’s shown on line 25 of IRS form 1040.
- DO NOT INCLUDE:
- Foster Care Benefits
- Student Financial Aid
- Earned Income Credit or Additional Child Tax Credit
- Welfare Payements, Untaxed Social Security benefits or SSI
- Combat Pay or military housing allowance
- Cafeteria Plan benefits
- Foreign income exclusion
Which tax year applies when completing the FAFSA?
You will use the “prior, prior” year as the base year for completing the FAFSA. So, when completing the 2020-21 FAFSA you will report information from your 2018 tax return.
The change to “prior, prior” year should allow almost every family to fill out the FAFSA based on a completed federal tax return. This also means that most families will be able to link to the IRS database and download required tax information when completing the FAFSA.
What asset information is reported on the FAFSA?
The FAFSA requires parents and students to report the net worth of assets, including:
- cash, savings, checking & certificates of deposit
- money market funds, mutual funds, stocks, stock options, bonds, other securities, installment and land sale contracts (including mortgages held), commodities, etc.
- real estate (do not include the home in which you live)
- rental property (includes a unit within a family home that has its own entrance, kitchen, and bath rented to someone other than a family member)
- Qualified educational benefits or education savings accounts such as Coverdell savings accounts, 529 college savings plans and the refund value of 529 prepaid tuition plans). For independent students who do not report parental information, the accounts owned by the student (and/or the student’s spouse) are reported as student investments. For a student who must report parental information, the accounts are reported as parental investments, including all accounts owned by the student and all accounts owned by the parents for any member of the household.
- trust funds
- Business net worth unless your family owns and controls more than 50 percent of the business and the business has 100 or fewer full-time or full-time equivalent employees. For small business value, your family includes (1) persons directly related to you, such as a parent, sister or cousin, or (2) persons who are or were related to you by marriage, such as a spouse, stepparent or sister-in-law.
- the value of investment farms, not including the value of a family farm that you (your spouse and/or your parents) live on and operate.
Summary of assets not included:
- The home you live in
- the value of life insurance
- retirement plans (401[k] plans, pension funds, annuities, non- education IRAs, Keogh plans, etc.)
- Small businesses where your family owns and controls more than 50 percent of the business and the business has 100 or fewer full-time or full-time equivalent employees. For small business value, your family includes (1) persons directly related to you, such as a parent, sister or cousin, or (2) persons who are or were related to you by marriage, such as a spouse, stepparent or sister-in-law.
- the value of a family farm that you (your spouse and/or your parents) live on and operate.
How is net worth computed?
Net worth means the current value, as of today, of investments, businesses, and/or investment farms, minus debts related to those same investments, businesses, and/or investment farms. When calculating net worth, use 0 for investments or properties with a negative value.
Unlike with the income questions – which ask you to report based on a prior tax year – you are required to report the value of each asset on the day that you complete the FAFSA.