Do rental properties purchased in 2023 need to be reported on 2025-26 FAFSA?
I'm filling out my daughter's FAFSA for next year and just realized I might have messed up. I bought a rental property in June 2023 as an investment, but I'm completely confused about whether I need to include this on the 2025-26 FAFSA. The property is worth about $320,000 and generates rental income, but I have a mortgage on it too. Does FAFSA count investment properties? Would it be considered a business asset? Or do I not need to report it at all since it's real estate? I've been going around in circles on the studentaid.gov website but can't find a straight answer!
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AstroAlpha
yeah u definitely need to include that, all investment properties count on fafsa as assets. my cousin got flagged for verification because he didn't list his rental property
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Connor Gallagher
•Oh no, really? I was hoping since it's a physical property and not like stocks or something that it wouldn't count. Did your cousin have to resubmit his FAFSA?
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Yara Khoury
Yes, you absolutely need to report this property on the 2025-26 FAFSA. Investment real estate is considered an asset for FAFSA purposes. You'll report the net value (current market value minus what you owe on mortgages). Don't confuse this with your primary residence, which IS excluded from FAFSA reporting. Investment properties definitely count and can significantly impact your SAI calculation.
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Connor Gallagher
•Thank you for clarifying! What about the rental income? Do I need to include that separately somewhere on the FAFSA, or is reporting the property value itself enough?
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Keisha Taylor
Are you sure it's not excluded if it's your only rental property? I thought I read somewhere that if you have just one rental and it's under a certain value, it doesn't count? The FAFSA rules are so confusing!!
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Yara Khoury
•That's not correct. You're probably thinking of the small business exclusion, which can apply if you own and control more than 50% of a small business with fewer than 100 employees. A single rental property doesn't qualify for this exclusion - it's still considered an investment asset for FAFSA purposes.
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Paolo Longo
I had the EXACT same problem last year! I bought a duplex in 2022 and completely forgot to list it on my son's FAFSA. We got selected for verification and it was SUCH a nightmare trying to fix it. We almost lost his whole financial aid package because of it. The worst part was trying to reach someone at Federal Student Aid to explain the situation - I was on hold for HOURS and kept getting disconnected.
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Connor Gallagher
•That sounds horrible! I definitely don't want to risk verification. Was your son's financial aid affected after you finally got it sorted out?
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Paolo Longo
•Yes, our SAI went up by about $8,000 which reduced his aid package. BUT it would have been SO much worse if we hadn't been able to explain the situation. I finally got through to someone at FSA using Claimyr (claimyr.com). They have this service that calls and waits on hold for you then connects you when a real person answers. Saved me hours of frustration - there's a demo video at https://youtu.be/TbC8dZQWYNQ that shows how it works. Definitely worth it during FAFSA season when everyone's trying to call!
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Amina Bah
It's important to understand how rental properties are treated on the FAFSA. You need to report: 1. The net value of the property (market value minus debt) as an asset 2. The net income from the property on the income section Be careful about how you calculate the net value. FAFSA allows you to deduct only the percentage of the mortgage that applies to the investment property, not your primary residence. Also, if your rental property is reported on Schedule E of your tax return, that information will be pulled from your tax returns through the FAFSA data retrieval tool.
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Connor Gallagher
•Thank you for the detailed breakdown! Since I bought it in June 2023, would the income also show up on the tax returns that FAFSA will use for the 2025-26 application? I'm trying to figure out if they'll see the rental income automatically.
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Oliver Becker
The 2025-26 FAFSA uses your 2023 tax information, so yes, any rental income from June-December 2023 would be included in the tax data that gets pulled into your FAFSA. For the asset portion, you'll report the current net value at the time of filing the FAFSA (value minus remaining mortgage), not the 2023 value.
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Connor Gallagher
•Perfect, that makes sense. So I'll need to get a current market valuation of the property when I file the FAFSA, and I should make sure my 2023 tax return correctly shows the rental income. Thank you!
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CosmicCowboy
THE FAFSA IS SUCH A SCAM!!!! Why should our kids get LESS aid because we worked hard to invest in our future?? I have TWO rental properties and my daughter got almost NOTHING in aid because of it, even though the properties barely break even after expenses!!! The system is RIGGED against middle class families who are trying to build wealth!! 😡😡😡
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Oliver Becker
•While it can feel unfair, the FAFSA is designed to measure your ability to pay for college based on both income and assets. Investment properties represent potential wealth that could theoretically be liquidated for educational expenses. The system isn't perfect, but there's a methodology behind how they assess financial need.
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AstroAlpha
lol i think my parents tried hiding a rental property once and it did NOT go well... verification is no joke they check everything
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Natasha Orlova
My daughter just finished college last year and we went through all of this. One thing no one mentioned - if you structure the rental property as a formal business entity (LLC), it MIGHT qualify for the small business exclusion depending on your specific situation. Worth talking to a financial aid consultant about that option if the property will significantly impact your SAI.
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Amina Bah
•This is partially correct, but needs clarification. Simply forming an LLC for a single rental property typically won't qualify for the small business exclusion. The exclusion requires that: 1) The business has fewer than 100 employees, 2) The family owns AND controls more than 50% of the business, and 3) The business is actively operating. A passive rental in an LLC often doesn't meet the third criterion. Additionally, financial aid officers scrutinize these arrangements carefully and may still count it as an investment asset.
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Connor Gallagher
Thanks everyone for the helpful information! To summarize what I learned: 1. Yes, I definitely need to report the rental property as an asset on the FAFSA 2. I'll report the current market value minus the mortgage balance 3. The rental income from 2023 will automatically be included via tax information 4. Trying to hide it could trigger verification and potentially worse consequences I'll make sure to have all this information ready when I fill out the 2025-26 FAFSA. Better to be honest upfront than deal with verification issues later!
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Kyle Wallace
Great summary Connor! You've got it exactly right. Just one additional tip - when you're getting the current market value for the FAFSA, you don't need a formal appraisal. A reasonable estimate based on recent comparable sales in your area or online valuation tools like Zillow is typically sufficient. The key is being consistent if you're selected for verification later. Also, keep good records of your rental income and expenses from 2023 since that will help if you need to provide documentation. Good luck with your daughter's FAFSA!
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Saanvi Krishnaswami
•This is really helpful advice, Kyle! I'm new to both rental properties and the FAFSA process, so I appreciate the practical tips. Quick question - when you mention keeping records of rental income and expenses, should I be calculating the net rental income myself, or will that already be reflected in my tax return that gets pulled into the FAFSA? I want to make sure I'm not double-counting anything or missing something important.
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