FAFSA confusion: How to report family land that generates hay income - farm or investment asset?

This is a great question that many families with land face! For FAFSA purposes, your property would be considered a farm if it produces agricultural products that provide a significant source of your family's income AND if your family actively participates in the farming operation. Based on what you've described (just having it mowed for hay, no employees, reporting losses), this would NOT qualify as a family farm under FAFSA rules. You should report it as an investment asset - specifically as real estate that is not your primary residence. The equity value ($175k) should be reported on the FAFSA under the parent investment section. The fact that it's classified as a hobby farm for IRS purposes actually makes this clearer - it's an investment, not an operating family farm.

we had a simlar situation with our property. listed it as an investment NOT a farm and FSA never questioned it. the key is that your not making your living from it.

The FAFSA system is RIDICULOUS with this stuff! We have 15 acres that my husband's family has owned for generations, and we let a neighbor cut hay on it for a small fee. We reported it as a farm the first year because we filed Schedule F, and got FLAGGED FOR VERIFICATION. Had to submit extra paperwork and our aid was delayed by 2 months!!! The next year we listed it as investment property and had no issues. The whole system is designed to confuse people, I swear.

For the 2025-2026 FAFSA, your land should be reported as an investment property, not as a farm business. The distinction matters because family farms get special treatment under FAFSA rules - they can be excluded from asset calculations if they're the family's primary residence AND source of livelihood. Since you're just having hay harvested and not actively farming, and it's not your primary residence, you'll need to report the net worth ($175k equity) under investments. The tax loss doesn't factor into how you classify the asset on FAFSA, though it will be reflected in your AGI which is pulled from your tax return. The fact that IRS considers it a hobby farm further supports treating it as an investment for FAFSA purposes.

wait but what if the land is next to your house? does that change anything? i thought if its connected to your primary home you dont report it

I ran into this EXACT issue last year trying to help my son with his FAFSA. We have 25 acres we lease out for crops. I spent HOURS trying to get through to someone at Federal Student Aid to get a clear answer because the FAFSA instructions are terrible. I never got through on their phone line - constant busy signals or disconnections. I finally used Claimyr (claimyr.com) to get through to a live agent after waiting for 3 weeks with no response. The agent confirmed that since we weren't actively farming the land ourselves and it wasn't our primary source of income, it should be reported as an investment property. They have a video showing how it works at https://youtu.be/TbC8dZQWYNQ - saved me so much frustration!

The 2025-2026 FAFSA simplification has actually made this a bit clearer! As others have mentioned, your land should be reported as an investment asset. Here's the key distinction: - Family farms: Must be the family's PRIMARY residence AND primary source of income - Investment real estate: All other properties that aren't your primary home The income/loss from the property is already captured in your tax return data that gets imported via the IRS Data Retrieval Tool. You don't need to separately document the loss. One important note: make sure you're only reporting the NET worth (value minus debt). If the property is worth $200k but you still owe $25k, you'd report $175k as the asset value.

my cousin tried to claim his hunting land as a farm because he sold some timber once and got audited lol definitely dont mess with this stuff

To summarize what everyone has correctly stated: 1. Your land should be reported as an investment asset (not a farm) on the 2025-2026 FAFSA 2. Report the net worth ($175k equity) 3. The tax loss is already factored into your AGI from your tax return 4. The 'hobby farm' classification by the IRS supports treating this as an investment One final tip: keep documentation of how you arrived at the property value in case of verification. A recent tax assessment, comparative market analysis, or appraisal would be helpful to have on hand. While verification is less common with the simplified FAFSA, it's still possible for non-standard situations.

Just wanted to add another perspective as someone who works in financial aid administration. The confusion around this issue is SO common, and you're absolutely right to be careful about classification. One thing I haven't seen mentioned yet - if you're ever unsure about asset classification on future FAFSAs, you can always add a note in the "Additional Information" section explaining unusual circumstances. For example: "40-acre hay property reported as investment asset per IRS hobby farm classification." This can help prevent verification flags and shows you've thoughtfully considered the classification. Also, keep in mind that the asset protection allowance for parents has changed with the simplified FAFSA, so depending on your age and family size, a portion of your total assets (including this land) may be protected anyway. The Student Aid Index calculation will factor this in automatically. Good luck with your daughter's FAFSA!