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!

As someone who just went through this exact scenario with my family's agricultural property, I can confirm what others have said - definitely report it as investment real estate, not a farm. We own 60 acres that we lease to a local farmer for corn/soybeans, and even though we file Schedule F, it doesn't qualify as a "family farm" under FAFSA rules since we're not actively farming it ourselves. The key test is whether it's your primary residence AND primary source of income - if either answer is no, it's an investment asset. The IRS hobby farm classification actually makes this decision easier since it confirms this isn't considered a business operation. One thing that helped us was getting a recent property appraisal to have solid documentation of the value. Even though verification is less common now, having that backup gives peace of mind. And definitely take advantage of that "Additional Information" section that Zoe mentioned - explaining your reasoning upfront can prevent headaches later!

This thread has been incredibly helpful! I'm dealing with a similar situation with some rental property that's been operating at a loss, and I was worried about how to handle it on my son's FAFSA. One question I haven't seen addressed - if you have multiple properties that generate rental/agricultural income, do you need to list each one separately on the FAFSA, or can you combine them into a single "investment real estate" total? I have the hay land plus a small rental duplex, both reported on my taxes but both running losses the past couple years. Also, for anyone who's been through verification - do they typically ask for documentation on ALL your reported assets, or just the ones that seem unusual? Trying to get organized before I submit!

This is such a valuable discussion! As someone new to the FAFSA process, I'm really grateful for all the detailed explanations here. I have a similar situation with about 30 acres that we rent out for cattle grazing - we get a small annual payment but definitely don't actively farm it ourselves. Based on everything I've read here, it sounds like I should also report this as investment real estate rather than a farm, especially since we're not living on it or making our primary income from it. The tip about adding an explanation in the "Additional Information" section is brilliant - I had no idea that was even an option! One follow-up question: when you report the net worth, are you supposed to use the current market value or the assessed value from property taxes? Our county assessments tend to be quite a bit lower than actual market value, so I want to make sure I'm reporting the right number. Thanks again everyone for sharing your experiences - this thread should be required reading for anyone with agricultural property!

This entire thread has been incredibly enlightening! As someone who will be helping my nephew navigate his first FAFSA next year, I'm bookmarking this discussion. We have a similar situation with some inherited farmland that we lease out for crop production. What strikes me most is how consistent everyone's advice has been - if you're not actively farming the land yourself AND it's not your primary residence/income source, it's investment real estate. The IRS hobby farm classification really does make this clearer than I initially thought. I especially appreciate the practical tips about documentation (keeping appraisals/assessments ready) and using the Additional Information section to explain unusual circumstances proactively. That seems like such a smart way to avoid potential verification delays. One thing I'm curious about - for those who have been through this process multiple times, does the way you report these assets stay consistent year to year, or do you need to re-evaluate the classification annually based on changing circumstances (like profit/loss patterns)? Thanks to everyone for sharing such detailed experiences. This is exactly the kind of real-world guidance that the official FAFSA instructions are missing!

This has been such an incredibly helpful thread! I'm a parent getting ready to help my daughter with her first FAFSA application, and we have a very similar situation with about 25 acres that we lease to a neighbor for hay production. Reading through everyone's experiences, it's crystal clear that this should be reported as investment real estate rather than a farm - especially since we're not actively farming it ourselves and it's not our primary residence or income source. The consensus here aligns perfectly with what I suspected but wasn't confident about. I really appreciate the practical advice about keeping documentation ready (property assessments, appraisals) and the brilliant tip about using the Additional Information section to explain the classification proactively. That seems like such a smart way to head off any potential confusion or verification issues. What I find most reassuring is hearing from people who've actually been through this process and encountered the same confusion with the official FAFSA guidance. It's validating to know this is a common issue and that there are clear best practices for handling it. Thanks to everyone for sharing their real-world experiences - this thread should definitely be pinned as a resource for other families dealing with agricultural property questions!

As someone who recently went through this exact situation with my son's FAFSA, I want to echo what everyone has said about reporting your land as investment real estate. We have 50 acres that we rent to a local farmer for soybeans, and even though we file Schedule F, it definitely doesn't qualify as a family farm under FAFSA rules. What really helped us was creating a simple one-page summary document that included: the property details, how we use it (rental income only), our tax classification (hobby farm), and why we're reporting it as investment real estate. We kept this with our FAFSA records along with our property tax assessment. Even though we never got selected for verification, having that documentation organized gave us peace of mind. The Additional Information section tip is spot on - we included a brief note explaining our classification reasoning, and the whole process went smoothly. Don't overthink it - if you're not actively farming it yourself and it's not your primary residence/income source, it's investment property. Period.

This thread has been absolutely invaluable! As someone who's been stressing about this exact issue for weeks, reading everyone's consistent advice has given me so much confidence. We have 35 acres that we lease for cattle grazing, and I was going in circles trying to figure out the right classification. The clarity around the key test (active farming + primary residence/income = farm, everything else = investment) is exactly what I needed. Plus all the practical tips - keeping documentation ready, using the Additional Information section, creating that summary document - these are the real-world insights you just can't get from the official FAFSA instructions. What really stands out to me is how many families are dealing with similar situations and how common this confusion is. It's reassuring to know we're not alone in finding the official guidance unclear. Thanks to everyone who shared their experiences - you've probably saved countless families from making costly classification mistakes!

Wow, this entire discussion has been incredibly helpful! As someone about to start the FAFSA process for my oldest child, I had no idea agricultural property classification could be so complex. We have a small 20-acre plot that we inherited and rent out for corn production - very similar to what many of you have described. What really resonates with me is how everyone emphasizes the same key principle: if you're not actively farming it yourself AND it's not your primary residence/income source, it's investment real estate. The IRS hobby farm classification actually makes this clearer rather than more confusing, which is reassuring. I'm definitely going to follow the advice about creating that summary document with property details and classification reasoning, plus using the Additional Information section to explain our situation proactively. The stories about verification delays when properties were incorrectly classified as farms have convinced me that being thorough upfront is worth the extra effort. Thanks to everyone who shared their real experiences - this thread is pure gold for families dealing with agricultural property on the FAFSA!