FAFSA due tomorrow: Do military disability payments count as tax-free income for reporting?
I'm literally down to the wire with my FAFSA submission (due TOMORROW) and just realized I'm confused about reporting my dad's military disability payments. He receives about $2,400/month for service-connected disability, which is tax-free income. Do I need to report the balance in his savings account where these payments accumulate? I think I read somewhere that you don't report tax-free income OR account balances from tax-free sources on FAFSA, but now I can't find where I saw that. Anyone know the correct way to handle this before I submit? Don't want to mess this up and lose potential aid!
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Ravi Patel
You're correct that military disability payments are tax-free income that should NOT be reported on the FAFSA. However, the actual balance in the savings/checking accounts DOES need to be reported as an asset, regardless of where that money came from originally. The source of the money doesn't matter for asset reporting - what matters is the balance as of the date you submit your FAFSA application.
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Emma Johnson
•Thank you! That makes sense. So I need to include the actual account balances even though they came from tax-free income. I was so confused because I thought I read somewhere that if money came from tax-free sources you didn't have to report it at all.
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Astrid Bergström
My son went thru this EXACT same thing last yr. Military disability = NOT reported as income. But any $$$ sitting in accounts = reported as assets no matter where it came from. Good luck getting it done by tomorrow!!
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Emma Johnson
•Thanks for confirming! It's really helpful to hear from someone who's dealt with the same situation.
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PixelPrincess
To elaborate on what others have said: 1. Veterans disability benefits = NOT counted as income on FAFSA 2. Money from those benefits sitting in bank accounts = counted as assets 3. For assets, you report the balance as of the day you submit the FAFSA Also worth knowing: parent assets only affect your SAI calculation at about 5.64%, so having savings isn't going to dramatically impact your aid eligibility. Don't stress too much about this part.
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Omar Farouk
•Is it really only 5.64%??? I've been keeping all my money in my uncle's account because I thought FAFSA would take like 50% of what we had saved! 😱
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PixelPrincess
•Yes, it's really only about 5.64% for parent assets (student assets are assessed at 20%). So if your parents have $10,000 in savings, it only increases your SAI by about $564. Definitely not worth hiding assets or doing anything questionable.
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Chloe Martin
i think the confusion might be because the VA disability payments themselves aren't reported as untaxed income (which fafsa does ask about) but once that money is deposited and sitting in an account then yeah its just a regular asset
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Diego Fernández
Been trying to get through to the Federal Student Aid helpline all week with similar questions! After getting disconnected 6 times and waiting on hold for hours, I finally tried using Claimyr (claimyr.com) to get through to an actual human. They have this service that calls and waits on hold for you, then calls you when a real person answers. Worked great and saved me hours of frustration. They have a video demo here: https://youtu.be/TbC8dZQWYNQ if you want to see how it works. The agent confirmed exactly what others said - disability payments aren't reported as income, but account balances are reported as assets regardless of source.
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Emma Johnson
•Thanks for the tip! I've been trying to call them too with no luck. I'll check out that service if I need to talk to someone at FSA about anything else. For now, I think I've got the answer I needed about the disability payments.
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Omar Farouk
My DAD has the same exact situatoin!!! We did our FAFSA last week and we just put the bank account balances in the asset section and left the VA disability payment OUT of the income section. The financial aid office at my community college said thats the right way to do it when I called to check.
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Anastasia Kuznetsov
This whole FAFSA process is DESIGNED TO CONFUSE US! They make these forms deliberately complicated so that people make mistakes and get less aid. I made this exact "mistake" last year by including my husband's VA disability as untaxed income AND reporting the savings account where we keep it. Ended up having to file a correction and it delayed my daughter's financial aid package by TWO MONTHS. The entire system is rigged against families who save money responsibly!
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PixelPrincess
•I understand your frustration, but it's important to note that the rules are actually designed to protect veterans. Military disability payments are specifically excluded from FAFSA calculations as income precisely to benefit veterans. The asset reporting rules apply equally to everyone regardless of income source.
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Anastasia Kuznetsov
•Maybe so, but why isn't this clearly explained ANYWHERE on the form? And why does it take 3-4 weeks to process a simple correction? The whole system needs an overhaul!
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Astrid Bergström
Another thing to remeber is they ask for the account balances on the day you submit so if youre really worried maybe pay some bills today before submitting? Just saying what my cousin did lol
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Ravi Patel
•I would caution against making large unusual withdrawals specifically to manipulate FAFSA reporting. While it's true they only ask for the balance on the day you submit, intentionally moving money around could be considered misrepresentation. Plus, as mentioned earlier, parent assets only affect the SAI calculation by about 5.64%, so it usually doesn't make a significant difference anyway.
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Emma Johnson
UPDATE: I finally submitted my FAFSA! I reported the account balances as assets but did NOT include the VA disability payments as income. Thanks everyone for your help. Now I just have to wait and see what kind of aid I qualify for...
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Ravi Patel
•Great job getting it submitted before the deadline! That's the approach I would have taken too. If you want to double-check anything, you can always log back in and make corrections within the next few days.
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StarSurfer
Congrats on getting it submitted on time! You made the right call - VA disability payments are definitely excluded from income reporting, but the account balances still need to be reported as assets. Just wanted to add that if you ever need to make corrections later, you have that option, but it sounds like you handled it correctly. Good luck with your aid package!
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