Which specific line on tax return does FAFSA use for calculating aid eligibility?

Thank you! Do you know if they look at the actual rental income or just what ends up on the 1040 after all the deductions? We have two rental properties but after depreciation and expenses they barely show a profit on paper.

Oh that's frustrating! We have about $45k saved for a kitchen remodel. I wonder if we should spend that before filing FAFSA...

Be careful with trying to spend down assets - there are look-back provisions that can flag suspicious asset transfers. The new FAFSA does have a higher asset protection allowance than before, so you might not need to worry as much about that $45k depending on your overall financial picture.

This is incredibly helpful, thank you! I didn't realize they also looked at the actual tax paid amount. Our rental properties are actually owned by an LLC - do you know if those assets still count directly against us for FAFSA purposes?

Yes, if you have controlling interest in the LLC, those assets will likely be counted in your SAI calculation. The FAFSA doesn't necessarily care about the legal structure - it cares about who ultimately owns and controls the assets. If the LLC is on your tax return (likely via Schedule E), the FAFSA will capture that data through the tax return integration.

Same thing happened to my brother! Worked overtime for 3 months to cover medical bills and boom - daughter's aid package tanked. System is broken.

In situations with one-time income increases, you can actually request a professional judgment review from the financial aid office. They have discretion to adjust your aid based on changes in circumstances or one-time income events. Worth looking into for next year.

I had that same problem last month! Was trying for 4 days straight. Finally used this service called Claimyr (claimyr.com) that got me connected to a FAFSA agent in about 20 minutes. They have a video showing how it works: https://youtu.be/TbC8dZQWYNQ The agent I spoke with confirmed they primarily use the AGI from line 11, but they also pull several other fields directly from your tax return through the IRS Data Retrieval Tool. Made everything way clearer than reading online forums.

Thanks for the suggestion! I might try that service. The student aid website has been super unhelpful and I really need to talk to an actual person about our specific situation.

This is exactly what I needed, thank you! One more question if you don't mind - we transferred one rental property to our adult son (he's 26) last year. Will that property still somehow count against our daughter's FAFSA?

As long as it was a legitimate transfer of ownership (not just on paper) and your son isn't counted as part of your FAFSA household, then no, that property shouldn't affect your daughter's aid eligibility. However, if the transfer happened very recently and appears to have been done specifically to increase aid eligibility, some schools might question it during verification. But generally speaking, assets owned by siblings who aren't in college and aren't part of the household aren't counted.

Ha! That's exactly how it feels trying to figure this stuff out. Did your daughter end up getting decent aid?

Yeah actually she did! Got more than we expected from her state school. Less from her dream school though. The weird thing is they used the same FAFSA info but came up with totally different packages??

That's good to know! 2023 was actually a pretty normal year for us, but I'm worried about 2024 because I might be getting a significant bonus (which would affect the FAFSA for my younger son who starts college in 2026). Is there anything we can do to mitigate that impact?

If you know a bonus is coming and you have access to retirement accounts, one legitimate strategy is to maximize retirement contributions in that same tax year. Contributions to traditional 401(k)s and IRAs can reduce your AGI. Also, if you have business expenses you could legitimately accelerate into that same tax year, that might help too. Just make sure whatever you do is legitimate tax planning and properly documented.

Thank you so much for mentioning the IRS Data Retrieval Tool! I hadn't heard about that before. That sounds like it would take a lot of the guesswork out of this whole process. Do you know when that tool typically becomes available? I'm trying to plan out our timeline for getting everything ready before the December FAFSA opening. Also, since you mentioned property values counting as assets - do you know if there's a threshold where they start impacting aid eligibility significantly? We're trying to figure out if it makes sense to pay down some of our rental property mortgages before filing.

The IRS Data Retrieval Tool usually becomes available a few weeks after the FAFSA opens, so probably sometime in January for the 2025-2026 cycle. As for asset thresholds, there's actually an asset protection allowance that varies based on the age of the older parent - for most families it's around $10k-15k that's completely protected. After that, assets are assessed at about 5.64% in the SAI calculation. So if you have $100k in rental property equity above the protected amount, it would add roughly $5,640 to your Student Aid Index. Whether paying down mortgages helps depends on your overall financial picture and cash flow needs. Just remember that primary residence equity doesn't count as an asset, but rental properties do!

This is really valuable advice about record keeping! I'm definitely going to be more meticulous about documenting our business expenses going forward. Quick question though - you mentioned that we'll be using our 2023 tax return for my daughter's first year. Does that mean if our income drops significantly in 2024 (which it might due to some business changes), there's no way for that to help her aid package for freshman year? Or is that where the professional judgment review that others mentioned would come into play?