Parent’s Federal Income Tax and FAFSA

 

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The image below depicts certain additional financial information regarding the parent that one may be required to enter.

FAFSA Filing

Federal Income Tax Paid by the Parents

The question regarding the federal income tax paid requires you to enlist the income tax paid by the parent/s without adding other taxes such as self-employment tax or household employment tax.

The question requires you to list only the federal income tax paid, and not any other kind of tax. It does not include any tax listed in the Other Taxes section of the federal income tax return or “Health care: individual responsibility.”

Why does the FAFSA not include the Self-Employment Tax with Federal Income tax?

 FAFSA does not include the self-employment tax in this section, because it is already being considered in some other section, and so, it will get counted twice if self-employment tax is included with the federal income tax.

Related:How important is the Federal School Code?

Questions on Additional Financial Information -  How to answer?

Not all the income and expenses come under the federal financial aid formula. There are certain income and expenses that should be reported in the Additional information section of the FAFSA. The following kind of income and expenses come under this section:

  • Certain taxable earnings from need-based student employment programs such as federal work-study.
  • Taxable portions of scholarships, fellowships, tuition reimbursements/waivers and AmeriCorps benefits (education awards, living allowances and interest payments) that were included in adjusted gross income (AGI)
  • Taxable portion of combat pay.
  • Education tax credits.
  • The amount of child support paid, except for the children counted in the household size.

Question on Federal Means-Tested Benefits Received – How to answer?

To calculate the answer to this question, you will have to include:

  • Supplementary Security Income (SSI)
  • Temporary Assistance for Needy Families (TANF)
  • Supplemental Nutrition Assistance Program (SNAP), previously known as food stamps
  • Special Supplemental Nutrition Program for Women, Infants and Children (WIC)
  • Free and Reduced Price School Lunch.

Related:Will my FAFSA be chosen for verification, even if I have used the IRS Data Retrieval Tool?

Question Regarding the Parents’ Untaxed Income

The FAFSA also takes into account certain untaxed income that are not even included in adjusted gross income. These include:

  • Money invested in retirement plans, pension plans, 401 (k) plans, SEP, SIMPLE, and also deductible contributions made to the tax-deferred IRAs and Keogh plans.
  • Untaxable investments into Health Savings Accounts.
  • Any kind of Child Support received.
  • Tax-exempted interest income.
  • Untaxed portions of IRA, pension and annuity distributions, such as a tax-free return of contributions from a Roth IRA. Parents must subtract rollover amounts from the amount of untaxed portions of IRA, pension and annuity distributions.
  • Veterans non education benefits (Disability, Death Pension, DIC) and VA Educational Work-Study allowances
  • Other untaxed income, such as disability and workers’ compensation (but not SSI), untaxed portions of Railroad Retirement benefits, black lung benefits, refugee assistance.

FAFSA FORM FILING

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