Your Questions Answered About FAFSA & Taxes
Do I need to file my taxes in order to file for aid?
No, you can use some other financial documentation like a W-2, 1099, or a paystub. It is certainly more straightforward to file with the prior-prior year's tax return.
What does FAFSA consider besides my AGI?
FAFSA looks at money currently held in cash, bank accounts, and investments. Assets like second homes, farm assets, and business assets will be assessed as well. You should report untaxed income sources like child support, interest income, and non-education veteran benefits.
I already filed my taxes, how can I move my money to reduce my expected contribution?
You can pay down your mortgage or rent, fund your retirement, and pay other bills. Parents should NOT gift money to their child's bank account or cash holdings as children are assessed at a greater rate than their parents.
What if my prior-prior year tax returns no longer accurately reflect my financial circumstances?
You can file an appeal with individual university's financial aid office. You should ask for a specific amount between $500 and $5000 that would be the difference between you attending that school and another. You should note changes to household income (lost jobs or wages) and expenses (like major medical expenses, taking in a family member, etc). If the student has raised their GPA or test scores, now is a good time to see if they are eligible for more merit aid.
Do I have to pay taxes on financial aid I received from my college?
Yes for work-study wages as well as grants and scholarships used for unqualified expenses; No for loans, nor grants and scholarships when used for qualified expenses.
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