Author: Paul Martin

5 important changes coming to FAFSA families need to know

by Paul Martinin Need-based Financial Aid

Students and parents applying for financial aid will complete a new, simpler FAFSA (Free Application for Federal Student Aid) for the 2024-25 academic year. The new FAFSA greatly reduces the number of questions and makes it easier for students and families to file.

Student Aid Index (SAI) will replace Expected Family Contribution (EFC) as the calculated amount a family is able to pay for a student’s college for a given year. Colleges will use SAI in place of EFC in the fundamental equation to determine need-based financial aid eligibility.

Cost of Attendance – Student Aid Index = Financial Need

Your financial need is the amount of need-based financial aid you would be eligible for.

Along with the new terminology, there are changes to how a family’s eligibility is calculated. Here are the five most important changes you need to be aware of and how they may impact you.

1) Elimination of the number of students in college

Change

The most discussed – and maligned – change is that the formula no longer divides Student Aid Index (SAI) by the number of students in college. Previously, the Expected Family Contribution (EFC) was calculated as a family’s ability to pay for all college costs for a single academic year. If there were multiple children in college, this EFC was then divided among those children so that each student was expected to pay a portion of the total EFC. Now, the SAI will be calculated equally for each student, except for differences in student income or assets reported between siblings.

Impact

Families with multiple children in college at the same time will see an increase in their SAI over previous years’ calculations, reducing their eligibility for financial aid.

2) Limits on income reported

Change

Income reported on the FAFSA will only come from federal tax returns. Parents (or students) will no longer be required to report untaxed or pre-tax income not captured by the tax return. Most notably, pre-tax contributions to employer retirement plans will not be counted. For student income, there is no longer the requirement to report money received or bills paid on their behalf by relatives or others. 

Impact

Parents who want to lower their SAI and increase aid eligibility and may now consider maximizing pre-tax employer retirement contributions to reduce the income reported on FAFSA.

Students can now receive money from relatives – grandparents and others – to help pay for college without that support having a negative impact on their future aid eligibility.

3) Child support now reported as an asset

Change

Child support will no longer be reported as untaxed income, but instead, the amount of child support received in the FAFSA tax year will be reported as a parent asset.

Impact

Divorced parents receiving child support may see an increase in their aid eligibility since the contribution rate to the Student Aid Index (SAI) from parent assets is much lower than from parent income.

4) Value of a family business or farm is reported as a parent asset

Change

The net worth of a family business or farm of any size will now be reported as a parent asset. The current EFC formula excludes this amount if the business or farm employs fewer than 100 full-time employees, which exempted most cases. Going forward, this change may impact more small business owners.

Impact

Families who report a value to their business or farm will see a higher Student Aid Index and a decrease in their aid eligibility. It’s important to note that the total value reported will not be counted as a parent asset, but only a portion. This 2024-25 chart details how this included amount will be calculated.

If the net worth of a business or farm is…Then the adjusted net worth is…
Less than $1$0
$1 to $165,00040% of net worth of business/farm
$165,001 to $490,000$66,000 + 50% of net worth over $165,000
$490,001 to $820,000$228,500 + 60% of net worth over $490,000
$820,001 or more$426,500 + 100% of net worth over $820,000

5) New rules to calculate an SAI equal to $0

Change

There are new thresholds for students to qualify for an SAI equal to $0 and receive the maximum Pell Grant. A parent’s Adjusted Gross Income (AGI) in the FAFSA tax year will be compared to a multiple of income for Federal Poverty Level for their marital status, family size and state of residence. If the parent’s AGI falls at or below this amount, then a student will be given a maximum SAI equal to $0 and awarded a full Pell Grant. Here is the 2024-25 chart with income thresholds by marital status and family size for the lower 48 states.

Family size/
members of household		Single parent with AGI at or belowMarried parent with AGI at or below
2$41,198N/A
3$51,818$40,303
4$62,438$48,563
5$73,058$56,823
6$83,678$65,083
7$94,298$73,343
8$104,918$81,603

SAI can also be as low as -$1,500 as a measure of extreme need. Any student whose parent is not required to file a tax return will be given an SAI equal to -$1,500; however, there are other scenarios where a student’s SAI will be less than $0.

Impact

For families with high need, a better opportunity to receive an SAI equal $0 and the maximum Pell Grant. The new methodology is more generous and flexible than today’s “automatic $0 EFC” income threshold of $29,000 or less.

Guide to creating your FSA ID

by Paul Martinin Need-based Financial Aid

Why do you need an FSA ID?

Your Federal Student Aid ID, or FSA ID, is an identity-verified ID with the Department of Education. An FSA ID is required by each FAFSA contributor to:

  1. Access the online FAFSA,
  2. Provide consent to the IRS to share your Federal Tax Information with the Department of Education,
  3. Electronically sign the FAFSA for submission.

You’ll use this same FSA ID to reapply for financial aid every year and manage the Federal Student Aid you may receive, such as Direct Federal Student Loans. Once created, your FSA ID will be your forever ID for all things related to the FASFA and Federal Student Aid.

You can create an FSA ID at: https://studentaid.gov/fsa-id/create-account/launch.

Who creates an FSA ID?

For a dependent student applying for financial aid, both the student and parent create their own FSA IDs. If the parent or student already has an FSA ID from prior applications, that FSA ID is used this year and every year.

Dependent student with married parents

If the dependent student’s biological or adoptive parents are married, here are the rules for which parents create an FSA ID for the FAFSA.

Consent to share the “Married filing jointly” tax information is required from only one tax filer. One parent can use their FSA ID to log in, provide that consent, and sign the FAFSA.

If parents file taxes “Married filing jointly.”
Only one parent needs to create an FSA ID.

Consent to share the “Married filing jointly” tax information is required from only one tax filer. One parent can use their FSA ID to log in, provide that consent, and sign the FAFSA.

Because parents file separate tax returns, consent is required by each parent to share individual tax information. Each parent logs in with their uniquely-identified FSA ID for consent and signature.

If parents do not file taxes “Married filing jointly.”
Both parents need to create FSA IDs.

Because parents file separate tax returns, consent is required by each parent to share individual tax information. Each parent logs in with their uniquely-identified FSA ID for consent and signature.

Dependent student with separated or divorced parents

If the dependent student’s biological or adoptive parents are separated or divorced and no longer live together, only the custodial parent is required to complete the FAFSA. However, if the divorced custodial parent is remarried, they must include their spouse on the application. Refer to rules on how to determine who is the custodial parent.

The custodial parent can use their FSA ID to log in, provide IRS consent, and sign the FAFSA.

If the custodial parent is not remarried.
Only the custodial parent needs to create an FSA ID.

The custodial parent can use their FSA ID to log in, provide IRS consent, and sign the FAFSA.

Consent to share the “Married filing jointly” tax information is required from only one tax filer. The custodial parent can use their FSA ID to log in, provide IRS consent, and answer all parent questions.

If the custodial parent is remarried and files taxes “Married filing jointly” with their spouse.
Only the custodial parent needs to create an FSA ID.

Consent to share the “Married filing jointly” tax information is required from only one tax filer. The custodial parent can use their FSA ID to log in, provide IRS consent, and answer all parent questions.

Because the couple files separate tax returns, consent to share individual tax information is required by both filers – the custodial parent and their spouse. This requires each to log in with a uniquely-identified FSA ID for consent and signature.

If the custodial parent is remarried and does not file taxes “Married filing jointly” with their spouse.
Both the custodial parent and spouse need to create FSA IDs.

Because the couple files separate tax returns, consent to share individual tax information is required by both filers – the custodial parent and their spouse. This requires each to log in with a uniquely-identified FSA ID for consent and signature.

How do you create an FSA ID?

Go to: https://studentaid.gov/fsa-id/create-account/launch.
Watch this quick, 5-minute video to create your FSA ID.

Financial aid application process for single, separated or divorced parents

by Paul Martinin Need-based Financial Aid

The rules and requirements for single, separated or divorced parents are different for submitting financial aid applications. The information below clarifies the rules for both FAFSA (Free Application for Federal Student Aid) and the CSS Profile.

Rules for 2024-25 FAFSA

Which parent completes the FAFSA?

If the student’s parents are 1. Never married, 2. Separated or 3. Divorced, only the custodial parent submits information on the FAFSA, unless the parents still live together in the same household. If living under the same roof, both parents will be required to submit their information regardless of marital status.

Who is the custodial parent?

The criteria FAFSA uses to determine who is the custodial parent are as follows:

  1. The parent who provides the greater financial support to the student in the 12 months prior to application submission.
  2. If the student receives equal support from both parents for that time period, then it’s the parent with the greater income or assets.

There is no basis for a parent to be the custodial parent for purposes of completing the FAFSA based on the following:

  1. Which parent the student lives with the most.
  2. Which parent has legal custody.
  3. Which parent claims the student on their taxes.

The custodial parent needs to create a Federal Student Aid (FSA) ID to complete and electronically sign the student’s FAFSA. Watch this short video tutorial on how to create an FSA ID.

What if the custodial parent is remarried?

A custodial parent who is remarried reports income and asset information for both herself/himself and their spouse. This is true even if the new spouse has not adopted the student. FAFSA requires the entire household’s financial information for financial aid consideration.

Rules for CSS Profile

Which parent completes the CSS Profile?

Most CSS Profile colleges will require both biological parents to submit their information, even if the parents are 1. Never married, 2. Separated, or 3. Divorced. Both the custodial parent and the noncustodial parent submit their information separately and securely into a single student application that is received by the college. Information submitted by each biological parent is never shared with the other parent.

Who is the custodial parent?

CSS Profile follows the same criteria as FAFSA to determine who is the custodial parent. The custodial parent submits her/his information in the primary application submitted by the student. This application is completed using the student’s College Board login, so no additional login needs to be created by the custodial parent.

How does the noncustodial parent submit her/his information?

The noncustodial parent creates a College Board login to submit her/his information. The parent links the information that s/he is submitting by using the CSS Profile Financial Aid ID aka “CBFinAid ID” associated with the student’s primary application. This ensures the information is combined into one application for the college. No access to this information is granted to either the student or non-custodial parent.

What if either parent is remarried?

If either parent is remarried, the remarried parent reports financial information for both herself/himself and her/his spouse. This is true even if the new spouse has not adopted the student. The CSS Profile requires the entire household’s financial information.

What if the noncustodial parent cannot or will not submit the application?

CSS Profile colleges do not consider a parent’s unwillingness to participate and submit her/his information as sufficient reason to not collect this information. Non-submission by either parent prevents a college from processing the student’s financial aid application.

Colleges do provide a formal waiver process for a student to petition for the noncustodial parent information to be omitted or waived. The waiver must be submitted separately to each college’s financial aid office, and each college uses its own evaluation process and discretion in granting a waiver.

The standard waiver request form clearly states circumstances that will and will not be considered for the waiver, often requiring “no contact” with the noncustodial parent. However, each college can create its own criteria for which circumstances to consider. Colleges may also require documentation to support your waiver.

Excerpt from CSS Profile Waiver Request for the Noncustodial Parent

You can review the entire standard waiver request form using the link below. Remember, to check with your specific college’s financial aid office, as they may have created their own institutional waiver request form.

Resource center for divorced or separated parents on the CSS Profile website

The CSS Profile Info for Divorced or Separated Parents resource center includes several resources, including:

New paths to excluding parent assets from eligibility calculation

by Paul Martinin New 2024-25 FAFSA, Uncategorized

Parent assets reported on the FAFSA impact a student’s aid eligibility. For many families, the amount parents are expected to contribute from assets reported can be as high as 5.64% per year, with a rough average of 5%. Given this, the ability to exclude assets from the calculation of the Student Aid Index can be helpful to maximize eligibility.

These are the three scenarios where a parent is exempt from reporting parent assets.

The exceptions to these scenarios are if:

  1. the parent either lives outside of the US, even when they file US taxes
  2. the parent does not file US taxes unless they don’t file because their income is below the filing threshold.

In both cases above, the parent will still be required to report parent assets.

1) Student is eligible for the Maximum Pell Grant

Students may be automatically eligible for the Maximum Pell Grant given new rules on parent AGI, family size and state of residence. In the application process, FAFSA will determine whether the student qualifies for the Maximum Pell Grant based on the 2022 AGI shared by the IRS before additional financial information is reported.

Here is the chart with income thresholds by marital status and family size for the lower 48 states.

Family size/
members of household		unmarried parent with AGI at or belowMarried parent with AGI at or below
2$41,198N/A
3$51,818$40,303
4$62,438$48,563
5$73,058$56,823
6$83,678$65,083
7$94,298$73,343
8$104,918$81,603

2) Combined parent income is less than $60,000

There are actually two parts to this qualification.

  1. Parents’ 2022 combined AGI (Adjusted Gross Income) is less than $60,000. AGI is reported on page 1 of the 2022 1040 on line 11.
  2. Parents filing taxes must also meet additional criteria beyond the income threshold. For 2022, parents must not file Schedules A, B, D, E, F, or H or not file a Schedule C with net business income greater than $10,000 of either loss or gain.

3) Student or parents receive a benefit under the means-tested Federal benefit program during the 2022 or 2023 calendar years.

Programs listed on the 2024-25 FAFSA that qualify are:

  • Earned income tax credit (EITC)
  • Federal housing assistance
  • Free or reduced-price school lunch
  • Medicaid
  • Refundable credit for coverage under a qualified health plan (QHP)
  • Supplemental Nutrition Assistance Program (SNAP)
  • Supplemental Security Income (SSI)
  • Temporary Assistance for Needy Families (TANF)
  • Special Supplemental Nutrition Program for Women, Infants and Children (WIC)
Screen provided by Federal Student Aid in the 2024–25 FAFSA Form Preview Presentation, July 31, 2023
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Changes to reporting parent assets

by Paul Martinin Uncategorized

Parent assets reported on the FAFSA impact a student’s aid eligibility. For many families, the amount parents are expected to contribute from assets reported can be as high as 5.64% per year, with a rough average of 5%. The values of any reported assets are the values on the filing date.

There are three notable changes to reporting parent assets on the 2024-25 FAFSA.

Screen provided by Federal Student Aid in the 2024–25 FAFSA Form Preview Presentation, July 31, 2023

1) Child support received

If the parent received child support for any of their children, that amount is now reported as a Parent Asset instead of parent untaxed income.

How does the parent calculate the amount of child support received?

2024-25 FAFSA asks for the total child support received in the full calendar year before the application is submitted. This may not be the same as the 2022 tax year used for the 2024-25 FAFSA. For example, if the parent is completing the asset section in January 2024, then the parent should report the total child support received in 2023, not 2022.

2) Business or farm owners

The net worth of a business or farm of any size is reported under Parent Assets. Previously, if the business or farm employed fewer than 100 full-time employees, that business or farm was exempt from reporting. This is no longer the case. This new requirement will have a large impact on some families.

How does the parent calculate the net worth of their business or farm?

Based on 2024-25 FAFSA guidance, net worth of a business or farm is the value of the business or farm minus (-) debts.

  1. The value of the business or farm includes the market value of land, building, machinery, equipment, and inventory.
  2. Debts of the business or farm are only debts where the business or farm was used as collateral.

What if the parent’s business is a services business, e.g., consulting, cleaning, etc…?

Most services businesses do not have tangible assets, like land or equipment, defined in the FAFSA. In this case, the business value may be $0.

3) 529 Plans owners

Starting with the 2024-25 FAFSA, parents should only report 529 Plans that benefit the student applicant. 529 Plans that benefit or are intended for siblings or other family members are no longer reported.

What if the parent has a college pre-paid plan?

College pre-paid plans are treated the same way as 529 Plans. Parents should only report the refund value of the student’s college pre-paid plan.

What are other parent assets reported on the FAFSA?

Reportable parent assets include the following:

  1. Amount of cash, savings and checking.
  2. Amount of brokerage accounts, not held in retirement. These may include: money market funds, mutual funds, stocks, bonds, and stock options.
  3. Certificates of Deposits (CDs).
  4. Educational savings accounts for the benefit of the student applicant, including: 529 college savings plans, Coverdell savings accounts, and the refund value of prepaid tuition plans.
  5. Commodities.
  6. Net worth of second properties. Net worth would be calculated as market value of a property minus (-) any debts owned against them.

What parent assets are not reported on the FAFSA?

Parent assets that should not be reported are:

  1. Primary home
  2. Retirement accounts, including: 401k, 403b, IRA, Roth IRA, Keogh plans, pension funds and annuities
  3. Value of life insurance
  4. ABLE accounts
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Changes to reporting family size

by Paul Martinin Uncategorized

The family size, previously known as household size, will now be determined by the number of dependents claimed on the parent’s 2022 tax return. This number is part of the Federal Tax Information (FTI) shared by the IRS, so it will not be shown to the contributor on their application. The contributor can manually enter their own number in family to override that number shared by the IRS.

Screen provided by Federal Student Aid in the 2024–25 FAFSA Form Preview Presentation, July 31, 2023

Does FAFSA want the number in family at the time of application or in 2022?

The number in family includes dependents living in the household that receive at least 50% of their support from the parent and will continue to receive at least 50% of support from the parent in the coming academic year (2024-25) when the student is in college. This can include non-children dependents like relatives and children who don’t live in the household because they are also attending college.

If the number isn’t shown, how does the parent know if it’s correct?

The parent can look at their 2022 tax return to total the number in family received from the IRS. The total is the parent or parents filing the return plus the number of dependents listed in the “Dependents” section on 1040, page 1.

Can the parent manually enter the number in family to be safe?

Many college access professionals suggest manual entry because of the many cases that there can be differences between the tax return and the actual number.

If the parent overrides the number in family from what is transferred, will this trigger a verification?

The Department of Education has stated that their standard verification will still be statistically driven, not driven by a manual entry of the number in college. This will not be considered “conflicting information” that a Financial Aid Administrator would be required to verify.

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Federal Student Aid (FSA) ID required for every FAFSA contributor

by Paul Martinin Uncategorized

Starting in 2024-25, every contributor to the FAFSA must have an FSA ID to complete their portion of the FAFSA. Contributors will go through multi-factor verification, like a push text to their phone or email to their inbox, every time they log in.

Why is every contributor now required to have an FSA ID?

The new FAFSA is an identity-based application, meaning that each contributor’s identity must be verified to process the application and for the student to be eligible for Federal Student Aid. When a contributor legally agrees to share Federal Tax Information (FTI), the IRS must know that the person giving that permission is who they say they are. This is true even if the contributor has no FTI to be shared.

How does a contributor create an FSA ID?

A contributor must have a Social Security Number (SSN) and a unique email address. The process takes a few minutes; however, the match with the Social Security Administration can take 3-5 days. For more information, see How to Create your FSA ID.

What if a contributor doesn’t have a Social Security Number?

The Department of Education is currently setting up an alternate way for a contributor without an SSN to verify their identity and create an FSA ID. This will be through TransUnion using their “knowledge-based” identity verifying process. Current timing on the availability of this alternative method for creating an FSA ID is October 2023.

Does a contributor have to wait until the 2024-25 FAFSA is released to create their FSA ID?

No. If a contributor has an SSN, they can proactively create their FSA ID today.

If a contributor already has an FSA ID, can they still use this for the new FAFSA?

Yes. The FSA ID is a unique, life-long identifier for an individual for any engagement or interaction with Federal Student Aid.

What if a contributor can’t create an FSA ID or doesn’t want to be identified?

There will still be the option to complete a paper FAFSA. However, this paper FAFSA still requires both consent for the IRS to share Federal Tax Information (FTI) and signature to complete the application. The Department of Education will make an effort to go through the identity-verifying process once the paper FAFSA is received.

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New rules for single, separated or divorced parents

by Paul Martinin Uncategorized

There are new rules for which parent will complete the 2024-25 FAFSA if the student’s biological or adoptive parents are single, separated or divorced.

The primary or custodial parent is now defined as the parent who provided more financial support in the 12 months prior to application. This parent will complete the FAFSA. However, if the biological or adoptive parents live together at the time of filing, both parents will have to be contributors to the FAFSA regardless of their marital status.

There is no basis for a parent to be the custodial parent for purposes of completing the FAFSA based on the following:

  1. Which parent the student lives with the most.
  2. Which parent has legal custody.
  3. Which parent claims the student on their taxes.

How will a student know which parent to include in the FAFSA?

The FASFA application process includes a new Parent Wizard that asks students a series of questions to determine which parent should be included in the FAFSA. FAFSA asks the student which parent provided more financial support in the 12 months prior to application.

Screenshot from Federal Student Aid 2024-25 FAFSA Prototype.

What if the parents provided equal or 50/50 support?

FAFSA asks the student to include the parent with either greater income or greater assets.

How does the student determine who provides more financial support?

The Department of Education is not providing guidance on measuring or calculating financial support to students. This means it is solely up to the student to make this determination based on their judgment. The student’s decision on which parent provides the most financial support cannot be verified by the financial aid administrator.

What if the student doesn’t live with their parents or receives no support from their parents?

If the student is determined to be a dependent student based on FAFSA’s definition but doesn’t receive financial support from their parents, FAFSA asks the student to include the parent with either greater income or greater assets.

How does FAFSA define “separated” status?

There is no definition of “separation” in the FAFSA legislation. This means a student’s biological or adoptive parents can be informally separated, and only one parent will complete the FAFSA as long as those parents are not living together.

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New requirement to consent to share Federal Tax Information (FTI)

by Paul Martinin Uncategorized

All contributors to the 2024-25 FAFSA are required to provide consent to retrieve and disclose Federal Tax Information (FTI) from the IRS to the Department of Education. Once consent is provided, the IRS automatically sends FTI, eliminating manual entry of income and tax information for contributors that filed 2022 US federal taxes.

If any contributor to the student’s FAFSA does not provide consent, the student will not be eligible for federal student aid, including grants, loans and work-study. Consent is required by every contributor regardless of their US federal tax filing status.

Screen provided by Federal Student Aid in the 2024–25 FAFSA Form Preview Presentation, July 31, 2023

Who is a contributor to the FAFSA?

For dependent students, contributors are:

  1. The student
  2. The student’s biological or adoptive parent or parents who are completing the FAFSA.
    • If the parents are married and file taxes “Married Filing Jointly”, then only one parent is required to be a contributor and can complete the entire FAFSA Parent Section. In this case, only the parent contributing must provide consent.
    • If the parents are married and file taxes “Married Filing Separately”, then both parents are required to be contributors. Each parent contributor must consent for their FTI to be shared.
    • If the parent is single, separated or divorced from the other biological or adoptive parent, then only the parent that provided the greater financial support in the 12 months prior to application would be a contributor and would need to consent. However, if that parent contributor is remarried, their spouse would be included in the parent FAFSA section. See more information, see New rules for single, separated or divorced parents.

What if the student or parent doesn’t file U.S. federal taxes or files taxes in another country?

Even in these cases, every contributor must provide consent. If no FTI is found, then the parent or student manually enters income and tax information.

What are other reasons why no Federal Tax Information (FTI) would be shared?

Every contributor must consent, but here are other reasons FTI would not be shared. In each of these cases, the contributor has to manually enter income and tax information.

  • Non-tax filers. These individuals aren’t required to file taxes because they are below the income requirements for mandatory tax filing. The most common case is a student who did not earned income in 2022 or didn’t earn enough to file taxes. Parents may also qualify as a non-filer.
  • Foreign tax filers. These contributors follow prompts to enter the equivalent information, converted to US dollars, from their home country’s tax forms.
  • Late tax filers. If a contributor has not yet filed taxes, they must provide consent and manually enter estimates. The FAFSA system will continue to contact the IRS to check for a filed tax form after the FAFSA submission. If that FTI is later found, it will replace the manually entered information. Ultimately, if a parent is required to file taxes, the college’s financial aid administrator will be required to collect the tax forms before aid is dispersed to the student.
  • Victims of identity theft. In this case, the IRS may not share information. These contributors enter income and tax information manually.
  • Recently divorced or separate parents who filed jointly with their ex-spouses in 2022. Because the 2022 “Married Filing Jointly” tax return has income and tax information from both parents, but only the custodial parent is required to contribute, the FAFSA will not use the FTI shared by the IRS. Instead, that parent contributor manually enters separated income and tax information to accurately reflect earnings for that individual parent.

If the contributor filed taxes, is there still an option to manually enter income and tax information?

If the contributor filed US tax return and provides the required consent, the answer is no. The cases for manual entry of income and tax information are listed above.

Can a contributor see the Federal Tax Information (FTI) that has been shared?

No. Because FTI is considered confidential, it will not appear in the application or the FAFSA Submission Summary. Even the questions associated with that information will not be shown to the contributor.

What if a contributor doesn’t provide consent?

If any contributor to the student’s FAFSA doesn’t provide consent, the student will not be eligible for federal student aid, including grants, loans and work-study. Consent is required by every contributor regardless of their US federal tax filing status.

Can a contributor who declined consent initially, go back and provide consent later?

Yes. Any contributor that previously declined consent can log into their section of the FAFSA and provide consent. Once consent is provided and FTI is shared, manually entered income and tax information will be replaced.

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Changes to reporting parent and student income

by Paul Martinin UncategorizedLeave a Comment on Changes to reporting parent and student income

The 2024-25 FAFSA will directly receive all income from Federal Tax Information shared by the IRS after a contributor provides consent. Income not reported on the US federal tax return, primarily types of untaxed income asked for in the past, will no longer be entered. Child support received will now be entered in the Parent Asset section.

What untaxed income is no longer counted?

Untaxed income that is not reported on the US federal tax return and is no longer be counted, includes:

  1. Pre-tax contributions to employer retirement plans. These include employer 401k, 403b and other pension or retirement plans.
  2. Housing, food and other living expenses paid to military members, clergy and others.
  3. Veterans non-education benefits.
  4. Workers’ compensation.
  5. Disability benefits.
  6. Money received by or paid on behalf of the student.

What untaxed income is still counted?

Untaxed income that is reported on the 2022 federal tax return and counts, includes:

  1. Tax-exempt interest earned (1040, line 2b)
  2. Untaxed retirement distributions, including untaxed IRA distributions (1040, line 4b – line 4a) and untaxed pension income (1040, line 5b – line 5a)
  3. Tax deductible payments to a traditional IRA (Schedule 1, line 20)
  4. Tax deductible payments to self-employed SEP, SIMPLE, KEOGH and other qualified plans (Schedule 1, line 16)

What untaxed income will have to be reported?

Foreign income earned in 2022, but excluded from taxable income, would have to be reported. This is known as Foreign Earned Income Exclusion and can be found on Schedule 1, line 8d.

What if no Federal Tax Information (FTI) is shared from the IRS?

If no FTI is shared, the parent or student will manually enter income and tax information. For more information, see New requirement to consent to share Federal Tax Information (FTI).

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