Well…only if that is actually true!
She said in post 7 that it is one tax parcel
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It is one tax lot.<<
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It’s just one tax lot and one set of property taxes. Yes, we do take depreciation. In the past, we didn’t – based on tax advice I had received. This was incorrect tax advice and so I worked with a tax specialist to do a one time depreciation catch up form. The rental house can’t be sold. Regarding our income in 2017, it still wasn’t particular high. My salary was about $50,000 and the rental (net) income yielded a few thousand. Yes, I am sure that the Dartmouth FA estimate is based on that income. I am not self-employed. My husband manages the property, as there is a lot of work to do. In the past years, he worked for many years at COSTCO, but when I went from part-time to full-time work for the government, he left COSTCO to concentrate on maintenance and upkeep of the property, which is endless. So his work is reflected on upkeep of our property, irrigation, fixing/repairing - things that had gone undone for many years. At the moment he is doing a Master Gardners course and will be putting in volunteer hours.
Yes, we were in England for about a year. Our daughter studied abroad. My husband has dual citizenship (USA/Irish). Last year’s numbers on the taxes (AGI) are not straightforward and are weird, and the AGI iof $37,000 is low – but primarily that has to do with the one time catch-up depreciation (it wasn’t something we had planned on, but after talking with a tax specialist, they helped us navigate through that complicated issue). So yes, I can see why, based on the information we supplied to both FAFSA and CSS that would skew our results higher.
So yes – it is complicated. The property holds significant value; again much less than Zillow estimate and in particular because of the rental home it becomes difficult for a bank to consider lending on it. We did the FAFSA in October; we were back home by then. The bottom line to all of this is that we earn significantly less than what was presented on FAFSA and the CSS. I am now a full-time student and my studies will conclude next June. The program that my husband is in may lead to future work opportunities; time will tell on that front.
We are still waiting on most of the other FA offers.
Perhaps I wrote incorrectly. My husband doesn’t have other income, other than what we file for rental and some farm (pasture) income. We use Schedules E and F and there are deductions that we can take related to each practice.
In the Deschutes County tax records, the valuation of the property is based on the entirety of the land and assets. The rental house is not broken out separately, so there is no way to assign a value for that. As I mentioned, one the one hand it provides rental income and therefore is value-added, but in terms of what it brings to the overall value (i.e., if the home wasn’t there the overall property value wouldn’t change significantly. It would drop some, but not nearly as much as one might think. Part of that, much of that has to do with not being able to get a comp; the other is that the home is an entry level, stick built - no frills structure).
With respect to gross income in 2017, if you mean my earnings (when I was employed) and gross rental and grazing (before we take off supplies, repairs, utilities, taxes, etc)…I’m estimating that it probably would have been about $68,000
You have to have a value to the rental if you are depreciating it. That is the value. The entire parcel has a tax value. That is the value I would have used, not Zillow. If no bank will lend you any money on it, they don’t think the land is worth very much.
No one said you had to use the Zillow value. You put that on your FAFSA/CSS. What is the school supposed to do but assume that is the value you are using for the businesses? If you are also getting income from crops and pasture rental, the schools are going to assume the land has some good value.
I think your taxes tell the story. You are running the 20 acres as a business. You rent an improvement and you rent the land. You depreciate the rental house so you have assigned some value to it.
We don’t know what numbers you put into the NPC to get a $4k family contributions. There is farm income and rental income being generated by a lot of that land. If you considered it all the ‘primary residence’ when filling out the NPC, that wouldn’t generate a good estimate of your contribution Your husband has to be putting in the maintenance time because you feel the farm is worth it, that his time generates income through higher rental rates.
Interestingly, I used Zillow for the NPC for Dartmouth (their recommendation) following through with all the questions they asked and that’s how I arrived at the $4k parental/student contribution. I think for CSS I used a lower value, based on two things (a different market at the time and what we believed we truly could get for the property). For purposes of depreciation, we use the cost to build; $78,000, so okay yes, we could say that the rental home probably does add that value to the overall property value. Why banks have been reluctant to lend is a curious thing that I think goes beyond what they think the land is worth. For whatever reason, lending institutions have perceived our property as risky, based on the two residences on one farm tax lot. It’s non-conforming. It makes no sense to us, in that we do have a lot of potential equity there.
The issue with us running the 20 acres as a business is a bit misleading. It’s zone Exclusive Farm Use. We have irrigation rights for 13.5 acres. Use it or lose it. We use it to irrigate our pasture. The pasture grows and needs to be eaten (we can’t hay the fields with the way the irrigation system is set up). So we lease out the pasture to a family who has a few horses. She pays us $175/month. It helps offset our irrigation costs $660/year and pays for fuel for the tractor and whatnot. Not really a high-end business.
You keep adding things to this story. First it was just renting another house on the same property. Now you have added that your husband is caretaker for the full 20 acres and you took catch up depreciation on this property. AND you are leasing the pasture.
It is very easy to see how Dartmouth views this as a “farm which you rent out”.
Most people do NOT “hire” and then take as a business expense…their husband to do work on the property they live on. Do you think others take lawn care, home maintenance and property maintenance as an “expense” which they then deduct on their taxes? They don’t.
I agree with @twoinanddone . If you are taking depreciation…there has to be an amount on your taxes…and your depreciation is a %age of the value of this property.
Are you taking depreciation on the WHOLE value? If so, you are lucky Dartmouth didn’t consider the whole value of the property. Perhaps this schedule is where they got 1/2.
You can’t have it both ways…
You are running your 20 acres as a farm business…you won’t be the first person with financial aid issues who has a farm business.
It doesn’t need to be “high end” for it to be a business.
Any non-conforming property has risk attached to it- the bank doesn’t care what YOU are doing on or to the property- their only concern is how quickly THEY could sell the property if you defaulted. So that’s the bank’s issue- how soon does it go off their balance sheet to another buyer. And the more complexity (tax, irrigation rights, zoning) associated with the property, the less likely it is that you’ll find a bank willing to overlook that.
Realistically, Dartmouth is not looking at reducing your EFC, but increasing it.
What is the realistic option for a uni? You must be focusing on that part with your DD, this Dartmouth part can be your issue to chase but you should be shoring up the reality of an affordable school with your DD.
The depreciation is for the rental house, not the entire property. Yes, my husband manages the property. He does all of the maintenance and repair work on everything on the property. We follow the rules closely for reporting income and taking allowable expenses. As the property is exclusive farm use and we have water rights, we have have irrigable pasture and need to do something with it. This is very typical and normal for all of the EFU properties in the area. Some people have their own livestock and others offer up their pasture to others.
Not sure what you mean by “hire” and then take business expense. We only report what is allowable on the tax forms.
We don’t rent out the 20 acres as farm property. There are 13.5 acres of pasture. A family with a couple of horses pays us $175/month. That amount covers our irrigation taxes and a few other expenses and yes, there’s a bit left over. All of this is reported.
Yes, I agree that banks are risk adverse. Having EFU zoned property with two dwellings versus one actually presents a risk to them (that’s how they see it). It’s a strange conundrum in that there is indeed value in the property.
Yes, Dartmouth has actually revised their EFC upwards to something like $30,000/year for parental contribution. I am hoping to present documentation and meet with them to see whether they will reconsider, as there is absolutely no way we can pay this kind of money. The reality is that I don’t know how anyone who is low, middle or even high middle-income could afford this kind of parental contribution.
Still waiting to hear back from other universities.
High middle income families who can afford 30k per year are NOT writing a check for 30K out of current income. They have been saving (in some cases, since their child was an infant) and putting the money aside in a 529 or similar plan where the money has been building up and the dividends reinvested. THAT’s how they can “write the check” for 30K- they are liquidating their college savings, over time, spread out over how many children they have (but if they can continue to save at the same rate while their kid is in college, that can slow down the rate that they’re paying down the college savings.
Right. That makes sense. Thanks for that insight. I suppose I never realized that it would cost that much money to send my child to college. Our eldest decided she wanted to go to an in-state college and was able to get a combination of grants, scholarships and a low-interest loans and we picked up the rest. Our youngest has different aspirations and I suppose in the end it’s just thrown us for a major loop as we don’t have those kinds of funds.
The reality is that I don’t know how anyone who is low, middle or even high middle-income could afford this kind of parental contribution.>>.
Your scenario is not most families. You have no savings for college? You are older parents, right?
Really, many state schools are costing around 30K a year. >$12 of that might be room and board. If you don't want to pay that, you target auto merit, or your kid attends the instate school that gives her merit money. Did you target merit?
You are land rich and cash poor. If that turns out to be the way Dartmouth views this…then hopefully your daughter has other options that are affordable.
We are older parents. We do have retirement savings and from that can pull something for college costs, but it is nowhere near $30K per year.
We don’t have a stand-alone college savings account/plan. Our daughter has applied and been accepted into one state school and got into the honors program and has received some decent merit. We can afford that plan. She did that as a safety net, but at this point in the process she’s not keen on that choice (perhaps over the course of the next few weeks she’ll change her mind as we sort through everything).
You are also dealing with a ‘western land holding’ situation and it’s an eastern school.
When I was filling out the NPC for Wyoming, there were a ton of questions (that I could skip) about ranch land and grazing cattle and irrigation equipment. That’s because a lot of those families applying had those assets and the school used its own money to ‘fix’ the shortfall the FAFSA would cause because FAFSA does consider those assets.
Interesting. Yes, I do think there is a disconnect (not sure if that is the correct word…maybe misunderstanding?) between western land holding and eastern schools. Well, the best I can do is to present my case from my perspective, to respectively ask for reconsideration of the EFC, meet with the financial aid folks in person and see what happens.
meet with the financial aid folks in person<<<<<<<<<
Like fly to the school? From Oregon? Why in person?