@jym626 I’m not too familiar with depreciation for tax purposes. The value of the rental properties are certainly not depreciating, if that’s what you mean?
Ok…so the values on the rentals are NOT depreciating.
Equity is based on the probable value of these homes…minus the mortgage. So…if your mortgage is $2,000,000 but the actual value of the properties has increased by $200,000…that would be your equity.
When you wrote “Correct,” did you mean that your parents owe $2million on those properties,…and they’re only worth $2M?
If so, did you indicate that on your FA app?
How much do your parents have in retirement accts? How much did they contribute last year to retirement accts.
Are these figures in U.S. dollars or Australian dollars? Either way (but more so if the figures are U.S. dollars), your family’s 2015 income was too high to qualify for need-based financial aid, and most schools that require the Profile form when applying for aid will take at least some of your primary home equity into account, and you have a lot of Primary home equity.
I meant that you were correct about the 170K income (from salary + rental income) for this year, and 250K for last year - sorry for the misunderstanding. And yes, I did put down the $2M figure on the CSS Profile.
I believe they put in $25K last year in retirement accounts.
It is possible to depreciate rental property in Australia. That could skew income further.
The money they deposited to retirement accounts in 2015 is added back in as income of it was pretax. Was it?
So in 2015, yoir family income was $250,000 for the year?
Did you think you would,qualify for need based aid with $250,000 in income for the year? That far exceeds the income amount for need based aid even at the most generous colleges.
Oh - I wasn’t aware of that @thumper1. I had assumed that rental income didn’t count as it was being used to pay back the loans on the rental properties. Thank you!
So your parents earned $250K last year, $170K this year, have almost half a million in equity in their personal residence, which will be counted , in part, by all Ivys but Harvard and Princeton, IIRC, and they contributed $25k to a retirement account last year (that will be counted as income for aid purposes). And you and your family are flying to the US? Hopefully not just to ask for FA from the school.
You might want to read the school’s FA policies before pursuing the request for reconsideration/professional judgment.
@jym626 No worries. Thank you everyone for your help!
Did you fill this out or did your parents? Unless you are very involved in their business or your parents are not conversant in English, they are the ones that should be filling this out. It may be worth consulting with a US tax person to have them fill it out or help you. The forms are hard enough for those of us with US tax returns, it is much harder for someone coming from a different system.
As an international did they want you to convert your returns to the US system or whether they accept the deductions that Australia allows? I have no idea.
Is CSS done in Austrailian or US dollars? The exchange rate matters not sure but Austrailian dollar is lower, I assume you either indicated the currency or connverted to US dollars which should show lower amounts? Same for all your assets and equity.
Depreciation is a tax concept that in the US is determined by the US tax code. So if I buy commercial property, the tax code tells me over how many years I can depreciate that property, to make it easy lets say over 20 years or some random number. If I paid $2M for that property, over the next 20 years I can deduct 1/20th of what I paid or $100,000. This will reduce my taxes that I owe but it is not a real thing so SOME colleges do not view this as me losing money (not the same as they would if I had to repair flood damage that was not insured) and count that $100,000 I deducted as part of my income.
Next, if you got $70k in income from the property but all of it went to pay the mortgage, plus expenses related to the property, in the US you may or may not have income from the property depending on your depreciation (for tax purposes possibly yes, possibly no or yes for FA). I am not 100% certain how the mortgage payment works, the interest portion and expenses should reduce the $70,000 but I am not sure how the principal repayment would be treated for FA or US taxes (ask an accountant). Again no idea how this is treated in Australia and whether FA accepted that treatment.
If you own an asset worth US$2M and it secures mortgages for the same amount that has not been repaid at all, then it is worth 0.
Do you or will you have siblings who attend college or will attend? While $170k US is probably too much income to get FA for one kid, except at a few schools, if there are two or more or you have other unusual circumstances (sibling with special needs who requires schooling, high medical bills) those are things you can present. Whether the school takes that into account is up to them.
As for home equity, it is sometimes not included and sometimes capped at 2.4X income varies by school. If the NPC asks you about your home, chances are it is factored in but you can always ask or google it.
I would check over your forms to see if they are correct and then email or call the FA office before you plan to go. The sooner this is done the better. If they are not correct, I would get them corrected and contact the FA office with the corrections.
Thank you so much @SeekingPam for that detailed explanation. I’ll definitely be following this advice. I’ve already made plans to visit the university, as I’m also visiting the US for other personal reasons. Thanks once again!
I edited a little. It sounds very complicated and you probably want to enlist an accountant for assistance.
Are you travelling alone on this trip, or is your whole family going?
Post # 13 days “my parents and I”
Is this a pleasure trip that your parents and you are taking?
@GMTplus7 Unfortunately, no. We’re seeing our extended family who are not fairing so well, health-wise.
Essentially, I was wondering whether it’d be worth travelling a little further up north to visit my school to discuss my FA, or whether it’d be best just to stick by my cousin’s bedside. Again, thank you all for your help!
What is the monthly payment on $2,000,000 in mortgages?