<p>So my mom makes somewhere around a six figure salary (not entirely sure of how much but I know that on a good year she can make quite a bit of money). However her business lost a lot of money this past year, so much money in fact that she lost more money through her business than she makes in a year. Would this affect how much money I can receive for financial aid in any way?</p>
<p>Possibly. However, “non-cash” losses or expenses like depreciation and amortization may not count.</p>
<p>^Amortization isn’t “loss”, so she wouldn’t be saying that it was to begin with.</p>
<p>^
But amortization is a deduction, so it is easy to bunch it up with depreciation.</p>
<p>Yes – she could easily be reporting a loss for tax purposes (quite legitimately) that would not be considered a loss for financial aid purposes, or at least not nearly as much of a loss.</p>
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I assume by amortization you are referring to money spent to pay down principal on loans, in which case it is not a deduction.</p>
<p>Also, would it not be difficult to separate the “real” depreciation from that which is not “actually” taking place?</p>
<p>^^^^
By amortization I mean loan costs like loan origination fees and organizational costs like costs to setup corporations.</p>
<p>Those are listed on deprecation and amortization schedule and in effect lower company’s taxable income each year those costs are amortized.</p>
<p>^They don’t really have access to that much^ information regarding your business expenses.</p>
<p>Amortization has a somewhat broader definition: you depreciate (and take depreciation on) tangible assets, but you amortize (pretty similarly to depreciation) the cost of intangible assets that decline in value. Neither is a cash expense, which is why they might not be considered for financial aid purposes – they can create “paper” losses.</p>
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They do if they ask for tax returns. Which CSS schools will. </p>
<p>My understanding is that it is the very expenses that arabrab is talking about that get added back to income by CSS schools, causing some surprises for business owners as it makes their income much higher than FAFSA alone does.</p>
<p>
Even the tax returns don’t give dollar for dollar breakdowns of the depreciations, which is what lerkin is talking about. We have rental properties. If we had to justify EVERY SINGLE DOLLAR of the depreciation to satisfy whether it was something the school liked or not it would take a ream of paper and weeks of digging. It isn’t just present on a line somewhere on the tax return. THEY DON"T HAVE ENOUGH INFORMATION TO BREAK OUT THIS KIND OF SPECIFIC INFORMATION. </p>
<p>If you think that they do, please tell me where on MY return they would find it.</p>
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</p>
<p>Did you look at the form 4562?</p>
<p>Quite frankly I don’t get what the argument is all about. I have no idea what possessed me to reply to sylvan’s post, but I did not think it would become such a big deal.</p>
<p>While amortization is not the losses (as sylvan rightfully pointed out), neither is depreciation. Both are deducted from income and thus can contribute to the loss on tax return. What I think everyone agrees on, schools that look at CSS profile will most probably add both depreciation and amortization back before deciding on what on the family’s EFC.</p>
<p>Let me give you an example. I’ll round the numbers for simplicity. We have a building we bought in 1995 for about $400K. Every year on the Schedule E for that property we have a certain amount for depreciation. </p>
<p>Included in that amount are numbers from the depreciation schedules for: the original cost of the purchase itself, including the price of the building, loan fees, lawyers, recording fees, etc., new windows for the entire building, a new roof, a new boiler, dozens of new appliances (amortized individually), carpets for 20 apartments (also amortized individually), upgrade to the deck/porch system, two refinancings, and more. Should you wish to identify which of the dollars in the depreciation number from last year belongs to which of these things, it is not going to be apparent on form 4562. You will need all the paperwork and receipts for these items over the past 18 years and their various depreciation schedules. </p>
<p>Since you obviously want them to add back in the cost of those two refrigerators we bought last month, perhaps you can say exactly why those should not count as expenses that we have to incur in the course of doing our rental business? </p>
<p>As I have mentioned before, it is readily apparent to me that there are people on this forum who have a real problem with people who own businesses or rental properties, etc and who give unwary posters a bum steer because of it. This is not the place to ask these questions, if you hope to get accurate information.</p>
<p>Op, your best option is to ask the schools themselves what their policies are. And no, I don’t agree that schools will just add back in those items (which they don’t necessarily have access to) in order to determine EFC.</p>
<p>Since I own both rentals and a business I assure you I am not like that. I personally don’t want them to add anything back, but they do. Moreover they count depreciable assets as real assets sometimes! And I agree with you that OP should contact his school to find their policies, because each school is different.</p>