<p>I keep reading on the financial aid forums how self-employed or business-owning families can kiss private institutional grants goodbye. I'm hoping someone can explain before we lose all hope of D going to a decent college!</p>
<p>Our family income, totalling less than $60,000, is 9/10ths regular W2 wages. However, I do some graphic design on the side that amounts to <$3,000 and we rent out our sailboat in the summer totalling <$6,500. So we don't really own a business, but we file schedule Cs on the 1040 for that income and we pay self-employment tax on it.</p>
<p>Is this income source going to ding her for financial aid? When I've filled in the NET PRICE calculators for the various LACs D is interested in, they often give her large grants. However, when filling in the calculators, I check "no" when it asks if we own a business. Is that OK?</p>
<p>I certainly don't want her to get her heart set on schools that we THINK we can afford based on the calculators, and find out that because we have these non-traditional income sources she's disqualified. It might be worth not renting the boat or taking side jobs for her college years if that's the case.</p>
<p>Can anyone explain why people keep saying that you won't get grants if you're self-employed or own a business? Any advice on what we should do? We'll be borrowing EVERY SINGLE PENNY that she doesn't receive in aid. </p>
<p>Thanks!</p>
<p>When businesses are involved, schools that give generous institutional aid often add back deductions that might be allowed on the tax return. This can come as a shock to small business owners in the FA process. Unless you are writing off huge sums of expenses related to them, I don’t think your income from your graphic design or from renting out your boat is what people are talking about in this situation.</p>
<p>I don’t think you will see any differences in your aid awards based on those income totals and expenses. Run the NPC or the FAFSA Forecaster with all of your income as W-2 income (including the graphic and boat income) and then run it as non-W-2 like you report it on your taxes. I don’t think there will be much difference if any. When I was a business owner I could deduct all kinds of things, auto mileage, cell phone, office supplies, etc. The standard deduction for my auto mileage was pretty substantial and honestly, worked out to more than I really paid out of pocket for my personal car use–except wear and tear and depreciated value because of the high miles. Those are the types of things that could get added back in. Our EFC was always different then what we thought it would be. </p>
<p>DO NOT BORROW that much money. You need to find schools you can afford without taking on those loans. At your income level, how do you really expect to pay back those loans? You are talking the potential of $2000/month or MORE.</p>
<p>I’m assuming she is a senior. What are her stats? What schools did she apply to? Did you look at the schools that meet 100% of need?</p>
<p>FAFSA schools are pretty straightforward, Profile is alittle different. We have rental property so have income and losses, depreciation and expenses on Schedule C, but it is not run like an LLC or a formal business . Just follow the instructions and capture the lines from your taxes and you should be fine in terms of doing it correctly IMO. There were differences between the colleges but nothing that i could pinpoint or figure out which deductions were being added back. I agree though unless you are continually showing a large loss on your tax form from your side “business” it probably isn’t going to made a substantial difference.</p>
<p>Yes, I think the people who get dinged for having businesses have formally incorporated businesses like an S-Corp or LLC. Some colleges consider the assets of those businesses to be available for paying college expenses, I guess (or they think you could borrow against them). If you are not incorporated, I don’t think they will hit you for that (eg, I don’t think they are going to consider your boat an asset you could/should borrow against for college).</p>