<p>For colleges that require the CSS Profile I understand that they add the monthly rental income back into the parents income. But what about the mortgage, property taxes, & HOA fees on the income property? How is that taken into account?</p>
<p>For example, if a rental property rents for $1000/month, but costs its owner $1500/month in mortgage, taxes, insurance + HOA fees, there is a monthly LOSS of income, not a gain. How could the colleges look at ONLY the income from the property, but not the monthly financial cost? In this situation the parents do not have an extra $12,000 per year of income. What they actually have is a $6,000 loss ( -$500 x 12mos).</p>
<p>I think I understand that the colleges do not consider the depreciation expense, and that is fine. But what about all those other expensive line items on Schedule E? Also wondering if these are treated the same on both CSS Profile and FASFA, as I believe we will have to file both.</p>
<p>Thanks for any insights anyone can give me. I find this all very overwhelming and confusing.</p>
<p>You will likely find some variance in how different Profile schools treat the items on your Schedule E when it comes to determining your financial aid. I’m not sure there is a “one size fits all” answer.</p>
<p>I believe what you would be putting on your Profile is the net income that is indicated on your schedule E. I don’t believe you can put negative numbers…but I do think you can put $0…I could be wrong about that.</p>
<p>Are the schools you are considering asking for your Schedule E with your financial aid application? If not, how would they KNOW the different “line items” on it?</p>
<p>After expenses (including depreciation) it is not usual to show a break-even or loss. It could be desirable from a tax standpoint because you can take that loss against income. If I remember from the Profile, you show the income and you show the equity in the property (which reflects the value minus any mortgage). I could be wrong, but that is what I remember. I might have used income before depreciation from Schedule E but I really don’t remember…Thumper might be right. It’s possible they are break even and the loss comes from the depreciation. </p>
<p>Regardless the “asset value” of the rental (the value - any mortgage) might be a more important number than the income number. That’s what “kills” us for Profile finaid.</p>
<p>tugtraveller, the values come from the Schedule E’s, so they don’t count the income as if you just get to keep it all. However, as you know from the Schedule E, you only get to deduct that part of the mortgage that goes to interest, not the principal payment. So if, in your example, $400 of the mortgage payment went to principal, your loss is only $100.</p>
<p>As motb pointed out, it is more likely that the equity you have in the rental is an asset which causes you to have a larger EFC.</p>
<p>thumper1,
No they have not specifically asked for Schedule E. I was just surprised when the Financial Aid office said they exclude the depreciation on rentals, or something like that. Also said that they verify EVERYTHING, including estimates on property values using the internet. I was just assuming when they say they want your tax returns, you have to give them all your Schedule A, E, copies of all the W2’s, 1099’s. Is that not the case, or is it only if you are selected for audit?</p>
<p>momofthreeboys and sylvan8798 ,
You are right. We are not deducting the entire mortgage payment on the Schedule E, just the mortgage interest. But we still have a net loss. I guess I will make some attempts to figure this out today using finaid.com, or the college financial aid calculator. You are right, that having equity in a rental property is the killer. It doesn’t seem to matter to them that you need that money just to be able to retire. Does anyone ever have success showing the financial aid office their underfunded 401Ks to offset one lousy piece of real estate?</p>
<p>Also curious, what should paperwork & documentation should I reasonably expect to show/give to financial aid offices for the CSS Profile Schools? It sounds like they want access to just about everything, and documentation for everything.</p>
<p>It sounds like the school is requiring a copy of your tax return which would include all schedules as part of their application process. If that is the case, they will have all of the info.</p>
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<p>If the SCHOOL has already told you that this is their policy…the this is their policy. But it might NOT be the same at other Profile schools. You will need to ask.</p>
<p>Generally if they want a copy of the tax returns they want the entire schedule. The only way to verify rental property is through the schedules otherwise it just shows on the 1040 as a gain or loss. Unfortunately depreciation is a fabricated number…it’s not a cash loss or a cash gain. A huge chunk of our retirement is tied up in rentals unfortunately most schools see the equity just like they see equity in money markets or bonds or stocks etc. The problem with rentals are that they are not liquid. I feel your pain.</p>