Colleges won’t care how the bank that gave you the mortgage classifies the property. If your wife’s name is on the mortgage and you don’t live there it’s not your primary residence, it’s a 2nd home. If your MIL’s name is on the mortgage, then your share is 50% so the equity you report is 50%. If only your wife (or you and your wife) own it, you report 100% of the equity. Any rent you charge is reported as income.
As I said above, even if it IS a primary residence, FAFSA allows ONE primary residence for the parent/s to be excluded from the asset assessment. It’s an outlier for my nephew to have married parents who happen to have separate primary residences (and not be in the Brad Pitt tax bracket; my sister teaches 4th grade and makes very little). They have to report one as an asset. It doesn’t matter if it is a rental, a vacation cabin in the woods or, as in their case, the actual primary home of one of the parents. There is an exception for the first house, not for the second.
This is probably too late for the OP for this year, but could his wife have a quit claim deed drawn up that would give the house to her mother?
@blossom Ah. I will investigate that. Thanks!
Be careful of that. It might cause the mortgage to be due in full.