I fall under the dependent category and have been claimed that way with efc 0000 and receives the pell grant. This year I started investing in stocks and made $2000 SO FAR (unearned income capital gains). I don’t work so I don’t receive earned income. I read that I could be claimed as a dependent and my stocks earnings could go underneath my parents income as long as it’s under $10.5k and that they will be taxed at the usual tax bracket rate. Is this true? Experts? Will my efc increase significantly or that I won’t get the pell grant?
You need to figure out if you have to file taxes based on your income, earned and unearned. Even if you have earned income, sometimes you don’t have to file. For the unearned income, you might have to file AND pay a kiddie tax on the amount. If you are EFC $0, your parents are likely in a very low tax bracket.
Whether you file your own taxes makes no difference as to whether you are dependent on FAFSA. Usually you are a dependent on FAFSA if you are under 24 and are working on your first undergrad degree.
Even if you make a lot of money and have to pay a lot of taxes, it is possible that your EFC of 0000 could remain unchanged because of your parents’ situation. The new FAFSA formula should be a available soon. Run a google search for EFC formula 2020 and you should get a link to the PDF. You can print it out and work theough it on paper to see how your income affects things.
I just have to ask…if you don’t work…where did you get the money you invested in stocks?
If your are receiving a Pell Grant and made $2k on investing in stocks, you are likely taking some high risk bets. Good chance that by the end of the year you will be back down to $0 net gain.
Have you sold those stocks and realized the gains, or are the gains as yet unrealized because the stocks haven’t been sold? In the first case, you have income. In the second case, you just have an asset.
Under certain circumstances, a parent can include a child’s income on the parent’s tax return so that the child doesn’t need to file his/her own tax return. This is only possible if the child’s only income is from interest, dividends, capital gains distributions, and Alaska Permanent Funds dividends. If you have unearned income from investing in stocks that is more than just capital gains distributions, you will need to file your own tax return. Make sure that you understand the difference between a capital gains distribution, which normally is based on actions taken by a mutual fund manager, and a standard realization of capital gains, which is based on a transaction that you as the asset owner have made. If you are the owner of individual stocks and you have realized capital gains through purchases and sales, these are not capital gains distributions, and the income cannot be reported on a parent’s tax return.
Johnny, there are two aspects to owning stock you should be aware of.
The first is dividends- as an “owner” of the business, many common share stocks will pay out a dividend to each owner (i.e. you). That income will typically show up on a form you will get in January even if you opt to reinvest the dividends in more shares of stock-- so even if you didn’t get a check for your dividends, it will show up as income on this form.
The second is capital gains. If you bought 5 shares of Walmart stock, and STILL have 5 shares (i.e. you haven’t sold any of your stock) for the purposes of the IRS you do not have a capital gain (yet) since you still own the stock. So just looking at the ticker and seeing that you’ve gotten a 2K “gain” because the share price is up, doesn’t mean you have a capital gain. It means that you own stock which is worth more- today- than it was the day you bought it.
Can you clarify for us exactly what’s happened with your stock- have you sold?