<p>I didn't know what forum to post this to, so the moderator is free to relocate it if need be.</p>
<p>We are in the process of selling our home and are scheduled to close on September 30th. We plan on renting a home for 3-4 months until we can find a new one.</p>
<p>The dilemma--we will have about $150,000 coming out of the sale with which we are buying our new home and a total income of $36,000 per year. Where do we put the money for our new home until we actually purchase it so that the money doesn't get counted when our EFC and/or financial aid is being calculated?</p>
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<p>For FAFSA purposes, if your income is that low AND you have one of the other qualifying things (dislocated worker, file 1040A or EZ, qualify for a means tested benefit)…I think you might qualify for the simplified needs test as your income is below $50K. (Swimcats…is that the right number?). If that is the case, your assets would not be reported.</p>
<p>BUT if not…timing is everything. If you are required to report this asset, you would be better served to buy the house BEFORE you submit your kiddo’s financial aid applications…or wait to sell the house until AFTER you submit the financial aid applications.</p>
<p>The simplified needs test applys ONLY to FAFSA…not to the CSS Profile which will likely consider that $150K as an asset. </p>
<p>Simply put…you “plan” to use it to buy a house. BUT until you do, the reality is you could use it for any purpose or just save it. It would therefore be considered as a financial asset available for college tuitions purposes.</p>
<p>P.S…for CSS Profile schools your home equity (must be at least $150K) could be counted at least in part as an asset anyway.</p>
<p>We have our house on the market and are potentially looking at a similar scenario.</p>
<p>I plan to fill out my forms at any point that I am residing in a home that I own, without the equity sitting there waiting.</p>
<p>I am in a similar situation here too, about to put house on market. From the research I’ve done it appears that any money I keep after the sale isn’t going to have a huge impact on EFC because savings is given far less weight than income. Estimating with an EFC calculator making $50K on the sale and simply placing in savings has no effect on EFC, it seems.</p>
<p>I know it’s wise to pay off any high interest debt, and to make the highest contribution to a retirement account that I can, but the leftovers could still be fairly significant.</p>
<p>I have seen this # a lot: “parent assets are assessed at up to 5.64%.” - what does that mean, exactly?</p>
<p>Can someone clarify…</p>
<p>If you sell your home in June 2011 and take the $50k profit and put it towards the new home bought in July 2011, then what do you put on FAFSA when you file in February 2012?</p>
<p>Are you claiming that you had a $50k profit? The money isn’t in saving when you file, it was moved from one escrow acct to another to pay for the new home. Is the $50k counted as income? That doesn’t seem right.</p>
<p>I know that you won’t count the $50k as an asset since it’s not in an acct on the day you filed FAFSA…it’s back in a house.</p>
<p>I don’t think it’s income at all. Fafsa only asks what assets you have at the time of filing, not including a home and not what came and went through the year. </p>
<p>As far as I know any money you clear from selling a home isn’t income and it isn’t even subject to capital gains, except when it exceeds like $250K (or $500K for a couple) - even then if you put it in another home you’re good. But I am going by some research I did today, not personal experience or expertise.</p>
<p>Proceeds from the sale of a house are not income if they fall under the 2 levels that ohiobassmom cited. If the gain is over the excluded level, then only the amount over the exclusion is taxed as a capital gain. If the cash is sitting in an account at the time you file FAFSA, it’s reported. It doesn’t matter where that cash came from. If the cash has been spent and it’s gone by the time you file FAFSA, then it’s not reported. It’s like any other cash asset.</p>
<p>I’m in the same situation: I sold my house late last year; no capital gains tax, but the cash is in my brokerage account. I’m renting now, in the process of buying another house. I had to file FAFSA by the school’s March 2 deadline. I reported all the cash, despite the fact that it will be going to the down payment on my new house this month. I’m expecting my son’s need-based aid to disappear due to this cash. Nothing I can do about it.</p>
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This is based on the formulas used to calculate your EFC.</p>
<p>For assets:</p>
<p>1) count up all your assets. check under couch cushions for loose change.
2) subtract your asset protection allowance. This varies by age and number of parents
3) take 12% of what is left.</p>
<p>Assuming that number is positive, you add that to the number from the income side. Then you look up in a table what your EFC is. The concept is very similar to the tax rate tables for your income tax - as you make more, the rate goes up.</p>
<p>The top rate on the EFC table is 47% (and you get there very quickly).</p>
<p>So the most an asset will add to your EFC is 47% of 12%, or 5.64%.</p>
<p>Here’s the formula guide: <a href=“http://ifap.ed.gov/efcformulaguide/attachments/010512EFCFormulaGuide1213.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/010512EFCFormulaGuide1213.pdf</a></p>
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If you have 5+ months to prepare for your closing, why would you need to rent for months? Start looking now, or in a few months at most. I would hope you could find something in that time.</p>
<p>Gah, the thought of moving twice. :)</p>
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The gain from the sale of your residence is considered income, however the first $500,000 ($250,000 if not married) is not taxed. See pub 523 here: [Publication</a> 523 (2011), Selling Your Home](<a href=“http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200634]Publication”>http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200634)</p>
<p>So nothing would show up from the numbers carried over from your tax return, because the profit of $50,000 isn’t taxed.</p>
<p>The kicker is line 92.i: “Other untaxed income not reported in items 92a through 92h, such as workers’ compensation, disability, etc”. </p>
<p>Would profits from a house sale fall under that? You could make a case for it, unless the FAFSA people say otherwise.</p>