<p>I am filling out the forms CSS/FAFSA online (have not submitted), and I have a question regarding AGI for my special case.</p>
<p>We bougth a house two years ago(not quite two years) before we sold our old house. Our original plan was to use the equity from the old house to cover most of the down payment for our new house. Since we bought the second house before we sold the old one, we borrowed the money from our 401K and other retirement savings to cover the down payment of the new house.</p>
<p>Due to the housing market condition, we were not able to sell the old house (for about a year). We finally leased out our old house starting from Oct 2008 and we are trying to resell it after the lease team (March of 2010).</p>
<p>Here is the problem: the second house was considered as the TEMP RENTAL PROPERTY, and the rent we collected minus the maintenance cost (NOT the mortgage) will be considered as a part of income (LINE 17 of 1040), which has driven the AGI (LINE 37) much higher even though we do not make any money at all from the second house.</p>
<p>How should I handle this? Does the AGI in CSS/FAFSA forms has to match what's in LINE 37 in1040?</p>
<p>Thanks, swimcatsmom. But do you know if there is a way in these forms to somehow show my true AGI? As I explained in my origianl post, we do not make any money at all from leasing the house. Mortgage plus other expense is more than the rent we collect.</p>
<p>There is no way to reflect this on FAFSA. You can talk to the schools and see if they would consider your situation to be a special circumstance that they would make some sort of adjustment for. Financial Aid officers are allowed to adjust your FAFSA to reflect special circumstances but they have to follow strict guidelines set by the federal government. Usually it is things like unusually high medical bills or loss of income. I don’t know if your situation would qualify. All you can do is ask. The FA officer at a school is the final word on whether to make any sort of adjustment.</p>
<p>I believe CSS has an area for describing special situations?</p>
<p>I have friends who were in your situation: a second house that cost more in mortgage payments and maintenance than the rent the were getting from it.</p>
<p>They did have to report that, like you, but wrote a letter to the college after receiving their kid’s FA award explaining their situation. There were reasons related to work why the had to have this second house, and they were taking a loss on it. The college made an adjustment in their aid award as a result. Now this was a private college (used the CSS Profile) with a decent endowment and respectable aid policies, so their consideration of this may not be typical… I don’t know… but it doesn’t hurt to ask for an adjustment and explain your situation.</p>
<p>This is all a separate process though. Unfortunately for initial reporting purposes, yeah, it will need to match your tax return.</p>
<p>Thank you both swimcatsmom and rentof2. I do appreciate the information you provided. I guess I need to write to FA office to explain my situation.</p>
<p>The second house in an asset you can depreciate. Given that, it’s hard to see colleges giving you a break it. Many are not losing money on assets they are holding.</p>
<p>I have looked at Schedule E, where rental income shows up before it migrates over to the 1040. It looks to me like you subtract the portion of your mortgage payments that goes to interest. It’s not the whole mortgage payment, but it’s something. You can also deduct the property tax, homeowner’s insurance, and things like that.</p>
Wouldn’t that results in a loss and the depression which makes it a bigger loss, therefore bigger deduction on your tax return, right. How is that become income on line 17? Did I miss something here?</p>
<p>You should likely be filing Sched E and the costs associated with the rental property - including depreciation, if you wish - would go on line 17 of the 1040 and should be negative if the facts are as you describe.</p>
<p>Thanks everyone. I have finally figured out where my problem is. This is the secode time I have to deal with tax issues with the second house so I have to say I am not familiar with this stuff at all.</p>
<p>For 2008 tax return, I had my tax done by a professional. He put the interest payment and taxes for the second house in schedule A. This is because I have occupied the house for a significant amount of time. The rent collected minus insurance and other maintenance costs was considered as income. </p>
<p>Based on 2008 tax return, I automatically assumed that this is the way my 2009 tax return is going to be handled (interest and taxes will be put in Schduele A, and rent minus other minor expenses will go to LINE 17 of 1040 as income). But I was wrong.</p>
<p>For 2009, the house was entirely leased out. I should be able to to use Schedule E to include all the costs (interest, taxes and others). There should be no issues for my situation.</p>
<p>Hi CCD - We’re thinking of buying a new SFR but holding onto our current home and renting it out. Sounds sort of similar to your situation. Would you recommend this course of action? Our new mortgage will be much higher than our current one, so we’re thinking it may offset the income we will receive from renting. My question is basically, will the fafsa only look at our gross income (salaries/rent) or will it look at our net income (sal/rent-expenses)?</p>
<p>If you own a second home, the equity in that home is listed as an asset on the FAFSA. If you rent the home, the rent is added to your income on the FAFSA.</p>