<p>Our son will graduate May 2012 and we, of course, have been reading and researching a lot about college. I just read something about a Simplified Needs Test. It is my understanding that if your AGI is less than 50k then your assets do not count on the FAFSA. I have also read that you can not file a 1040 form(which we do), but also if they qualify for free/reduced lunch program that the 1040 is okay then. We are right on the line of 50K this year(never have made that in the past, but husband had a lot of mandatory overtime this year). I have a small income from a home based business that is fairly new and has made a very small profit the last two years. </p>
<p>So, is what I said true above about being able to use the 1040 as long as they qualified for the reduced lunch? Also, our computer is almost 10 years old and we had been contemplating getting a new one because of the work I do. We would most likely get a new printer, too. We are so close to that income line and I want to do this legitimately.IYKWIM. Do we go ahead and buy that equipment and put the business income into the negative? I really think it is a needed upgrade right now. How would that affect the SNT? Is qualifying for the SNT a big deal either?</p>
<p>Qualifying for the Simplified Needs Test for the FAFSA can be a big deal if you have a lot of assets (savings accounts, stocks, rental property, etc). that would then not be counted. Your house equity and retirement accounts (401Ks, IRAs) are not counted anyway. If your child is going to a private school, they might require additional forms besides the FAFSA and this whole discussion would be moot because they calculate their
own expected contribution.
To qualify for Simplified Needs, you must meet the under 50k (this is the Adjusted Gross Income line on your tax return) AND meet at least one of the following - not required to file a 1040, eligible for reduced/free lunches, or be a displaced worker (laid off). See the exact wording on the FAFSA instructions. So, yes, if you have been eligible for the reduced lunches, you can still file a 1040 and meet the test.</p>
<p>As stated above, FAFSA doesn’t look at home equity or money in qualified retirement accounts. In addition it also doesn’t look at a certain amount of protected savings. For a couple in their mid forties, for example, the first $50K or so of savings is not counted. Beyond that, savings are assessed at 5.5% (I think). The protected amount depends on marital status and the age of the older parent.</p>
<p>We do not own an expensive home, or have much equity in it. Our retirement accounts are more or less non existent. We are pretty much what you would call cash poor, but my DH inherited his grandparents farm land and that has a fairly high value. Selling it makes no sense because of capital gains and we do receive farm rental income from it each year. On paper, though, we would have somewhat significant assets. It is pretty much all we have for any investment for our future, though. </p>
<p>How do my small business deductions affect the SNT? Is it wise to purchase the needed equipment before years end when we are so close to the income limit for the SNT? It is all something we planned to buy very soon anyway…switch to a laser printer for shipping labels and upgrade our 10 year old computer to a new model. My small business will most likely be in the red this year then, but it will sure help costs and time in the future years. How does that all effect the SNT? If our wage income and rental income is just above 50k, but the small business is negative and puts the AGI below the 50K is that what number they need? We are trying to do this legitimately, but be wise about our timing at the same time. I don’t want to be a red flag to the IRS, but don’t want to be scared to do what we think is best for the business in the future now. Then the question of timing is important because of the SNT. If it helps with that, then buying the equipment before years end makes sense.</p>
<p>Thank you for the link. I have read through and filled out both ways the best I can. If I did it right, I think there will be a difference of about 3000 in the EFC. What is a low EFC score…the point where they look at grants?</p>