<p>Acesplit – if any of the taxes on the 1040 are self-employment taxes, then those should NOT be deducted in the FAFSA formula – I think the fact that your dad was self-employed is the complicating factor. (Self-employment taxes are like FICA – they are already accounted for and are the reason that the form asks you to specify how much of the income came from “work”).</p>
<p>In any case, if your income goes up the next year, your EFC will go up as well. Just assume it will go up roughly 44 cents for every dollar of increased income and you’ll have a good ballpark. So basically, with an increase from $53K to $75K, the EFC might go up by another $9500. An again, keep in mind that self-employment taxes cannot be written off – so if your enterprising father is still running his own business, you need to tease out the self-employment tax from the straight income tax. </p>
<p>I think you are right to take advantage of the free community college opportunity in Missouri. It sounds like your dad is a hard worker and doesn’t give up easily, so I think it is reasonable to anticipate that as the economy improves, your family income will go up as well. Whatever you could get in need-based aid your first year of college could be substantially diminished by years 3 & 4 when your family income improves – so it would make a lot of sense for you to conserve resources now, so that you will have a better set of options down the line when you transfer to a 4-year college. </p>
<p>I would note that there are some advantages as well as disadvantages to being self-employed, as self-employed people do have a little more control of when income comes in and the bottom line each year for net income. There are always legitimate but discretionary business expenses that can provide a write-off to income, depending on whether the person chooses to invest more money in their business (such as by hiring an employee) - or to opt to bring more home.</p>