<p>I am planning to begin construction on a new home and rent out my current home. How will this new construction loan and rental affect my daughter's FASFA? Thank you</p>
<p>The construction loan won’t affect FAFSA at all. Debt is not considered by FAFSA unless it is against a reportable asset. Once you are living in the new home, it will not be a reportable asset. Your current home will become a reportable asset once it is no longer your primary home. The rent on it will be income reported on your tax return and on FAFSA.</p>
<p>The equity in the home that will become the rental will be an asset.</p>
<p>the rent you collect will be income reported on your tax return and on FAFSA. </p>
<p>I’ve never submitted FAFSA and I have rentals, so maybe Swimcat can respond to this: If you collect $1000 a month rent on a rental, but you pay $800 a month for the rental’s mortgage, how is that all handled on FAFSA? </p>
<p>We have rental property and since the mortgage equaled rent there was no income noted on taxes or Fafsa but the equity was included in Fafsa. </p>
<p>And depreciation, repairs and other allowable tax expenses bringing income level to zero on rent received. </p>
<p>Isn’t there a schedule you complete for rental properties? There was YEARS ago when I had one. I thought that is where any “income” would be derived.</p>
<p>For FAFSA purposes, a rental home is an asset. You report this asset as value (what you could sell it for now) minus any mortgage you have on it. </p>
<p>And the rental income is income…if there is any income from the property.</p>
<p>On the tax return, you report the rental income and any expenses related to the rental property (mortgage interest, depreciation, real estate taxes, maintenance, utilities if you pay them rather than the renter, advertising the property for rent etc etc). They will appear on schedule E of the 1040 and the net rental income (income less expenses) will flow through to a line on the 1040 which will then be included in the AGI. The AGI is what is reported on FAFSA.</p>
<p>Schools requiring forms in addition to FAFSA (such as CSS) may add non cash expenses such as depreciation back to income when determining need for their institutional aid.</p>
<p>^^That is how I have done it for years and years for FAFSA…I report the rental value as an asset and use the reportable AGI. For the Profile colleges you submit your tax forms generally so I assume that added back whatever they want to add back. I assumed at a minimum they added back depreciation. </p>