One parent in my household is a sole proprietor who files a schedule C. The other parents has a straight-forward W-2. The sole proprietor business is fairly simple, with no employees and no assets beyond typical office equipment.
Will the NPC be accurate for my family?
The answer is…it depends. Some colleges will add back in business expenses as income which are allowed by the IRS for tax purposes but not by the colleges for financial aid purposes.
Can you give some examples of what might be added back in? I know that business losses are added back, but I didn’t realize that if you report a profit that expenses might still be added back in.
What gets added back in? Things like……cell phones, business cars and business car expenses, home offices, travel, meals, clothing, utilities for home offices, basically things most people would be paying for anyway. These things can really add up.
Your business profit is not added back in…but some of these deductions might be. Depends on the college.
Thanks.
Is this just for schedule C businesses or would it also apply to Subchapter S corps?
@BelknapPoint perhaps you know the differences between these businesses and how deductions are handled for each type for IRS purposes.
@MMRose it’s very hard to get an accurate read using the net price calculators when a parent is a self employed business owner.
That is good news for me because I don’t have a home office, business car, etc.
If your gross income and net income aren’t that far apart, maybe the NPCs will be at least a ballpark.