I think I am providing accurate inputs to the various NPCs, but hoping others help clarify/confirm. My situation is pretty down the middle and should be easy I think. Just want to be sure I’m getting an accurate read.
For the record I’m married, with spouse that works. Two kids, 14 & 17. No farms, business ownership or exotic investments. Spouse has teachers retirement and I have 401K + liquid savings & 529 for each kid. I do have an options acct where I have been granted options through profit sharing.
Income:
Sometimes they ask for income and sometimes it is AGI. If they don’t explicitly ask for AGI do they want the gross number before any deductions?
Untaxed income:
Is this my 401k contribution + my employers contribution primarily? I don’t have any significant income outside of my job. Not really sure on how to value opinions? Assume it’s only net value. Only those that have vested?
Thought about looking into a FAFSA Specialist, but don’t really think my situation is all that complex.
I would suggest answering the questions as they appear on the specific NPC. And these questions WILL vary. For the 2022-23 FAFSA year, you will need tax year info from 2020.
Some NPCs are more “robust” than others.
Employee’s pre-tax contribution only- do not report any employer contribution as parent’s untaxed income.
Thanks to Peteclo for starting this thread - I have been thinking about these same issues. Just to clarify, let’s say a student’s family has $100k in total gross income from a single W-2 job, of which $8k goes to 401k pre-tax contributions. Assume no other pretax contributions and no outside income. I can see at least three ways to fill out NPCs (and CSS for that matter):
- Income: 100; Other untaxed income: 0
- Income: 92; Other untaxed income: 8
- Income: 100; Other untaxed income: 8
Option 3 actually makes the least sense to me, as it appears to double-count 8k. But I’m sensing that this is how colleges will expect the info to be entered in order to get an accurate estimate. Is that correct?
No. FAFSA (and Profile, last time I saw it) asks for Adjusted Gross Income from the federal tax return, which is a general measure of W-2 box 1 income (after employee pre-tax contributions have been subtracted from gross income) plus assorted additions and minus assorted deductions (if applicable). Using your example above, option 2 is how parent income and a 401(k) pre-tax contribution would be reported on FAFSA (and presumably Profile).
Option 2 is correct. If the NPC is not clear about where the information is located, Google FAFSA pdf for the most recent year (2021-22 until the new one comes out October 1). You’ll find directions there on how to report each item.
Note that there have been some substantial changes to the EFC formula for 2022-23. Many families won’t see any difference in their EFC as a result of the changes, but others will. You’ll need to wait until the NPCs have been updated after October 1 (may take awhile, depending on the school) to get a more accurate result.
Thanks for these helpful responses. Where the NPC has a specific field for AGI but also asks separately for income, would you use total gross income or W-2 box 1 income?
The CSS Profile actually seems easier to understand, or at least the 21-22 version was - in addition to line-by-line numbers from the 1040, it separates out how much the parent earned from work (100, in my example), how much the parent contributed to tax-deferred retirement accounts (8), and other untaxed income (0).
Unfortunately, many NPCs replace the latter two categories with one generic “untaxed income” field, and the instructions vary about what should be included there. It’s especially frustrating that running these NPCs with Option 2 above rather than Option 1 creates a substantial reduction in estimated aid, as much as 13k for some schools. I suspect something is being double-counted in that instance, but it could also be that Option 1 somehow understates actual resources in the eyes of the schools.
I suggest completing the NPC using the FAFSA instructions (https://studentaid.gov/sites/default/files/2021-22-fafsa.pdf). The explanations are excellent.