I’m sorry if this should be obvious, but I’m having trouble finding the answer:
On some schools’ online calculators, it’s really clear where to put in numbers from W2s etc. However, I have seen a couple of times:
Parents’ income from wages/salaries:
[and then later]
Parents’ untaxed income:
Suppose parents make $100K gross of which $10K is pretax income (retirement, health insurance premiums, etc.) - what goes in the first slot; is it 100K and then 10K in the second, or is it 90K in the first slot and 10K in the second? And is there a distinction between the types of “untaxed” income, because I don’t see one.
Thank you!
I would subtract the pre-tax amounts that are for medical and dental insurance from gross income for the first question. I wouldn’t subtract the pre-tax amount of retirement contributions because they will be added back in by the schools. If there is a later question asking specifically about the amount of pre-tax retirement contributions, then I would subtract them in the first question.
I would use the 2nd question for any other kinds of untaxed income you may have.
@annoyingdad - Thank you - so let me ask:
Suppose there is 100K gross
2K health insurance premium
1K taxes/socsec/etc. (just for number sake so I can see where everything goes)
7K retirement contribution to 401(k)
no other income
Then enter:
Income from Wages/Salary - 90K
Untaxed Income - 7K
?? Is this correct
Assuming there isn’t a later question specifically about pre-tax retirement contributions, I would put $98k for the first question and 0 for the 2nd. The income basis for finaid is generally AGI but schools generally will add the $7k back to AGI in their formulas. I wouldn’t subtract out tax withholding amounts or FICA. The actual finaid formulas generally will give you credit for actual taxes paid and amounts paid for FICA though I can’t say for sure whether the formulas in the calculators will do the same.
I guess you could put $91k for question one and $7k for question two. The taxes paid and FICA paid credits you get are only going to based on the taxable amount from your tax return which would be $91k.
ETA: Try it both ways and see what if any difference it makes between 98k/0 and 91k/7k. The only difference should be the amount of credit for having paid tax/FICA on $98k vs. $91k.
Thank you! It ends up also being confusing because as a public school teacher, I don’t pay (or get, later) social security, but I have a mandatory state retirement contribution for my later pension instead, of a much higher %. So I imagine that I’ll have to explain that at some point, to whichever college.
So the pre-tax retirement you’re talking about is mandatory contributions? That’s different, mandatory contributions generally aren’t reported and added back in. What code is in Box 12 of your W-2 for those contributions?
I have both my DH’s non-mandatory 401(k) and my mandatory (and a small amount of non-mandatory for me, but that won’t make an appreciable difference). I made up the numbers above btw just for clarity.
On my W2, in box 12 it says “E” for my non-mandatory 403(b) and in box 14 it says “RET” and has the 11% mandatory contribution. And zero for social security earnings/deductions though the normal medicare deductions and all taxes, of course.
I fear, however, that the mandatory contributions will be reported and added back in, because that’s what happened with the private school financial aid application we did for my younger son - I argued with them but they said it didn’t “count” the same as social security, and there was no budging them in spite of the fact that it replaced soc sec for my salary, and that I had no access to the money.
I wouldn’t report the mandatory part on fafsa, but yes, schools can handle it however they choose for their own aid. So the NPCs may be a less accurate for you than for others.
Thank you! I may be asking you more again next fall when we’re actually filling them out. 