<p>Hello,</p>
<p>We live in CA, and have a rental home in SC, which has an equity of about $30,000. We don't have any positive rental income; it's about break-even.
Do you know how schools calculate the $30,000 other assets toward the EFC under both Federal and Institutional Methodology? Is it the full amount $30,000, or just 5.65% of the $30,000?<br>
Thanks,
Lynn</p>
<p>Since that’s an asset it should be the 5.65%. However, my understanding is rent would be considered current year income (but more knowledgeable people can correct me).</p>
<p>For the FAFSA, start here: [IFAP</a> - Electronic Announcements](<a href=“http://ifap.ed.gov/eannouncements/091312EFCFormulaGuide1314.html]IFAP”>http://ifap.ed.gov/eannouncements/091312EFCFormulaGuide1314.html)</p>
<p>For the CSS Profile, expect that they will come after the fillings in your teeth.</p>
<p>The $30,000 in equity is treated the same as other assets such as money in your checking account or stock you own that is not in a protected plan.</p>
<p>It is assessed at a maximum rate of 5.64%, it may be less depending on your income and your total amount of assets.</p>
<p>For income purposes, FAFSA uses whatever falls onto your 1040 from your schedule E. If it’s break-even, it will not add anything to your total income, so the income part will have no effect on your FAFSA (the Federal methodology).</p>
<p>For Profile (institutional methodology) they may or may not allow you to take deductions for things like depreciation. This can increase your “income” by thousands of dollars, and therefore increase your EFC from the Profile by quite a bit.</p>
<p>You probably will not be able to get the Profile schools to tell you exactly how they treat it, and you shouldn’t treat the institutional methodology calculators as being very accurate because they do not factor this in.</p>
<p>For example, if you are claiming $6000 in depreciation on schedule E, a Profile school will disallow this deduction, raising your income by $6000 and your EFC by about $3000.</p>
<p>Thanks. I’m very confused, since I was told by another certified financial planner that the $30,000 would be count in full as other assets, not at 5.64%?</p>
<p>Here’s the way it works for assets:</p>
<ul>
<li>add up all your countable assets</li>
<li>subtract the asset protection allowance</li>
<li>take 12% of this amount</li>
</ul>
<p>This amount is then added to your income, and you look up your EFC from a chart.</p>
<p>For FAFSA the top “bracket” is 47%, so 47% of 12% gives 5.64%.</p>
<p>So the full value of the asset is added up your total assets. Of the total, at most 5.64% is added to your EFC.</p>