<p>First let me say I'm not trying to scam the system. Given that though I would like to be able to increase D's chances for financial aid in anyway possible. So here is the situation. </p>
<p>We own a vacant lot next to our house. When we purchased it, it was with the intent that we would either build a smaller home on it when our children have moved out or sell it at some point. We've thought of it as part of our retirement nest egg. For now we just use it as an extension of our property. Considering how we use it and that it is adjacent to our main lot, can we consider this part of our home equity? H and I have discussed getting a HELOC type loan on it so this "real estate" asset doesn't appear so substantial, but even a couple of years ago our bank said it wasn't possible to do that type of loan on it. And honestly, we don't have any interest in selling it at this point--even if we could. </p>
<p>From what I understand, there would be some advantages in being able to consider this part of our home equity. </p>
<p>FYI--I'm not talking about 100s of thousands of dollars here. It's a building lot in a relatively inexpensive part of the country.</p>
<p>Hmmm, interesting question, since it is adjacent and used by you now, it may be considered part of your home for FAFSA. I have several neighbors with two lots and they use them all as one.</p>
<p>they are often billed for property tax purposes as two lots however- at least in our county, I would expect that it would not be part of your home equity because selling the adjoining property would not impact the original site of your home.</p>
<p>However, if you have one mortgage that covers both properties you may be able to argue your case with the finaid office.</p>
<p>It would be to your advantage to make it part of your primary residence. If you get separate tax bills for the properties, they will likely be considered separate. Maybe you can get them put into one category.</p>
<p>I've wondered about asking the county to give us a single tax bill, but I'm not sure how/what the mortgage company (on the house and primary lot) would think about that idea. When we refinanced it this year we decided to open an escrow account for taxes and insurance. It's easier that way, and we don't forget to pay the bill. </p>
<p>I think it's probably a long shot. Kind of too bad....if we would have put the money into a "retirement" account it would have looked better for financial aid I think. The positive side is that the lot has appreciated in value far more than any retirement account would have done. It was a great "deal" which is one reason why we purchased it.</p>
<p>Why don't you call up some college financial aid offices and ask a counselor there how to structure this whole thing? There may be an answer other than what is given here. I certainly do not know for sure. I know folks who own two adjacent lots where the second one is salable, buildable for a separate home but it is considered part of the primary residence. I don't know if it is the paper work, tax work or what that makes it considered as such. Do find out. And let us know.</p>
<p>I'd consult a tax adviser. This question must come up all the time when calculating what's eligible for the capital gains exclusion on sale of one's primary residence. The IRS must have some rulings, instructions, or guidance on it. If the IRS says it's OK to treat the adjacent lot as part of the primary residence, then it's probably reasonable to make that assumption for FAFSA. If the IRS says it's a non-starter, I would touch it with a 10-foot pole.</p>
<p>Another thing you might consider is actually annexing this vacant lot to your home property. The taxes where we live are much higher on a separate building lot than they are on additional property added to the lot on which your house sits (because another house isn't going to be built there). If that vacant lot becomes part of your home property, it should be considered part of it...</p>
<p>bclintonk--I do know how the IRS treats it. Under current tax codes, if we sell it with our primary residence (or at the same time) it's considered eligible for the capital gains exclusion. If we sell it before or after we sell our primary residence, we would have to pay capital gains tax on it. </p>
<p>I think I need to make a few calls this week to a Profile school and a FAFSA school. Probably should call the county about the bill as well.</p>