<p>I suspect the confusion is that certain types of income aren’t taxable, and don’t have to be reported on the 1040. They don’t end up being included as part of the AGI-- I believe that military pension income and some religious income falls into that category.</p>
<p>But FAFSA is different-- it includes a schedule where you include any untaxed income that’s not reported elsewhere, and that gets added to the other income when calculating aid.</p>