<p>I would love to hear any guidance or input folks have about applying for FAFSA when one parent is self employed. Our daughter's school financial aid office has given us the runaround. There seems to be a great deal of confusion about self employment tax and how it is shown on FAFSA. The last thread was dated in 2006 - any new information out there?</p>
<p>I honestly don't know anything about self employment taxes. Here is a link to the FAFSA EFC formula
<a href="http://ifap.ed.gov/eannouncements/attachments/0809EFCFormulaGuide.pdf%5B/url%5D">http://ifap.ed.gov/eannouncements/attachments/0809EFCFormulaGuide.pdf</a></p>
<p>In the formula actual federal taxes paid are used as an allowance against income but State and social security taxes are calculated using tables and formulas rather than the actual amounts paid. That may be where some discrepancy seems to happen for self employed people (I am thinking you pay more than the % allowed for SS taxes in table A2 on page 18 of the formula)</p>
<p>Swimcatsmom is right. When you complete your FASFA and enter the amount of federal tax paid you need to subtract the amount of your self-employment tax from line 63 (which is the line for total tax).</p>
<p>Yes, self-employed pay double the amount of SS taxes (they pay what both the employer and employee pays), however this is not an issue on the FASFA for the following reason:</p>
<p>One half of self employment tax is an above the line deduction (ie subtracted before your AGI is calculated), and the other half is calculated
(6.2% SS plus 1.45% medicare) and used as an allowance against income on the FASFA. So, your full 15.3% payment is taken into consideration. (This also holds true for self employment income over 94000 where everyone only pays medicare).</p>
<p>jjcddg is correct- you cannot put in your SET $ amount where the FAFSA asks for federal taxes paid- and if you read the question carefully you will see it specifies a different line number than SET.</p>
<p>On page 1, before the bottom line YOU subtract 1/2 from your income, so that is already gone from your AGI</p>
<p>The other half, the half every one pays, employee or self-employed, is accounted for in the EFC formula:</p>