@thumper1 In addition to the new one, the only other property my parents own is our residence. The new property is not a rental property.
Are you a freshman? Is this the first FAFSA you’ve filed? If you filed the FAFSA and said all your family made was $20k (estimating off 2013 income taxes), you may have received a EFC estimate of zero. Now that your taxes are filed and your parents’ MAGI is really $283k, and they had to file a 1040 and not a 1040A, the Auto Zero estimate is gone and it looks like they made $283k and you get nothing in federal need based financial aid. You can ask the FA officer to review, but have all your ducks ready - when did they sell the lot, why didn’t they reinvest the money immediately (and thus have it be a 1031 exchange and not counted as income at all), will there be a correction to their income tax now that they reinvested? How much did they use for bills (will be counted as income) and how much did the new farm cost. If they are showing income of $283k with no deductions, they must have paid $50k in federal taxes. THIS is what doesn’t seem right to me about this transaction.
I don’t know what school you are going to. Getting a ‘lot of money from FAFSA’ isn’t really how it works. FAFSA will determine if you qualify for a Pell grant, maybe a SEOG from your school, Perkins loan, and Stafford subsidized loans. Some schools also use it to determine any school grants, but some schools don’t have a lot of school grant money. If your school also used the Profile, you would have had to disclose the farm land and value, which probably would take you out of contention.
So you have a couple of choices. You can ask the FA for a professional judgment exception for this one time, or you can take a gap year and file using a gross income of $20k for 2015 taxes. If you say which school you are looking at, someone might know if that school is lenient on granting professional judgment. I filed appeals for both my kids this year because of a change in income and one schhttp://talk.collegeconfidential.com/financial-aid-scholarships/ool gave me twice as much as the other.
@twoinanddone The reason they didn’t reinvest right away was because they had to look for a property that was actually worth it which isn’t that easy to find.
I am going to the University of Washington Seattle. Currently I have a $4,000 merit/need based scholarship there. $5,000 in Federal Pell Grant, $10,500 State Need Grant, and a $150 Federal Supplemental Grant. I set the AGI on my FAFSA to $20k before my parents filed taxes which is why I received all this aid. They couldn’t file a 1040A even if they made $20k because you can’t file 1040A if you have income from your own business which they do.
And yes I am a freshman.
You ‘guestimated’ and they qualified for an Auto Zero. However, the reality was that they don’t qualify for the auto zero. We all live by the same tax rules and same FAFSA rules, and even though you don’t think it is fair, it’s what it is. I have to add back in my 401k contributions to my salary on FAFSA even though if I don’t save I won’t have anything to use for retirement, just like your parents won’t.
It is unfortunate, especially on the first year of filing FAFSA, that some people make tax mistakes and they do affect FAFSA. Some people have too much in assets when they apply that first year, and learn to pay bills with money in a savings account in January. It takes a while. This year I knew not to file until I’d paid as many Jan and Feb bills as I could. I paid the spring tuition. I depleted that savings account as best I could.
Contact the FA office and see what they can do. If possible, make an appointment. It is a HUGE difference for a $20k income and a $283k income. Honestly, I don’t think the school will make that much of an adjustment for you and you most likely will have a lot of that aid removed. You can ask them. You can suggest taking a gap year. You also need to be very careful for future years to stay below $24000 in income if you want to continue to qualify for the auto zero. If you can’t file a 1040A, I don’t think you can qualify for the simplified asset test for incomes between $24-50k.
Yes you can qualify for simplified needs without a 1040A.
The requirements are being below the income threshold (for simplified needs, it is $49,999, I believe, and one of the following (not all, one).
- Being eligible to file a 1040A or 1040EZ.
- Qualifying for a means tested benefit such as SNAP, free or reduced lunch, etc.
- Being a dislocated worked (parent).
The auto $0 EFC requires the same but the income threshold is below $23,000 a year.
So do I contact just my college’s financial aid department? Or do I contact the Federal Pell Grant, State Need Grant, and Federal Supplemental Grant as well? I’m kind of confused on who exactly I should be contacting.
You should be contacting the financial aid office. In addition you should be correcting your FAFSA
Log back into your FAFSA to correct it with actual tax return ‘filed’ amounts and the actual amount of cash and/or investments on the day you originally submitted the FAFSA.
Since all your free aid will disappear with reporting $280k AGI plus some hundreds of thousands in assets, you should consider taking a GAP year and working if your appeal is unsuccessful.
Did you really expect to attend college for free for 4 years with you and your parents having no responsibility to pay for anything (since they don’t want to have ‘nothing in 6 years’)?
I think we can dial back on the (seeming) sarcasm. He is asking a question, let’s not make him feel that he shouldn’t even ask. For example, what if all this same money (approx. $200,000) we are talking about was in a 401K or a company pension account. Would the family be expected to cash those out and suffer the tax penalties, not to mention no means left to retire, to pay for his college? I am far from expert in financial aid issues, but that seems unlikely to me. My point being that since the OP has presented this as the money in question being his parents de facto retirement account, it doesn’t seem like an unreasonable question. Now maybe lawmakers didn’t take this scenario into account when they structured the rules, but how would he know that? That is why he is here asking. It is a reasonable question, it seems to me.
The OP is going to get the only accurate answer by discussing this with the financial aid department at his school.
Re: retirement money…if it’s not in a retirement account…it’s not retirement money for financial aid purposes. It’s an asset. If that is the OP’s concern, he should include that in the info he shares with the financial aid office at his school.
Right now, the family owns an investment property…which is additional to their regular primary residence. For FAFSA purposes, the asset might not be counted (next year…because they bought it in 2015) IF the family qualifies for auto $0 or simplified needs test.
HOWEVER, there is no auto $0 or simplified needs test for Profile schools. So if this school is a Profile school, this asset could very well be included in the calculation for need based aid.