<p>My S-I-L has alway filed just barely under Simplified Needs on her FAFSA as her income was in the $40,000.00 range . Now she is able to put some money aside ( with her husband ) through a small inheritance into a new Roth IRA ( they have no 401k, no pensions on their jobs ). </p>
<p>When she did the calculator for new upcoming second D for college , the ROTH IRA contribution was ADDED as INCOME ?? It pushed her out of simplified needs category . She has no assets but she felt that filing the 1040 EZ got her the most aid with first D in college.</p>
<p>What could she have done ? Could she have waited to start her Roth Ira ? She did the full $8000 which pushed them up to $52,000.00 a year .</p>
<p>I"m not positive since I haven't dealt with an inheritance, but it seems like that money would have counted as income whether or not it was put into an IRA. The good part about puting it in a retirement fund is that next year it will not count as an asset.</p>
<p>FAFSA requires inclusion of IRA <em>deductions</em> in Worksheet B, 2nd question. Thus, inclusion of an IRA contribution in FAFSA income depends on whether it is deductible on the tax return.</p>
<p>A contribution to a <em>Roth</em> IRA is not deductible on the tax return, so it is not includible in FAFSA income. If it had been a so-called traditional IRA, then the contribution would have been a tax return deduction, and a FAFSA income inclusion.</p>
<p>Thanks , dt . So does that mean that Roth Ira contributions do not have to be listed on tax forms as "deductible " - therefore , not reported as " deductions" in Worksheet B question ??? It's funny that it's not so clear on the FAFSA ( Roth , Traditional IRA ) , although I see educational IRA's contributions listed .</p>