Good news…we sold our house and will have an additional 200,000 in cash. We have yet to purchase a new house, so it looks like the cash is just sitting there, which I suppose it is. How will this affect our FAFSA and the amount intended to pay for college tuition of our 2 children, which will start next year. Is there anything we can do with the funds until that time? I don’t want to rush into purchasing something.
Thank you,
John and Pasha
If it is there on the day you fill out and file the FAFSA, it is going to be an asset. You could ask for an override as a ‘one time thing’ and a school might grant it if, for example, you are closing on a home soon. However, the easiest thing to do would be to buy the new house before you file FAFSA.
Will this matter? Are your income and other as sets low enough that your children would qualify for FA like Pell grants?
It will be considered an asset available to pay for college - a 5.6% hit on FAFSA (not necessarily on the Profile).
My parents received an ~$30,000 relocation package from my dad’s company. It did go on FAFSA, but there was somewhere on one of the forms where we could explain that it was one-time and used for moving expenses. I received my FA package and it would appear that they did not count the $30,000.
Remember asset protection for FAFSA is only $8,000 now, not $30,000+ like in the past.
There is a place for an explanation on the Profile. There is not on the fafsa.
I can’t imagine that $200k sitting in the bank could be ignored, unless maybe a purchase contract could be shown. Why would a school believe that someone is “going to” buy a home with ALL of it? A family could choose to rent, use only some of it towards another home, or spend it all jewelry and fur coats.
A “make whole” reimbursement for a company move is a totally different situation.
So you don’t plan to buy a house by 2016?
Where are you renting now and how long is the lease?
<<<
I don’t want to rush into purchasing something.
[QUOTE=""]
[/QUOTE]
??
It’s JULY, not December.
You won’t have to submit FAFSA until after the first of the year. You probably could delay filing until February and still have a “good place in line.”
Even the most pickiest of buyers can find a great home within a few months time.
That said, FAFSA is for federal aid and “free money” from the feds is for low income families. You may not even qualify for need-based grants if your income and other assets are too high.
It sounds like you’re new to the FA process and may not understand how it all works. Most schools do not have much aid to give, so even with a low EFC (if each child gets one), their schools may not offer much aid and leave you with huge gaps.
Run a VARIETY of schools’ Net Price Calculators excluding that $200k and see what the results are. And, also run the NPCs including the $200k. Variety = instate public, OOS public, top private, mid-level private, etc.
If it’s a school that included home equity, then include the $200k…see what the results are.
I think you need to start house-hunting. It’s just too unlikely that a school will ignore that much money. Even if they believed that you were going to buy another home soon, they have no way of knowing whether you’re going to use the entire $200k for a down payment, or if you’ll only use half and use the other half for something else.
Simultaneously, start looking for schools that will give your kids LARGE assured merit scholarships for their stats.
^ I agree. You should first check your current EFC with and without the $200k.
Does that $200k from the sale count as income for 2015?
The sale of your house is a capital gain in the tax year in which it sells, not ordinary income.
Selling a primary residence usually does not result in a capital gain tax anymore. This looks to be well under the threshold.
Some people still remember the pre-1997 regs on home sales. Any tax would only be on the profit and this doesn’t appear to exceed any of the current limits assuming the house was the principle residence and the OP lived there at least 2 of the last 5 years. Practically speaking with the amount the OP mentioned there would only be possible capital gains if the home was lived in less than 2 years.
House used partially for business and so some depreciated? House purchased outright or through a 1031 exchange? I assume nothing when someone asks “do I owe taxes”.
Check pub. 523. I wouldn’t tell anyone “you don’t owe any taxes” without taking them through the relevant worksheets…
Regardless of the capital gain issue…the $200,000 if sitting in a bank account the day the fafsa is filed will add $11,200 to the EFC per fafsa.
I would think that an $11,200 addition would motivate someone to start house-hunting.
Unless OP foresee a drop in real estate that would be more than that amount within the next few months.
True, but the house-hunting could start NOW, regardless. It’s getting close to end of summer when prices start dropping anyway because the prized “summer move” time will have ended.
Paying rent in the meantime is no great shakes, either.
that said, I think the OP may be naive about FA if the schools are FAFSA only.
Here’s an opinion:
The salient fact of the above is that an applicant can ask for a review and that the finaid officers have the ability to override the formula when the information is compelling. In this case, NOT commingling the proceeds and setting up specific accounts is a good start. Another option is to talk to a title company in case there are prospects and ask to open a escrow account specifically dedicated to the purchase of the future home. With low interest, this should not cost a fortune. There is a more aggressive stance that could be used regarding reporting the 200,000 – still showing the existence of the assets but not listing under the standard cash.
If the funds will not be used to purchase another home, hire a specialist and discuss converting the cash into an asset that might be excluded from the FAFSA calculations.