<p>We were once again selected for verification (6th out of the 8 times my kids have attended college). I sent this in in the spring and just got a notice that the college pracessed it and sent it to FAFSA in September.
Our EFC HAD been $2000 ish, with reported assets below the threshold of what FAFSA was asking for. The corrections the college made include $90,000 in assets!!! Which changed the EFC enough to effect my D's Pell Grant. I will call FA tomorrow, as they are closed now, but I need some advice so I know if I am right.
Our primary residence includes 40 acres of land, 20 of which we rent to a farmer for $1400 a year. This is included in our income on our taxes, listed as land rent. The only place I could see that they could come up with an asset is that they are counting this as "investment property/rental property". However, no one ever asked what exactly our rental is and what this is worth, etc.
Question: Can they count this 20 acres as an asset? How do you value that when it is part of our primary residence...which we have a Home Equity loan on, an by itself that land is only worth about $20,000 at the most, and that would be if we were to sell it to someone to build a house on.
I guess I need to be prepared when I call FA, to ask the right questions.
PLEASE help! Thanks!</p>
<p>Question: Can they count this 20 acres as an asset?</p>
<p>I don’t know what the rules are, but it sure looks like they’ve decided that altho it’s part of your primary residence that it is a part that you aren’t using (proof is that you’re renting it out) and therefore has a value.</p>
<p>I guess it’s almost like you owned 4 cars and you were renting 2 cars out. Then those 2 extra cars might be considered as having value as well as rental income…even tho cars don’t usually count on FAFSA… </p>
<p>It looks like they’re treating that land as a divided piece of property. Perhaps they have someway of putting a dollar value on it.</p>
<p>You might search for poster Curmudgeon, he had a farm and had some sort of issues a few years ago and might be familiar with the rules so that you can provide details to clarify the issue</p>
<p>I think Curmy had issues with CSS Profile and the value of his ranch. I don’t think it was a FAFSA issue. </p>
<p>CSS Profile can be brutal to those with farms/ranches, etc.</p>
<p>I think this is more of an issue that since the land is being rented out, it’s not protected like a primary residence.</p>
<p>Yup I agree, sounds like they assigned a value to the land since you ‘rent/lease’ it much like someone who has a house they rent. You should call, but what you might want to do is see if a real estate agent can give you a value for that land (in writing in an e-mail or something on paper) should you split it and put it up for sale so you have a number if the college has done it’s own valuation. Remember you “value” land at the price you could sell it for ASAP which is short hand for “fire sale” price and hopefully you are correct on your guesstimate if you were to split. You might tell them it’s contiguous land (assuming it is) and not currently legally split from your property. Is it a family member that is farming it?</p>
<p>As you are receiving rental income for the land, I think they have to show the revenue generator as an asset. I agree with Mom3 - have it valued by a real estate agent and see if the school will use that value. As you had not shown a value they probably had to use some sort of formula to calculate a value. If they used something like what value an investment would have in order to produce $1400 at current interest rates, it would come up with a much higher value than $20,000.( For instance at 1% interest you would have to have $140,000 invested to make $1400).</p>
<p>We don’t own a working farm and it is not a family member farming it, but this has never come up on verification before…all 5 other times! Our taxes have been exactly the same all of those times. How can they even guess on value as they do not even know how much or where the land is located, and that it is farm land? Plus if we claim it as an asset, we have to claim what we owe on it, which would be hard to figure out since the Loan is on our total property. Hmmm. I will call first then see where we are at. My daughter cannot tell if her Pell was reduced. If it was, it was by 1000, which is significant to her. I have to find that copy of her original FA award letter that she got this summer. Thanks everyone!</p>
<p>Just a guess - but they may be assigning an asset value based on the income-generating potential of the property. That’s how farmland is assessed for taxes, in Illinois at least, where potential sale value plays no part.</p>
<p>I don’t think it matters that the rest is not a working farm.</p>
<p>I think it’s the same if you owned 4 cars and you rented 2 of them out. Cars aren’t usually reported as assets on FAFSA, but once you rent them out, then the rent and the value becomes an issue.</p>
<p>The fact that this never came up on earlier FAFSAs isn’t really an issue…don’t open that can of worms…you don’t want those past FA packages being re-evaluated and then be told that you owe for money that you shouldn’t have gotten.</p>
<p>As for figuring the mortgage…Guess you’d have to figure the part that’s for the building(s) and then determine the rest is for land and then calculate by acre.</p>
<p>If it were me…and I were you…I would take the tax records from your town that show that this 20 acres is NOT a separate parcel of land from your primary residence. The tax property has not been subdivided…you are simply renting some of the space on it. That is different than unannexed property, one would think. The rental income would have to be noted on the FAFSA but that should not increase your family contribution.</p>
<p>My question…how did the college know you were renting 20 acres? My guess is they have assigned a “value” to that land as though it were a separate property. With your tax and assessment records in hand…and maybe a plot map for your property, you should be able to show that it is NOT a separate property.</p>
<p>I let my BIL “rent” my car for a week this summer…it would not have shown up as a “rental vehicle” because it isn’t…and it’s my personal car…just like this land is part of your personal property. </p>
<p>Have you been verified by this particular college in the past?</p>
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<p>That’s what I would do. I also would not get into any discussion about previous years. I have no idea how they valued it, but ask a real estate agent that knows what the zoning is for that area (rural or agricultural or something else) which will also impact what it’s worth/assessed as a poster above mentions.</p>
<p>*My question…how did the college know you were renting 20 acres? *</p>
<p>It sounds like when they listed the rent, they listed it as rent against 20 acres. </p>
<p>I let my BIL “rent” my car for a week this summer…it would not have shown up as a “rental vehicle” because it isn’t…and it’s my personal car.</p>
<p>that might be a different situation since you wouldn’t be renting your car out for the whole 12 months or even a large period of time. Was this just a theoretical situation? </p>
<p>I think when you rent something out for a long period of time you’re indicating that you aren’t using it for personal use, you’re using it to generate income.</p>
<p>We simply list it as “land rent” for taxes. we have been verified by this college all 4 years my daughter has gone there. I am very upset they waited until after they sent out her FA award letter to process these verifications. We accepted loans based on the amount of her Pell grant, and now she might come up short next semester.
I will see if the taxes are split between the acreage and the house itself - my husband thinks they are - bummer. We just got our school tax bill, so maybe it is on there.
Have to work this morning, so I will call FA this afternoon. I will let everyone know what I find out.</p>
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<p>No it was not theoretical…we do it every year.</p>
<p>Wouldn’t this situation be similar to that of someone renting out a room in their home?
It would seem to me that the rental income would have to be declared (as the OP said it was) but the room would still be considered part of the primary residence, and not a separate rental property.</p>
<p>I second the idea of getting the town tax records and showing that the property is all one parcel.</p>
<p>Wouldn’t this situation be similar to that of someone renting out a room in their home?</p>
<p>Not really…you can’t just sell off part of your home. But a person can split off land and sell it.</p>
<p>The other thing to consider is that the OP may be getting tax benefits to having the property used for agriculture. I have a BIL that owns a second home and specifically has some of the property (land only) rented to a farmer as it has a significant tax benefit in his favor to be classified as agriculture. The actual rent collected is not the only benefit!</p>
<p>There are MANY folks who have a “tax benefit” for some reason on large parcels of land…whether it’s designated open space or something of that sort. That would NOT make that section of your land “separate” for financial aid purposes, if it is really part of your primary residence parcel.</p>
<p>I know it isn’t separate, I was just pointing it out that they may have been getting much more value ( especially over time) than the $1400 rent from the farmer. Open space designation wouldn’t trigger an income that creates a paper trail for the FA folks to dig deeper. Our town has an active “open space” program and the tax benefit is there to compensate for the fact that the property may have less resale value due to restrictions or easements. The town benefits from the open space esthetically, environmentally and also eases the potential for a larger burden on town services of higher population of school age children, need for police/fire/support services etc.</p>
<p>We get no benefit from the farmland. No tax breaks. Nothing. Ok, maybe some venison from people who hunt on our land…</p>