What is Family Income for admission purposes?

Paying for College
1

<p>Line 7 on 1040 Tax form is where you report wages,salaries, tips etc. Then on line 22, that's total income which takes into consideration interest, dividends, losses etc etc. Line 37 is AGI. When you run Net Price calculators, it asks you what is your family income. Which one is considered as family income for college admission purposes?</p>

2

<p>I would think AGI of you and your parents are the family income.</p>

3

<p>^^Agree. Income is all your income - from jobs, investments. For financial aid, FAFSA asks for the AGI. Also some non taxable income.</p>

4

<p>If it’s AGI then that’s not all income. AGI is adjusted income which is after deductions.</p>

5

<p>AGI is after some deductions but not after itemized deductions. What lines 23-35 have numbers on the return? Line 32 will be added back in to AGI by fafsa and generally by colleges. The other lines generally won’t be added back in. If you have amounts on the lines indicating self-employment, note that NPCs are less accurate for those who are self-employed, own rental properties, own business etc. If all income from work is W-2 income then the NPCs are more accurate.</p>

6

<p>

Not quite. Only certain deductions are deducted to calculate the AGI - what are known as above the line deductions. For instance the deductible part of self employment taxes, self employed health insurance, alimony are all deducted to arrive at the AGI. A lot of deductions are “below the line deductions” and are deducted after the AGI is calculated. For instance the standard deduction, itemized deductions (mortgage interest, medical, charitable contributions etc), and the personal/dependent exemptions are all below the line deductions and come off *after *the AGI is calculated. </p>

<p>For FA, the AGI is asked for. But some pre AGI deductions (such as IRA contributions) are added back to the AGI in the FA formula.</p>

7

<p>My Dad’s income is all for salary. Line 7 is after 401 K and other deductions; Only adjusted gross income is from traditional IRA. So I believe they will add 401 K and IRA contribution to the salary and wages for that year. Correct? Afterwards 401k and IRA amount is not part of family contribution.</p>

8

<p>The contribution to a tax deductible IRA/401k for the year is added back to the AGI and is used for determining the EFC. (a Roth contribution does not affect the AGI in the first place so nothing to add back). </p>

<p>The balance in an IRA/401k is not reported as an asset on FAFSA.</p>

<p>So, for FA purposes, income can not be reduced by making a contribution to a retirement account. But retirement assets are protected assets in the EFC formula.</p>