cali1290

I live by myself and completely being independent from my family. However, I have to file as dependent because I'll be 23 in July 2013, no kid, single, and still in undergrad. My father's adjusted gross income is $16k/year and we have 3 people in the household including me. Let's say I use my $10k saving to trade stocks and earn $10k (not paying tax yet) within a year, now will I still be eligible for financial aid? I'm aware that I'll have to put my profit + my father's income on FAFSA forms, will they find out that I have $10k? Does it help if my father doesn't claim me on his tax? Or how does it work?

Can somebody give me some insights please? I'd really appreciate it!

mom2collegekids

your dad's income is low enough that you probably qualify for auto 0 which means your assets don't get reported.

cali1290

Thanks for replying mom2collegekids. Btw, the $10k that I put in stocks is what I saved from financial aid, so does that count as my assets? Will FAFSA verify any information with IRS?

4kidsdad

Auto zero EFC also requires your parent filed 1040A/1040EZ tax returns, not 1040.

mom2collegekids

True...I shouldn't have assumed that someone earning only $15k per year with a family wouldn't have deductions. Maybe they do.

Your other problem is that if you become independent while still in school, your income assets will count. Are you a senior in college now? or what?

notrichenough

Have you already doubled your money trading stock? Or you are planning on doubling your money?

If you've already doubled your money, congratulations, you should drop out and trade for a living, you are 1 in a million. Only half kidding.

If this is your plan to put yourself through college by doubling your money, I would say you much a much greater chance of losing it all than doubling it, and maybe you should rethink it.

Only if you fill out the forms honestly. Or if they examine your tax return, where they might wonder how you made $10K in STCG with no reported assets.

cptofthehouse

If the student has a realized gain in stock, he has income of, say $10K as he gives as his example. He has to file his own taxes to report this regardless of whether he is a dependent or not. I'm no tax expert, but the rules are pretty clear as to what the break points are as whether or not a dependent has to file his own return and $10K in unearned income is over that amount.

So when the student files FAFSA, he does have to report that as his income on the student part of the form. Where it gets sticky for me, and hopefully someone who knows can answer this, is does this nullfy the auto zero EFC? Doesn't the student now have to file a Schedule D for his taxes which means a 1040 for him? The parents can still file the 1040 Ez but what happens in this situation where the student show has to file a 1040?

notrichenough

The EFC Formula Guide says nothing about the student's income or assets when qualifying for simplified means or auto-zero, it only talks about the parents.

http://studentaid.ed.gov/sites/defau...c-forumula.pdf

cptofthehouse

I see. But I've read at finaid.com the following: "An applicant qualifies for the simplified needs test if the parents have an adjusted gross income of less than $50,000 and every family member was eligible to file an IRS Form 1040A or 1040EZ (or wasn't required to file a Federal income tax return)." I thought I saw the same for the auto zero. I really don't know.

It does seem a bit strange that if student has a large income/assets from a trust or other sources but the parents are low income that such a student could have a zero EFC and qualify for PELL. It's possible that it is a quirk in the way the system works.

notrichenough

Well, if you work through the formula guide, if the parents qualify for auto-zero the instructions say to stop, and you never even get to the student part.

It does seem odd though. That's a pretty big loophole.