<p>Mom2collegekids…I’m not sure. Doesn’t the FAFSA ask for income (like ‘what’s on line 7’)? Then you add and subtract from there with some things not included in the income (retirement fund, pretax exclusions) added back in. It’s not that US citizens living abroad don’t have to state what their income is, it is just that there is an exemption from tax on that income, just like there is an exemption or credit for certain income earned in the US. A person could have a high AGI, but have enough exemptions or credits not to pay much in taxes (or even get credits as income). It would seem to me that the foreign income is the same. The taxpayer states “I made $100k” but then gets an exemption and doesn’t have to pay taxes on that. On the FAFSA, wouldn’t that amount still be listed as income? Why would someone who made $100k then qualify for PELL?</p>
<p>I don’t know the answer, just seems that it would work that way for US citizens filing from abroad. I have no idea how they have the non-US citizen parents fill out the FAFSA, but I thought the same way. What is your INCOME, not what is the taxable income (after all exemptions and credits).</p>
<p>The FAFSA question 85 asks for AGI, but for anyone not required to file a US return(doesn’t sound like the parents are US citizens) but files a foreign return the instructions say:</p>
<p>If the OPs parents live in a country without an income tax, there is a worksheet to figure what to enter, on page AVG-16. It also applies to US non-filers.</p>
<p>Re the discussion about the foreign income exclusion, it is specifically excluded from untaxed income for those abroad who are required to file a US return, page AVG-23.</p>
<p>I don’t think there is any above-the-line deduction or exemption that would reduce AGI for foreign tax filers as you describe. Foreign tax credits/exemptions/decuctions may reduce overall taxable income, but those reductions are taken after AGI is calculated, as far as I can see.</p>
<p>Financial Aid is not a benefit we get in return for paying our taxes. If it were we could just pay our tuition directly.</p>
<p>Taxes support both the universities overall and the students attending because we all benefit from the research and from having educated graduates in society and participating in the economy. So it shouldn’t matter that people overseas aren’t paying taxes, it is everyone here, not there, who benefits from having the university research and graduates here.</p>
<p>The amount of the exclusion is entered as a negative number on line 21 of the 1040 and subtracted to get line 22, total income. This is before adjustments and does affect AGI.</p>
<p>Guys, you are ignoring a possibility. The OP has non-American parents who were on study/work visas while following their graduate studies in US.</p>
<p>If that is the case, the parents are not liable to any IRS filling or taxes after they depart the country. Only the OP is, if the OP has his/her own income.</p>
<p>(US) tax obligations don’t extend to foreign parents of American citizens that are not living in US anymore. </p>
<p>This will be an odd case, as far as FAFSA goes.</p>
<p>This is not an odd case at all for the FAFSA. There are many students in the OP’s situation. The challenge for them is to determine which lines of the FAFSA correspond to their own situation so that they can complete it properly.</p>
<p>I had NO in state school when I was a child. My parents were ex pats and had severed their relationships with any state. They sold their house when the moved overseas, and did not pay state income tax. Because my father was a DOD civillian employee, he had most citizenship rights but he chose to terminate his state residency situation because of state tax implications. And so he did not pay state income taxes for the 20 years he did live overseas. </p>
<p>A result of this was that I had no state school for which I was in state for tuition and admissions purposes; nor did my siblings. This is not an unusual situation at all. I was entitled to federal grants, loans, workstudy, but none that were state specific. </p>
<p>I don’t know what is required to maintain a state residency; I believe that differs from state to state, and by situation. Military, for instance, get some accommodation. Most of my classmates were “army brats” and most of them did not some home state, and in state college options at that state. I did not . </p>