I have searched CC and found good advice from previous years but now with the changes on small businesses and farms, I would be grateful for clarificaiton. How do CSS schools calculate small business income when, for example, income from one business is put into another struggling business … No income is taken for personal reasons but may not be perceived as such …
I think in general each school determines aid individually. So you’d need to contact each prospective school for specific guidance. Forms are just to compile info but are not for interpretation.
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It depends on the details and I agree it varies by school. But in general what they care about is net business income as it flows to your AGI. But if we’re talking a large S Corp income offset be a large sole prop loss on schedule 1, I could see schools doing a deeper dive on each business return (1120s and schedule c) and perhaps disallowing some of that loss if appropriate.
I understand what you’re saying about business income not used for personal reasons but the schools don’t take that view most of the time. They consider business income available for college even if, for example, the business income flowed from an s corp that never actually distributed to shareholders.
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Thank you so much for this in-depth explanation. I kept checking to see if i got a response and I did! It seems some schools have added back the losses and others did not.
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The income you have to report will just be taken directly from tax returns. The trickier part is how to value your business as an asset, and it’s important not to overvalue your business since it’s being assessed, from a financial aid perspective, as a liquid asset. So, one option is liquid assets - liabilities. Many business owners (rightly so) think of their business as being worth a lot more than it actually is in a “fire sale” situation, and that can hurt them on financial aid.