Have 48,000 in AGI and around 21,000 in savings, 5 members in family. How do i find out the asset protection allowance, is there a formula or worksheet. Thanks!
also does 401k contribution or IRA contribution count??
401k contributions are income in the year they are made (not an asset). The body of the 401k contributions are not reported in assets.
The asset allowance is based on the age of the parent(s).
so my 401k deductions from my paycheck get added on to my AGI in the fafsa calculation.? Also, Is there a table for the asset allowance amounts?
https://www.savingforcollege.com/article/the-fafsa-s-asset-protection-allowance-continues-to-crash
Read this.
so what would be the asset allowance for a 56 year old
Google ‘asset protection allowance’ and see the Federal Register docs.
https://ifap.ed.gov/fregisters/attachments/FR050117.pdf
You can also play with the ifap formula, put in different values. Complicated, the first time, but it helped me understand how certain values affect results (in theory. How any college supports a student is based on their policies.)
Well…it would be below $18,000.
It also makes a difference if the parent is married or single. Single parents get very little.
There’s a table in my link. Seems to be 26k for 56, married. But OP, you need to read through the docs.
This also goes into detail, see if it comes through
https://www.google.com/url?sa=t&source=web&rct=j&url=https://ifap.ed.gov/fsahandbook/attachments/1819FSAHbkAVGCh3.pdf&ved=2ahUKEwiQlaTE04beAhXCTd8KHStXDlcQFjAAegQIABAB&usg=AOvVaw2j99HbLpdhyWkMoPl5zH4I
great thanks! does it also make a difference is there is about 16,300 that went to 401k in paycheck deductions
The balance IN you 401k is not an asset for financial aid purposes on the FAFSA.
Your contributions TO that 401k in 2017 (for the 2019-2020 FAFSA) are added back in as income. Income has nothing to do with asset protection.
I was given the wrong information then by financial counselor. So the $16,300 in 401Kcontributions is added back to my agi of $48,000 ??? That makes my income go up!!!
Contributions to tax deferred accounts is added back in as income…because it IS income. It is your choice to place that income into a tax deferred account.
For tax purposes, it reduces your taxable income. But for financial aid purposes, that income is added back in as…income because it is…income.
With an AGI of under $50K, would you qualify for the Simplified Needs Test? Then you wouldn’t need to report any assets.
@laralei simplified needs requires income lower than $50,000 a year AND one of the following…
- Ability to file. 1040 A or EZ form.
OR
- Family qualifies for a means tested benefit like free/reduced lunch, SNAP, Medicaid
OR
- One parent is a dislocated worker.
It’s not JUST the income threshold.
@genesh your AGI doesn’t increase because of the contributions to your 401K… but those contributions ARE considered as income in the formula to compute your FAFSA EFC.
“Finacial counselors” are not necessarily financial aid experts. They know taxes, not the aid process.
@thumper1 Yes, I know income isn’t the only thing required for the Simplified Needs Test, but their income prompted the post & why I asked if they would qualify? Just expected the OP to specifically look up the SNT to check it out; clearly not as helpful as it should have been.
Glad you were more specific.
It did not give me the option to answer one of the following 3 questions above, it skipped over them - but we are on reduced lunch. I printed a summary after completing, before submitting(which I have not done yet) and Free/Reduced Price lunch is filled in as NO, even though the question never came up. Wealso could have filed 1040A, but again the question never popped up and populated as a NO on the summary.