<p>I’ve read that retirement contributions (up to the maximum allowed) are deducted from your income on the fafsa. Is this true? What is the maximum allowed?</p>
<p>On a tax return any pretax contribution to a retirement account are deducted from income before the AGI. The AGI is the income reported on FAFSA. Any contributions to retirement accounts will be added back to the AGI in the EFC formula. Any after tax contributions (such as to Roth IRAs) do not reduce the AGI in the first place so are not added back to it.</p>
<p>Maximums are complicated including certain income limitations. For 2009 IRA contributions have a maximum of $5000 for those aged 49 or less and $6000 for those aged 50 or older. The contributions to 401ks are more complicated - related to income - the lesser of the max % a company allows or some % of income set by the govt.</p>