<p>Proceeds from the sale of a house are not income if they fall under the 2 levels that ohiobassmom cited. If the gain is over the excluded level, then only the amount over the exclusion is taxed as a capital gain. If the cash is sitting in an account at the time you file FAFSA, it’s reported. It doesn’t matter where that cash came from. If the cash has been spent and it’s gone by the time you file FAFSA, then it’s not reported. It’s like any other cash asset.</p>
<p>I’m in the same situation: I sold my house late last year; no capital gains tax, but the cash is in my brokerage account. I’m renting now, in the process of buying another house. I had to file FAFSA by the school’s March 2 deadline. I reported all the cash, despite the fact that it will be going to the down payment on my new house this month. I’m expecting my son’s need-based aid to disappear due to this cash. Nothing I can do about it.</p>