I’ve been recently accepted to a 100% financial need met university. After receiving my FA package, I found a $10k difference from the Net Price Calculator on their website. I contacted the FA office and they told me it was because the Foreign Income was not taxed. I do not understand why having a foreign income taxed would make a difference, especially to a private university.
Was your foreign income included in your AGI as reported on your Profile?
If you have foreign income that was not taxed, that means that you have more money to spend on education costs, as compared to a family that has an equivalent income but is taxed on the entire amount. It doesn’t make any difference whether the school is a private university or a public universtity - the goal is to distribute need-based institutional aid in as fair a manner as possible.
O.K, so lets say for instance that the income tax is 15% for a certain income and lets assume we make X dollars abroad. If we divide X by 0.85 (or 85%) we should get the equivalent of our income in the U.S subjected to tax. Lets call this number Y. When I plugged in Y into my NPC i still got a lower value( half actually) than my FA package.
Have you run the NPC including ALL of the foreign income that was excluded? Plus any that wasn’t? In other words…ALL of your income?
Depending on your income, 15% may be too low a figure. The top marginal U.S. federal income tax rate for 2015 is 39.6%, although 25% to 28% is probably a more realistic figure to use. And don’t forget the additional 7.65% FICA tax. Your foreign income isn’t subject to that, either.
If you have $10k in income that isn’t taxed, you have $10k. It’s easy to figure out how much it is in after tax dollars, it’s $10k. For the forms, it asks for MAGI, which would exclude the non-taxed foreign income. They are just adding it back in. No need to figure out what the tax would be if you had paid taxes; you paid no taxes on it.
I think for FAFSA only schools, those with foreign income get a break. Not sure if FAFSA makes you add it back in. For CSS schools, they can consider anything they want including foreign income.
thanks for everyone’s responses. The problem is when I plugged in my foreign tax exclusion into the NPC, I got a figure that represents nearly half our income and our income is certainly not very high (<60k), especially for a family of six.