If your parents are W-2 employees (work at what most of us call a regular job) they may have a 401k or IRA savings plan offered by their employers. The max an employee over 50 can contribute is ~$22000 per year. So either one is putting in the max or both are contributing about half.
Yes, those contributions are pretax deductions, and our friends at FAFSA think those dollars should be used to pay for college. Past contributions are not counted, but current year contributions are added back to salary. Even if you didn’t put an amount in for 2014-15 fafsa, it should have adjust when you used the tax tool.
Pre-tax deductions from income that go to fund retirement (e.g. 401(k)) accounts. Earned money that was saved into retirement funds pre-tax. Therefore, your parents earned $170,000, but saved $20,000 in a pre-tax retirement account, so that their W-2 reflected a $150,000 taxable income.
@twoinanddone so it’s basically money that my parents are saving up for retirement right? So then I was correct-ish in assuming that they basically counted it as extra income? (I was editing my previous post right when you posted).
One thing I’m confused about still is why AGI doesn’t account for it. The AGI amount on 1040 is 150,000, and this line 94 on the W-2 is 20,000. Since it’s gross income, I thought it would be the income they made before they had to pay taxes/took a chunk out to put into retirement. But it seems that’s not the case, and they’re counting it as 170,000
edit: just saw @ItsJustSchool’s post, I see…
In the end, I guess this won’t matter that much since I’m attending UC, so my FA will hardly change. Still, if I had to attend private then I guess I’d be feeling crappy haha. Well, now that I know that there was no error and it was actually an error on my part in the past, I guess…that blows
Random thought, but I thought at most only 20% of income could be used? So 170,000 * .2 is still only 34,000. Yet my EFC is 45,000. And a 20,000 increase in income results in 75% of it having to be used? Even if I’m wrong in some numbers (if it’s higher than 20%), still…hm
There isn’t any income percentage limit. And you can think of that contribution as marginal income, the last $20k of income will be hit at a higher percentage than the first $20k of income.
The DRT can only pull over info from the tax return. Pre-tax 401k contributions don’t appear on a tax return. The IRS does have the W-2 showing it, but only tax return info is pulled over to fafsa.
The 401k contribution is in the gross income, but it is pretax. The tax code gives it favorable treatment, the fafsa does not.
I see…so to sum it up, the AGI on 1040 isn’t the actual gross income. Maybe that’s why it’s…Adjusted Gross Income? Ahhh now it has finally clicked, after several posts *-
I guess there’s nothing I can do, but it doesn’t make a difference (much) since I’m attending a state school. Anyway, thank you all who posted/helped/advised, I really appreciate it.