I am the beneficiary of a trust that allows me to take out a small percentage of the principal one time per year. The trust has its own tax ID and pays the taxes on this income so it isn’t reported on my tax return.
So even though technically it is taxed, should I still put it in the untaxed income spot because I am not the one who paid the tax?
Where do you put this on your income tax filing forms?
Also, your %of the value of this trust probably needs to be listed as an asset. At least that was what we were told about a potential family trust.
Are you talking about on FAFSA or CSS? If FAFSA, I don’t think a principal only trust distribution goes on FAFSA…there’s no general untaxed income question anymore. FAFSA only asks for IRA and pension untaxed distributions. See Q20/38/45 on the fafsa pdf below.
If you are talking CSS, I would contact a financial aid director at one of the schools on your kid’s list. Trusts can get so complex.
Here’s the FAFSA PDF https://studentaid.gov/sites/default/files/2027-28-fafsa-form.pdf
It’s highly likely you will have to include the NPV of your share of the trust as an asset on FAFSA (Assuming you have to report assets on FAFSA) and CSS. Ask your trustee for help in calculating NPV, if needed.
Be ready for colleges to ask for your trust documents and its tax return.
@politeperson any insights?
OP said it’s not on their tax forms because the trust paid the tax:
@Bluesky_99 and others…reading this might be helpful.
Thank you! This is helpful. I am sorry to say I don’t know what NVP means.
Net value of Principal?
I am asking for both the FAFSA and CSS
NPV is net present value