filing-the-fafsa-2015-2016-edition

Filing the FAFSA 86
The intention is to include untaxed income of a discretionary nature in total income. Non-elective pension
plan and retirement plan contributions are not counted in untaxed income. For example, contributions to
certain state public employee retirement systems, such as the IPERS (Iowa), KPERS (Kansas) and OPERS
(Ohio) retirement systems, are involuntary and so should not be reported as untaxed income on the
FAFSA. Contributions to a 401(k), 403(b) or IRA, on the other hand, are voluntary and must be reported
as untaxed income on the FAFSA. Likewise, contributions by federal employees to the Thrift Savings
Plan (TSP) are voluntary and, therefore, represent untaxed income. Note that employer contributions to
retirement plans, health benefits and pension plans are not counted in untaxed income.
Note that the student’s untaxed income figure includes cash
support, while the parents’ untaxed income figure does not.
Cash support includes money, gifts and loans, plus expenses
paid by others on the student’s behalf, such as food,
clothing, housing, car payments or expenses, medical and
dental care and college costs. A dependent student does not
report cash support received from his or her parents, except
that cash support received from a non-custodial parent is
counted as untaxed income if it is not part of a legal child
support agreement.
Examples:
IRS Form W-2, Boxes
12a through 12d
Elective Contributions to Retirement
Plans
Code D – 401(k)
Code E – 403(b)
Code F – 408(k)(6) SEP
Code G – 457(b)
Code H – 501(c)(18)(D) tax-exempt
organization plan
Code S – 408(p) SIMPLE plan
• If a dependent student’s parents are divorced, cash support from the custodial parent and the
stepparent (if the custodial parent has remarried) is not reported as untaxed income to the student.
If the custodial parent dies, the stepparent is no longer considered a parent for federal student aid
purposes. Accordingly, any support from the stepparent will be counted as untaxed income to
the student. (The stepparent will no longer be able to borrow from the Federal Parent PLUS loan
program, since the stepparent can borrow from this loan program only when the stepparent is
married to the student’s biological or adoptive parents.)
• Similarly, suppose that a student is living with his or her grandparents and the grandparents have
not adopted the student. Any support the student receives from his or her grandparents must
be reported as untaxed income to the student on the student’s FAFSA. This support must still be
reported as untaxed income even if the student is an orphan or the grandparents are the student’s
legal guardians (in which case the student is an independent student).
• If the student is an independent student, any support received from the student’s parents must be
reported as untaxed income to the student on the student’s FAFSA.
• If a dependent student’s parents receive cash support from the grandparents, it is not reported as
untaxed income to the parents on the student’s FAFSA.
Note also that only the amount of untaxed income and benefits actually received should be reported. For
example, if an ex-spouse is in arrears on his or her child support obligation, only the amount actually
paid by the ex-spouse should be reported, not the amount that was due.