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Can a Stepdaughter be Counted in the Household If She Lives with the Other Parent?

Mark Kantrowitz

July 25, 2011

My stepdaughter used my husband’s tax return to file her FAFSA because her mother had said that his taxes needed to be used because he claims her on his income tax return. From what I know, the parent that the child lives with most of the time should be used. Am I right or wrong? She got denied financial aid when she used our taxes so we had her refile using the mothers taxes. Although we claimed her as an exemption on our taxes (we get to claim one of the three children that he pays child support for), she lives with the mother. Another issue was that when she initially got denied using our taxes, I was able to receive a Pell Grant on my FAFSA. When she changed her FAFSA, I changed mine to show 2 in household instead of 3 and only one attending college (from 2). Now I don’t qualify for the Pell Grant. The school told her that she had to use her dad’s income tax even if she lives with the mother. Is this true? Can I now change my numbers back so I can receive a Pell Grant? — R.M.V.

The statute is quite clear in specifying which parent must complete the Free Application for Federal Student Aid (FAFSA). A dependent student’s FAFSA must be completed by the parent with whom the student lived the most during the 12 months ending on the FAFSA application date. Only if the student lived an equal number of days with both parents, as might occur in a recent divorce or in a leap year, will the FAFSA be completed by the parent who provides more support.

A multiple support agreement that allows one parent to claim a tax exemption for the student is irrelevant. Need analysis for federal student aid purposes is controlled by the Higher Education Act of 1965, not the Internal Revenue Code of 1986, and the standards for what counts as support differ.

The following is an excerpt from section 475(f)(1) of the Higher Education Act of 1965. It specifies that the parent responsible for completing the FAFSA is based on residence first, the support test second.

DIVORCED OR SEPARATED PARENTS. – Parental income and assets for a student whose parents are divorced or separated is determined under the following procedures:

(A) Include only the income and assets of the parent with whom the student resided for the greater portion of the 12-month period preceding the date of the application.

(B) If the preceding criterion does not apply, include only the income and assets of the parent who provided the greater portion of the student’s support for the 12-month period preceding the date of application.

(C) If neither of the preceding criteria apply, include only the income and assets of the parent who provided the greater support during the most recent calendar year for which parental support was provided.

Similarly, the following is an excerpt from subregulatory guidance that appears on page AVG-29 of the 2011-12 Application and Verification Guide. It directly addresses the tax return exemption issue raised by your stepdaughter’s mother.

Divorce of the student’s parents

If the student’s parents are divorced, he should report the information of the parent with whom he lived longer during the twelve months prior to the date he completes the application, regardless of which parent claimed him as an exemption for tax purposes. If the student lived equally with each parent or didn’t live with either one, then he should provide the information for the parent from whom he received more financial support or the one from whom he received more support the last calendar year for which it was given. Note that it is not typical that a student will live with or receive support from both parents exactly equally. Usually you can determine that the student lived with one of the parents more than half the year or that he received more than half support from one of the parents.


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