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What Income is Listed on the FAFSA when Separated Parents File a Joint Tax Return?

Mark Kantrowitz

November 12, 2012

I am praying that you may be able to advise me on the FAFSA application. I am a senior in high school and will file the FAFSA in January. I live with my mom. My dad moved out almost 2 years ago. As part of my parents’ agreement, my dad is paying for our rent and utilities. My mom and dad are still married, and not legally separated. They plan to continue to file jointly for tax purposes. My mom is a dislocated homemaker. I know that for FAFSA purposes, I do not have to put down my dad’s info since he is not the custodial parent. But, since they file jointly, do I still go ahead and list his info? Since my dad filed jointly (he is the only one that works, and his income is about $44,000, and we are a family of 5, not including my dad, then we would be 6) doesn’t that mean that my mom filed too and that I need to report my dad’s income as well? — Blanca

A student’s parents do not need to have a legal separation or divorce decree to be considered separated on the Free Application for Federal Student Aid (FAFSA). An informal separation can count as a separation for federal student aid purposes. In an informal separation, one parent has left the household indefinitely. Living on separate floors of the same house is not sufficient. The parents cannot cohabit in an informal separation. Temporary absences for work, education or military service also do not count.

IRS rules are different, so it is possible for a couple with an informal separation to file federal income tax returns as married and the FAFSA as separated. (Parents who are divorced or who have a legal separation cannot file federal income tax returns as married. However, if the divorce or legal separation occurred after the end of the tax year but before filing the FAFSA, it is possible for there to be a joint return in the prior tax year.)

If the parents are separated, only the parent with whom the student lived the most during the 12 months ending on the FAFSA application date is responsible for completing the FAFSA. The other parent’s income and assets are not reported on the FAFSA. The other parent is also not counted in household size.

If the student’s parents are separated but filed a joint federal income tax return, the custodial parent will have to figure out their share of the income and taxes paid on the joint return.

If the parents live in a community property state, the income is split evenly. Otherwise the parent’s income should be based on their IRS W-2 and 1099 forms, plus any income that can be extracted from the joint return. Income and dividends from joint accounts and investments should be split evenly. Taxes paid can be calculated using one of two methods. The preferred method is to use the IRS Tax Table or Tax Rate Schedule to calculate the amount of taxes that would have been paid had the parent filed a separate return, taking into account the deductions and exemptions the parent could have claimed. The other approach is to split the joint taxes paid in proportion to the parent’s share of the joint AGI.

If the custodial parent receives any support from the non-custodial parent, this should be reported as untaxed income on the FAFSA. Likewise for any support received by the student from the non-custodial parent. For example, if the non-custodial parent is paying bills that the custodial parent would otherwise have to pay, such as rent, utilities, insurance and food, that counts as untaxed income to the custodial parent.

Parents who are separated but file a joint federal income tax return will not be able to use the IRS Data Retrieval Tool to transfer information from the federal income tax return to the FAFSA. Such a FAFSA is more likely to be selected for verification.


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