The rules on what Parent Income is included when calculating your Student Aid Index – or ability to pay for college – differ from FAFSA and CSS Profile.
FAFSA : a more limited accounting of income
The FAFSA only takes income from certain lines of a parent’s personal tax return. The personal tax return for FAFSA purposes includes the 1040, Schedule 1, Schedule 3 and Schedule C. For a detailed look at which amounts are included, check out this resource from Federal Student Aid with screenshots from the 2023 tax return. Overall, this limits the total income included.
CSS Profile : a broader accounting of income
The CSS Profile uses this same income as a starting point but adds additional untaxed income. What is the untaxed income that the CSS Profile includes? They can vary depending on a parent’s sources of income and form of employment, e.g. working for an employer or self-employed. Here are the most common examples:
- Pre-tax contributions to an employer retirement account, like a 401k, 403b, or pension.
- Pre-tax contributions to an HSA.
- For business owners, certain business deductions are allowed by the IRS but not considered outgoing expenses exclusively for business purposes, like the home office deduction or business expense of a personal car.
- For property owners, depreciation of the property is allowed by the IRS to offset rental income but is not allowed by CSS Profile for financial aid eligibility.
In each of these cases, these amounts are added back to the taxable income to calculate the income used in the financial aid evaluation. The result can be a larger amount of income included for evaluating need-based financial aid through the CSS Profile versus the FAFSA.
Parent Income Included in the FAFSA and CSS Profile
This table summarizes the income included in each application.
| Income | FAFSA | CSS Profile |
|---|---|---|
| Earnings from work | Yes | Yes |
| Net earnings from investments | Yes | Yes |
| Earnings from business | Only net earnings reported on the personal tax return after all IRS-allowable deductions | Includes net earnings reported on the personal tax return and addition of some IRS-allowable deductions |
| Earnings from rental properties | Only net earnings reported on your personal return after all IRS allowable deductions. | Includes net earnings reported on your personal tax return and addition of some IRS-allowable deductions |
| Retirement distributions | Both taxed and untaxed retirement distributions reported on 1040, lines 4a/4b & lines 5a/5b | Both taxed and untaxed retirement distributions reported on 1040, lines 4a/4b & lines 5a/5b |
| Social Security benefits | Only taxed Social Security benefits reported on 1040, line 6b | Both taxed and untaxed Social Security benefits reported on 1040, lines 6a |
| Unemployment | Yes | Yes |
| Pre-tax contributions to self-employed retirement accounts (SEP, SIMPLE, etc…) | Yes, reported on Schedule 1, line 16 | Yes, reported on Schedule 1, line 16 |
| Pre-tax contributions to traditional IRA | Yes, reported on Schedule 1, line 20 | Yes, reported on Schedule 1, line 20 |
| Child support | Self-reported as a Parent Asset for more favorable treatment | Yes, self-reported |
| Disability payments | No | Yes, self-reported |
| Pre-tax contributions to employer retirement accounts (401k, 403b) | No | Yes, from employer W-2, box 12 |
| Untaxed alimony | No | Yes, self-reported |
| Additional business income offset by non-allowed deductions | No | Yes, as found on applicable business tax return |
| Additional rental income offset by non-allowed deductions | No | Yes, as found on Schedule E or applicable return where the property is listed |