Does FAFSA AGI include IRA Deduction?

[phildonnia]

I'm finding conflicting information on this; I think the formula may have changed from 2023 to 2024.

It is my understanding that the FAFSA formula uses AGI only, taken from Line 11 of the tax return.  Line 11 includes "above the line" deductions like an IRA deduction.

Our plan is get our 2024 income to a good place for FAFSA eligibility, and we're on track to do that.  Our contingency plan is to make a deductible IRA contribution if we need to lower AGI at the last minute.

However, some online sources from 2023 say that "untaxed income" is also included in the formula; e.g.: a traditional IRA contribution.  I am aware that the formula has changed from 2023 to 2024, so maybe that's why?

This site says yep, you can do that:  https://freekick.bank/adjusted-gross-income-fafsa/
This site says bad idea, that income will be included anyway: https://www.edvisors.com/student-loans/fafsa/reducing-adjusted-gross-income/

Does anyone know where an authoritative answer can be found for 2024?

[seattlecyclone]

This "Federal Student Aid Handbook" indicates that "Parents’ deductible payments to self-employed SEP, SIMPLE, Keogh, and other qualified retirement accounts" are added back to the AGI for the purpose of determining a dependent student's expected parental contribution.

[phildonnia]

This "Federal Student Aid Handbook" indicates that "Parents’ deductible payments to self-employed SEP, SIMPLE, Keogh, and other qualified retirement accounts" are added back to the AGI for the purpose of determining a dependent student's expected parental contribution.

I'm still searching through the Handbook for whether that includes regular old Traditional IRA.  I guess that would be an "other qualified retirement account"?

[seattlecyclone]

Your guess is as good as mine.

[phildonnia]

Ok, it looks like I'm good.

The "Maximum Pell Grant" eligibility apparently uses AGI, and AGI only. 

The section of the handbook you referenced applies to the "Calculated Pell Grant", which considers some untaxed income, such as IRA contributions.

We intend to qualify for the former, so we shouldn't have to worry about this "untaxed income".  That's my reading of it, anyhow. 

Thanks!

[seattlecyclone]

Yes upon further reading it does seem like there's a multi-step process where they first look at your AGI compared to the poverty level to see if you automatically qualify for the maximum Pell Grant. Only if you don't do you move onto the next step of the process where they calculate your contribution based on your income (with some things such as retirement contributions added back in).