What Income and Assets Count on the FAFSA
By Muntasir • Published Sep 18, 2026 • Updated Sep 18, 2026 • US Financial Aid & Scholarships
The FAFSA counts most taxable income plus cash, savings, and investments. It excludes your family's primary home, retirement accounts, and, starting with the 2026-27 form, qualifying family farms and small businesses.
💵 Income comes straight from your 2024 federal tax return through the IRS data exchange.
🏠 The home you live in never counts as an asset.
💰 401(k), IRA, and pension balances do not count as assets.
🎓 Student assets count at a higher rate than parent assets.
Where the FAFSA gets your income data
The 2026-27 FAFSA uses income from your 2024 federal tax return. Most contributors, meaning you and your parent or spouse if you have one, give consent for the IRS Direct Data Exchange to pull that return straight into the form. You rarely type income figures in by hand anymore.
Income that counts
The FAFSA counts adjusted gross income from your tax return: wages, salaries, tips, and business or self-employment income. It also counts some untaxed income reported on your return, such as untaxed IRA and pension distributions pulled through the data exchange.
One change from the old formula: pretax contributions to an employer retirement plan, like a 401(k) or 403(b), no longer count as income on the FAFSA. Under the prior EFC formula, those contributions got added back in.
Which parent reports if your parents are separated
If your parents are divorced or separated and you are a dependent student, only the parent who provided more financial support over the past 12 months reports income and assets on your FAFSA, regardless of which parent you live with. If both parents provided exactly equal support, use the parent with the higher income and assets. If that parent remarried, your stepparent's income and assets count too, according to reporting on the current parent-reporting rule . Unmarried parents living together report income and assets together, the same as married parents.
Assets that count
Cash, savings, and checking account balances as of the day you file
Investments, including stocks, bonds, mutual funds, and 529 college savings accounts
Real estate other than the home you live in, including vacation homes and rental property
Net worth of a business or farm, unless it qualifies for the small business and family farm exclusion described below
A 529 plan owned by a parent, or by a dependent student, counts as a parent asset. That matters because parent assets get assessed at a lower rate than student assets. A 529 plan owned by a grandparent or other third party does not count as an asset at all, and a distribution from it no longer counts as untaxed student income the way it did before the FAFSA Simplification Act, according to reporting on the grandparent 529 rule change .
Assets that never count
🏠 The home you live in
💰 Retirement accounts: 401(k), 403(b), IRA, pension, and annuity balances
Life insurance cash value
Personal belongings like a car, furniture, and clothing
Federal Student Aid confirms these exclusions apply the same way for every applicant, according to its guidance on reporting net worth of investments .
The small business and family farm exclusion is back
Starting with the 2026-27 FAFSA, a qualifying family-owned or family-controlled small business or farm goes back to being excluded from your reported assets, reversing a change made under the earlier FAFSA Simplification Act, according to reporting on the reinstated exclusion . Check with your school's financial aid office to confirm whether your family's business or farm qualifies.
How the formula uses this information
Your income and assets combine into your Student Aid Index (SAI), the number schools use to calculate your aid package. Available income is assessed on a sliding scale, so a larger share of income above a certain threshold counts toward the SAI. Student assets are assessed at 20 percent, a higher rate than parent assets. A dependent student's income below a set threshold, $11,770 for 2026-27, contributes nothing to the SAI, according to analysis of the official 2026-27 SAI guide .
The SAI goes as low as negative 1500, which flags you for the deepest level of need-based aid at most schools.
If your situation changed since your 2024 tax return
The FAFSA uses 2024 income even though a job loss, divorce, or other major change might mean that number no longer reflects your family's current situation. Contact your school's financial aid office directly to request a professional judgment review. Financial aid administrators adjust your SAI based on documented circumstances like a job loss, medical expenses, or a change in household size, even though the FAFSA form itself will not reflect the change automatically.
Common questions
Does financial aid from my school count as income?
No. Scholarships, grants, and other aid you already receive do not count as income or assets on a future FAFSA.
Do I need to report my own retirement account?
No. Retirement accounts are excluded whether they belong to you or your parents.
Bottom line
Report income and assets accurately using your 2024 tax return and current account balances. Skip the home you live in and retirement accounts. If your family owns a small business or farm, ask your financial aid office whether the 2026-27 exclusion applies before you assume it counts against you. Gather account statements and your 2024 tax return before you start the form, so you fill it out in one sitting.