Plan For College

Friday, August 12, 2011

FAFSA for Divorced or Separated Parents

If Parents Are Divorced, Whose Information Needs To Be Used On The FAFSA?

Normally it is the parent that the student lives with the most during the year.  It does not make a difference which parent claims the student as a dependent for tax purposes. If the student doesn’t live with either parent or lived equally with each parent, the parental information must be provided for the parent from whom the student receives the most financial support or the parent from whom the student receives the most support the last time support was given.
If the student is a dependent student and their parent or parents are remarried, the stepparent's information must be included or the student will not be considered for federal student financial aid.

If The Parents Are Separated, But NOT Divorced And The Student Lives With One Of The Parents, Which Parent’s Income And Assets Does The Student Use When Completing The FAFSA, If The Parents File A Joint Tax Returns?

Report only the parent’s income and asset information in which the student lives with the most during the year or the parent that provides the most support.  The parents DO NOT have to be LEGALLY separated.  However, they MUST have two separate living addresses that show the parents are not living together.  If the parents are separated, but still live together the FAFSA will still consider them married and living together.  If the parents live apart and file joint tax return, use the custodian’s (father’s or mother’s) W-2 Form or other records to determine the parent’s share of the income reported and taxes paid on the tax return.  Sometimes you can get this information off the parents’ state tax return.

How Is Income Received For Child Support Treated When Completing The FAFSA?

If you are receiving child support from an ex-spouse, you MUST report child support you received for ALL children. Do not include foster care or adoption payments.

The Student Does Not Live With Their Birth Parents And Lives With The Grandparents Or Other Individuals.  Whose Financial Information Should Be Used To Complete The FAFSA – Parents Or The Person That The Student Lives With?

If the person or persons the student lives with have NOT legally adopted the student, the person or persons’ financial information should NOT be used in calculating the student’s EFC.  If the student is living with another person or persons other than their birth parents and was classified as a ward of the court – the student would only need to put their financial information on the FAFSA, as an independent student.  If this is not the case and the whereabouts of the birth parents are known, the student needs to get the birth parents’ financial information (where divorced or separated) and use this income on the FAFSA. 

I would recommend getting professional help in dealing with this situation.  Talk to the student’s guidance counselor, profession college consultant or calling the college that the student will be attending for guidance.

If Parents Are Divorced And One Of The Parents Would Benefit More (qualify for the educational tax credits and educational deductions) By Claiming The Student As A Dependent What Must The Custodial Parent Do In Order To Give The Dependence Exemption To The Other Parent

Under IRS Code Sec. 152(e), a noncustodial parent can only claim a dependency deduction for a qualifying child or qualifying relative of the taxpayer only if the custodial parent submits a release of claim to the exemption.

A release of a claim to an exemption can only be executed in two ways:

  • Complete Form 8332, Release/Revocation of Release of Claim to
    Exemption for Child by Custodial Parent, or successor form; or

  • A written declaration that is not on Form 8332 but conforms to the
    substance of that form and that is a document executed for the sole
    purpose of releasing the claim.

Many parents of college student may feel a court order or decree or a separation 

agreement can serve as the written declaration, however this is not true, according to IRS.  The noncustodial parent must attach a copy of Form 8332 or the written declaration to the parent's return for each year that the child is claimed as a dependent.

Once form 8332 or written declaration is completed the noncustodial parent can claim the student as a dependent and potential qualify for the college tax credits or deduction.