When you go to complete the FAFSA, one of the important factors that helps to determine your EFC (Estimated Family Contribution) is assets. You always want to make sure that you accurately list all the required assets but it is to your benefit to not overstate any of your assets. For example, you should never include home equity or retirement savings in your asset calculation. But, you always need to include any cash, traditional savings, mutual funds, stocks, etc…

I recently received a few good FAFSA questions from a reader (related to assets) and I thought that it might be a good idea to share them here on CheapScholar.org.

Question 1: My family and I have a business that we run and I am wondering if we need to include the assets of that business on our FAFSA?
Answer 1: A small business that has less than 100 employees and is family owned and operated is not required to report its assets on the FAFSA. In addition, for FAFSA purposes, a small business does not need to be incorporated to be classified as a “small business”

Question 2: My family and I established a LLC and that entity currently owns the building in which our business resides. We rent it from the LLC. Does that building need to be included in my asset calculation for the FAFSA?
Answer 2: The quick answer is no. As long as the property is deeded to the LLC and not the actual family members AND the LLC qualifies as a small business,  you don’t need to report the building on your assets.  Now if the property was deeded in the family’s name, then you would be responsible for reporting your percentage of ownership of the asset on your FAFSA. So, if the building is worth $225,000 and you are one of three family members recorded on the deed, your reportable asset is $75,000.

Question 3: Our family (5 of us) owns a farm. We don’t reside on the property and we rent it out to farmers for agricultural use. Do we need to report the farm on the FAFSA as an asset?
Answer 3: Yes, you would have to report 1/5th of the asset value on your FAFSA. Typically family farms are excluded from the FAFSA but since you do not live on the property and you are not materially participating in the farming, it does not qualify as an asset exemption on the FAFSA. And… starting a small garden on the land doesn’t constitute “material participation” in the farming aspect! 😉  “Material participation” usually means that more than half of the family’s income is derived from the farming operation.

Question 4: Our family (5 of us) has a cottage in Canada. Do we need to report that as an asset on the FAFSA?
Answer 4: Yes. You will need to report 1/5th of the asset value on your FAFSA as long as your name is one of the five on the deed and the cottage is not your permanent place of residence.

I think those were some tough questions.. or at least questions I don’t encounter on an every day basis. I appreciate the challenge.

If you think you have a tough FAFSA question that you would like to toss my way, please don’t hesitate to drop me a line. I always enjoy hearing from our readers and I am always glad to help!