Question on rental property and financial aid

nisryus

Senior member
Sep 11, 2007
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So I have a rental property in Austin which I lease out half of the year. It doesn't make me rich, but the rents it generates helped pay for property tax.

My son is a sophomore in high school, and we are thinking what impact this rental property will have on amount of aid from FAFSA. I heard that if I created a LLC, the property can be excluded because it can be count as small business? But some people said for LLC loophole to work, there must be service provided at the property.

I read the info at finaid.org and got more confused.

Anyone has experienced with trying to use this possible loophole with LLC and FAFSA?
 

deadlyapp

Diamond Member
Apr 25, 2004
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At the end of the day it would very much depend on how you have the LLC structured and how you compensate yourself. If you keep the LLC completely separate and taxed as a corp you may be able to help your financial standing in terms of finaid, but it really is more convoluted than that.

If you moved the house into an LLC and taxed it as a sole proprietorship/single member LLC, then you could take all the expenses of the house as deductions on your federal taxes, and also claim the income. You could consider all expenses for maintaining the home, etc, as expenses to help benefit you. However, if you wanted to personally use the house I'm not sure how that would work - you may have to basically pay the LLC from your personal accounts in order to keep them adequately separated.

Either way, with FAFSA you're going to have to report total income earned, and if you are taking rental money with the property, then you should be reporting this. If you are flying under the radar and that is not being reported to the IRS...well I'd be cautious.
 
Nov 17, 2019
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Have the kid get a job and start saving for tuition and costs. Sell the rental if you have to in order to pay the bills. Don't have the kid start out in mega debt and start clamoring for student loan forgiveness later.
 

deadlyapp

Diamond Member
Apr 25, 2004
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Have the kid get a job and start saving for tuition and costs. Sell the rental if you have to in order to pay the bills. Don't have the kid start out in mega debt and start clamoring for student loan forgiveness later.
FAFSA is more than just loans.

With that said, the rates on student loans are often so low that it makes more sense to take on that debt and use other financial vehicles to outpace the interest.

Saying to get a job for basically one year or two and save up tuition is asinine - no highschool level jobs are going to earn you enough to pay outright - although I do agree that a combination of multiple sources is the best thing.
 

nisryus

Senior member
Sep 11, 2007
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For now, the kid will be working as a life guard during summer to earn a tiny bot of cash. Most likely will work part time when he can.

He is wanting to go into pre-med, so that will be tough. Not sure if he will get the time to do anything else as I heard its very brutal and students hardly have times for anything else.

We might look into checking with one of those "qualified" college financial advisor, or just let it be and leave the house as rental for now.
 

Zeze

Lifer
Mar 4, 2011
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Don't do pre-med... you're gonna pigeon hole yourself into becoming a doc.... with a mountain of debt.

Doc/lawyer path is so 80s/90s... only pursue it if he feels super passionate about it and got the academic knack for it too.
 

nisryus

Senior member
Sep 11, 2007
703
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He wants to help people, and has even join the local EMS post to learn and get hands on experience, especially trauma.

We tried to talked him to an easier path, but he is not having it.