Once you’ve finished the income section of the FAFSA, you’re on the home stretch. What’s left? Assets. And once again, the form is deceptively simple: “As of today, what is the net worth of your parents’ investments, including real estate (not your parents’ home)?”

OK, so not the home. But what does count? For those who’ve already filed the CSS PROFILE, the list is slightly different. The FAFSA counts the net value of the following as parent assets:

  • Bank accounts such as checking, savings and money market
  • Taxable investment accounts such as brokerage or mutual fund accounts, stocks, bonds or CDs
  • Investment property such as a commercial or residential rental property
  • Parent-owned 529 accounts (UTMA accounts are included as a student asset). (Those with multiple children, remember that all parent-owned 529 accounts need to be reported as assets, not just the student’s.)
  • Businesses or farms, but only ones that are fairly large

Not all of these count at “market value.” Investment accounts or investment properties are assessed at their net value– the market value less any debt attached to the account or property.

Unlike investment accounts, bank accounts are counted at their gross value: you don’t get to subtract any consumer debt from the balance in your checking account, which means it’s important to pay your credit card bill (and all your other bills) before you file the FAFSA.

Before you get too concerned about being penalized for saving in a 529 account– because that counts as an asset– remember how assets are treated: It’s only the amount above the Asset Protection Allowance that’s assessed (and the FAFSA will helpfully display your specific asset protection allowance), and only 5.64% of that amount is considered available to pay for college. So each $1,000 over the allowance only translates to another $56 in EFC. Saving is better than not saving, which is to say that for the typical family, $25,000 in assets only increases EFC by about $340.

What doesn’t count? Retirement savings accounts, your home, 529 accounts owned by someone other than the parent, and life insurance and annuity accounts are the most commonly-held not-counted assets.

Assets are counted on the day you file the FAFSA, so if you’re close to the threshold for the allowance, be careful about your filing date relative to paying bills and getting paid. And because someone always asks: When you update your income data via the IRS Data Retrieval tool, you are only updating income, not assets.

Perhaps more importantly: Student assets are also reported, and have no asset protection allowance and are assessed at a higher rate: 20% versus 5.64%. What’s a student asset? Besides any money in their bank account, an UTMA is a student asset. So $15,000 in an UTMA will translate to $3,000 additional EFC, whereas that same amount in a 529 account would be somewhere between $0 and $864 depending on the parents’ other assets. For that reason, it’s generally a good idea to convert an UTMA to a 529 before filing the FAFSA.