FAFSA Custodial Parent

For divorced parents, figuring out who is the custodial parent for FAFSA filing purposes can be a little confusing. Actually, the rules are pretty simple: the custodial parent is the one with whom the student spends the most time. That’s not necessarily the parent named custodial parent in the divorce decree, or the one claiming the student on their tax return.

For parents who share custody, it can be worth figuring out if it’s more beneficial to have one or the other be the custodial parent. Of course this only works if both parents can reasonably make the case that the student slept at their house at least 183 nights last year. Before instantly deciding that the lower-earning parent is the best choice for the FAFSA, look at all the income streams going to both parents and all the college resources to make sure you aren’t shooting yourself in the foot.

For example:

  • Is alimony or child support being paid? If so, the recipient reports both of those as income, which often evens things out.
  • Does the non-custodial parent own the student’s 529 accounts? If so, the student reports those withdrawals as student income.
  • Is either ex remarried? If so, the new spouse’s income is also reported.

Divorced parents should also consider whether one or both are eligible for the AOTC ($80,000 MAGI for single filers; $160,000 for married filing joint). If so, it may be most beneficial for the eligible parent to claim the student on their tax return during college years.

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