What Tax Year Does FAFSA Use for 2024-25?

The Free Application for Federal Student Aid (FAFSA) is a primary tool for individuals pursuing higher education. It serves as the application for federal financial aid programs, including grants, scholarships, work-study opportunities, and federal student loans. Completing the FAFSA is a necessary step that helps make higher education more accessible.

The Tax Year for 2024-25 FAFSA

For students applying for federal financial aid for the 2024-25 academic year, the FAFSA requires income information from the 2022 tax year. This is part of the “prior-prior year” rule, which uses tax data from two years before the academic year to simplify the application process.

This rule allows applicants to complete the FAFSA earlier, as their tax information is already available and finalized. This eliminates the need to estimate income, making the process more streamlined and accurate.

Gathering Your Tax Information for FAFSA

Acquiring the necessary tax information for your FAFSA application is a crucial step. The primary method for providing this data is the Direct Data Exchange (DDX), formerly known as the IRS Data Retrieval Tool. This system directly and securely transfers your federal tax information from the Internal Revenue Service (IRS) into your FAFSA form.

All individuals contributing financial information to the FAFSA, including students, parents, and spouses, must consent to the direct data exchange with the IRS. This consent is mandatory, even if a contributor did not file taxes or filed taxes outside the U.S. Without this consent, the student will not be eligible for federal student aid. Using DDX ensures accuracy by pulling verified IRS information, which can also reduce the likelihood of FAFSA verification. If you electronically filed your taxes, this data is typically available for DDX within two weeks; for paper filers, it may take six to eight weeks.

If you are unable to use the DDX due to specific circumstances, or if your FAFSA is selected for verification, you may need an IRS Tax Return Transcript. These transcripts provide a summary of your tax return information. You can request a tax transcript directly from the IRS online, by phone at 1-800-908-9946, or by mail using Form 4506T-EZ. Transcripts requested online or by phone usually arrive within five to ten business days, while mailed requests can take ten to fifteen days after the IRS receives the form. Having copies of your 2022 IRS Form 1040, W-2s, and 1099s readily available will assist you in completing the FAFSA, even if using the DDX.

Understanding Income Reporting on FAFSA

The FAFSA requires specific income figures from the designated tax year to determine financial aid eligibility. Your Adjusted Gross Income (AGI) is a key figure, found on line 11 of IRS Form 1040. It calculates gross income minus certain deductions. The AGI plays a significant role in determining your Student Aid Index (SAI), which colleges use to assess your financial need.

Beyond AGI, the FAFSA also considers certain types of untaxed income. For the 2024-25 FAFSA, relevant untaxed income includes the untaxed portions of IRA distributions (excluding rollovers), untaxed portions of pensions (excluding rollovers), tax-exempt interest income, and the foreign earned income exclusion. Recent FAFSA simplifications eliminated the need to report many previously required untaxed income items, such as child support received. While primarily focused on income, FAFSA also considers assets held as of the day the application is filed.

Addressing Income Changes and Special Circumstances

The FAFSA primarily relies on income data from the prior-prior year, which may not accurately reflect a family’s current financial situation if significant changes have occurred. If your financial circumstances differ substantially from the 2022 tax year data, a process known as “special circumstances” or “professional judgment” exists. This allows financial aid administrators to consider your current financial reality.

Such circumstances can include job loss, a significant reduction in income, divorce or separation, or substantial unreimbursed medical expenses. If you believe your family’s financial situation warrants a review, complete and submit your FAFSA as accurately as possible based on the required tax year. After submission, contact the financial aid office at each college you are considering. Each institution has its own procedures for reviewing these cases and will likely require specific documentation. This review is conducted on a case-by-case basis and does not guarantee an adjustment to your aid package.