01/18/2026
One of the Most Common Tax Questions Parents Ask
After many years working in tax, one of the questions I hear most often is:
“My child is over 18, attending college full-time, and earning about $12,000 per year.
Should my child file taxes as Independent?”
As both a Tax Consultant and a former College Planner, my answer is very clear:
NO.
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❗ A Common FAFSA Misunderstanding
Many parents believe that if their child files taxes as “independent,” then FAFSA will no longer consider the parents’ income when determining financial aid or student loans.
Unfortunately, that is not how FAFSA works.
FAFSA determines whether a student is independent based on federal rules — not tax filing status.
⸻
FAFSA considers a student independent ONLY if the student:
• Is age 24 or older
• Is married
• Has children they support
• Is in the military
• Has been legally emancipated by a
court
If these conditions are not met, FAFSA will automatically classify the student as a dependent student, regardless of how taxes are filed.
👉 Even if the student files their own tax return, FAFSA will still require the parents’ income information.
⸻
⚠️ Why filing as Independent can actually hurt
When a student does not meet FAFSA independence requirements and has low income, filing as independent often causes more harm than benefit:
• Parents lose eligibility for the American
Opportunity Tax Credit (up to $2,500)
• The student usually has little or no tax
liability, so education credits provide
minimal or no benefit
• FAFSA results remain unchanged,
whether the student is claimed or not
📌 Result:
You lose valuable tax benefits — but financial aid does not increase.
⸻
📄 Should the student still file a tax return?
Yes — absolutely.
Students should still file their own tax return to:
• receive any tax refund
• Income is over the standard deduction
However, they should file their own return as a DEPENDENT student.
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💡 What about retirement accounts?
Good news:
FAFSA does not count student retirement accounts, including:
• Roth IRA
• Traditional IRA
• 401(k), 403(b)
• SEP IRA or SIMPLE IRA
Retirement accounts are not considered assets on the FAFSA application.
If parents are separated or divorced — whose income does FAFSA count?
FAFSA counts the income of the parent who provides the MOST financial support,
NOT the parent who claims the child on taxes.
This rule changed starting with the new FAFSA (2024–2025 and later).
⸻
✨ Understanding the difference between tax rules and financial aid rules can save families thousands of dollars each year.
Wishing everyone a smooth tax season and the maximum refund possible.
Mimi Nguyen
Portland Insurance & Tax Services
12720 SE STARK ST
PORTLAND, OR 97233
(503) 207-5583
