those	expenses,	the	formula	assumes	that	the	remaining	income	is	available	for	discretionary	purposes,	including	paying
for	a	postsecondary	education.	The	available	income	can	be	a	negative	number.
The	student9s	(and	spouse9s)	available	income	is	the	sum	of	the	taxable	and	untaxed	income	minus	amounts	reported	in
the	income	but	excluded	from	the	formula	(offsets	and	allowances).
Student9s	(and	spouse9s)	taxed/untaxed	income.	The	sum	of	the	following	items,	reported	on	a	U.S.	tax	return,	is	the
student9s	(and	spouse9s)	total	income:
Student9s	(and	spouse9s)	AGI
Student9s	(and	spouse9s)	deductible	payments	to	self-employed	SEP,	SIMPLE,	Keogh,	and	other	qualified	retirement
accounts
Student9s	(and	spouse9s)	tax-exempt	interest
Student9s	(and	spouse9s)	untaxed	IRA/pension	distributions	(excluding	rollovers)
Student9s	(and	spouse9s)	foreign	income	exclusion
Student9s	(and	spouse9s)	income	offsets.	The	sum	of	the	following	items	decreases	the	student9s	(and	spouse9s)	total
income:
Student9s	(and	spouse9s)	taxable	college	grant	and	scholarship	aid	(included	as	income).	This	amount	is
self-reported	on	the	FAFSA	form.
Student9s	(and	spouse9s)	education	credits.	Use	the	amount	reported	on	the	FAFSA	form.
Student9s	(and	spouse9s)	Federal	Work-Study	(FWS).	Schools	annually	report	FWS	earnings	by	individual
earners	to	the	Department.	ED	will	then	use	this	information	to	report	FWS	on	the	individual	earner9s	FAFSA	form.
Student9s	(and	spouse9s)	income	allowances.	The	sum	of	the	following	allowances	reduces	the	student9s	(and
spouse9s)	total	income:
U.S.	income	tax	paid.	Use	the	amount	reported	on	the	FAFSA	form.
Student9s	(and	spouse9s)	payroll	tax	allowance.	Use	<Table	C1:	Payroll	Tax	Allowance=	in	the	2025-26	Student
Aid	Index	(SAI)	and	Pell	Grant	Eligibility	Guide.	Apply	the	rates	shown	in	each	step	of	the	table	to	the	total	income
earned	from	work	in	2022	for	the	student	(and	spouse)	as	reported	on	the	FAFSA	form.	The	total	allowance	for
payroll	taxes	is	never	less	than	zero.
Income	protection	allowance.	Use	<Table	C2:	Income	Protection	Allowance	3	Married	with	Dependents=	in	the
2025-26	Student	Aid	Index	(SAI)	and	Pell	Grant	Eligibility	Guide	for	married	or	remarried	students.	Use	<Table	C3:
Income	Protection	Allowance	3	Single	with	Dependents=	for	unmarried	students	(single,	separated,	divorced,	or
widowed)	and	married	students	(married	or	remarried).
Employment	expense	allowance.	The	allowance	is	35%	of	the	student9s	(and	spouse9s)	income	earned	from	work
or	a	maximum	allowance,	whichever	is	less.	The	maximum	allowance	is	updated	annually.	See	the	2025-26	Student
Aid	Index	(SAI)	and	Pell	Grant	Eligibility	Guide	for	the	current	year	allowance	amount.	The	employment	expense
allowance	is	never	less	than	zero.
Student9s	(and	Spouse9s)	Contribution	From	Assets
The	full	formula	uses	the	student9s	(and	spouse9s)	assets	and	determines	a	<contribution	from	assets.=
First,	the	student9s	(and	spouse9s)	net	worth	is	calculated	by	adding	the	following	assets	reported	on	the	FAFSA	form.
Cash,	savings,	checking,	time	deposits,	and	money	market	funds.	Use	the	amount	reported	on	the	FAFSA
form.
Net	worth	of	investments.	Includes	real	estate	(excluding	primary	residence),	vacation	homes,	income	producing
property,	trusts,	stocks,	bonds,	derivatives,	securities,	mutual	funds,	tax	shelters,	and	qualified	education	benefits.
Adjusted	net	worth	of	business	and/or	farm.	Use	<Table	C4:	Business/Farm	Net	Worth	Adjustment=	in	the	2025-
26	Student	Aid	Index	(SAI)	and	Pell	Grant	Eligibility	Guide	to	adjust	the	total	reported	on	the	FAFSA	form.
Second,	the	student9s	(and	spouse9s)	discretionary	net	worth	is	calculated	by	subtracting	the	asset	protection
allowance	(<Table	C5:	Asset	Protection	Allowance=	in	the	2025-26	Student	Aid	Index	(SAI)	and	Pell	Grant	Eligibility	Guide)