Parents9	available	income.	The	parents9	available	income	is	calculated	by	subtracting	certain	allowances	from	the
parents9	total	income.	These	allowances	account	for	certain	nondiscretionary	expenses,	such	as	taxes	and	basic	living
expenses.	Once	a	minimum	level	of	support	has	been	offset	for	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	total	income	is	the	sum	of	the	taxable	and	untaxed	income,	minus	amounts	reported	in	the	income	but	excluded	from
the	formula.
Parents9	taxed/untaxed	income.	The	sum	of	following	items,	reported	on	a	U.S.	tax	return,	increases	the	parents9	total
income:
Parents9	AGI
Parents9	deductible	payments	to	self-employed	SEP,	SIMPLE,	Keogh,	and	other	qualified	retirement	accounts
Tax-exempt	interest
Untaxed	IRA/pension	distributions	(excluding	rollovers)
Foreign	income	exclusion
Parents9	income	offsets.	The	sum	of	the	following	items	decreases	the	parents9	total	income:
Parents9	taxable	college	grant	and	scholarship	aid	(included	as	income).	This	amount	is	self-reported	on	the
FAFSA	form.
Parents9	education	credits.	Use	the	amount	reported	on	the	FAFSA	form.
Parents9	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.
Parents9	income	allowances.	The	sum	of	the	following	allowances	reduces	the	parents9	total	income:
U.S.	income	tax	paid.	Use	the	amount	reported	on	the	FAFSA	form.
Parents9	payroll	tax	allowance.	Use	<Table	A1:Payroll	Tax	Allowance=	in	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	2023
for	both	parents	(as	reported	on	the	FAFSA	form).	The	total	allowance	for	payroll	taxes	is	never	less	than	zero.
Income	protection	allowance.	Use	<Table	A2:	Income	Protection	Allowance=	in	the	2025-26	Student	Aid	Index
(SAI)	and	Pell	Grant	Eligibility	Guide.	This	allowance	is	for	the	basic	living	expenses	of	a	family.	It	varies	according	to
the	number	in	the	parents9	family	size,	as	reported	on	the	FAFSA	form.	In	general,	a	school	can	assume	that	30%	of
the	income	protection	allowance	amount	is	for	food,	22%	for	housing,	9%	for	transportation	expenses,	16%	for
clothing	and	personal	care,	11%	for	medical	care,	and	12%	for	other	family	consumption.
Employment	expense	allowance.	This	allowance	recognizes	extra	expenses	incurred	by	families	with	working
parents.	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.
Parents9	contribution	from	assets.	The	full	formula	uses	the	assets	of	parents	of	a	dependent	student	and	determines
a	<contribution	from	assets.=	This	amount	is	combined	with	available	income	to	quantify	the	family9s	financial	strength.
First,	the	parents9	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	investment	farm.	Use	<Table	A3:	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.
Child	support	received.	Use	the	amount	reported	on	the	FAFSA	form.	Child	support	received	should	be	reported	as
the	total	amount	received	in	the	most	recently	completed	calendar	year.	For	example,	if	the	FAFSA	form	is
completed	in	January	2024,	the	amount	of	child	support	received	should	be	the	total	for	the	2023	calendar	year.
Second,	the	parents9	discretionary	net	worth	is	calculated	by	subtracting	the	asset	protection	allowance	(<Table	A4: