Divorced parents: Who files for financial aid?

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(MoneyWatch) Filling out financial aid applicationscan seem especially daunting when parents are divorced. Consequently, today I'm answering a question from a divorced mother, who is puzzled about who should file for aid.

Question: My husband and I are divorced and share who gets to claim our daughter every other year on our tax form. She lives with him the majority of the time, but I get to claim her for the 2012 tax year. Can I still fill out the Free Application for Federal Student Aid with her father's information if I claim her on my taxes, or does she need to be on his tax return for her to apply with his tax information?

Who should complete the FAFSA

The answer to this question is simple. To determine who should complete the FAFSA, you just need to know where the student lived the majority of the year.

Did the daughter live with the mom the most or the dad? And the year, for financial aid purposes, is the 12-month period ending on the day the FAFSA is completed. If the FAFSA is completed on March 1, 2013, for example, the 12-month-period would start on March 1, 2012.

For financial aid purposes, whoever takes care of the child the majority of that year (and that could mean six months and a day), will be considered the custodial parent. Who claims a child on income tax returns is irrelevant and so is any court designation that stipulated who is the custodial parent.

In the highly unlikely event that the student lived with each divorced parent the exact same amount of time, the custodial parent will be the one who spent the most money on his or her care.

Divorce and financial aid strategy

Obviously, there are benefits for a student to live the majority of the time with the parent with the lowest income. If one parent, for example, is a substitute teacher and the other a physician, it's clear which one should be considered the custodial parent for aid purposes.

If the custodial parent has remarried, however, the new spouse's income and assets must also be included on the financial aid form.

For further explanation of financial aid and divorce, I'd suggest that you check out this YouTube video interview that I conducted with Paula Bishop, a CPA in Bellevue, WA, who is an expert on this topic.

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