2027-28 FAFSA: which 2025 Form 1040 lines feed your Student Aid Index

Every October the same scene repeats at kitchen tables across the country: a family opens the Free Application for Federal Student Aid, expecting to type in income, and discovers that the form has already filled in most of it. Since the 2024-25 cycle the FAFSA has imported federal tax data straight from the IRS through the FUTURE Act Direct Data Exchange, and what it imports is not a vague “household income” but a short, specific list of lines from a specific return. For the 2027-28 form, which the Department of Education has committed to open to all applicants no later than October 1, 2026, that return is your 2025 Form 1040 — the one filed in early 2026, not the 2026 return you will file next spring.

The short answer. The 2027-28 FAFSA pulls your 2025 adjusted gross income from line 11 (labeled 11a on the 2025 form and repeated as 11b on page 2), your total tax from line 24, and five smaller items that adjust that figure up or down: tax-exempt interest (line 2a), the untaxed portions of IRA distributions and pensions (lines 4a minus 4b and 5a minus 5b), deductible IRA and self-employed plan contributions (Schedule 1 lines 16 and 20), education credits (Schedule 3 line 3), and the foreign earned income exclusion (Schedule 1 line 8d). Those numbers run through the Student Aid Index worksheet published in the 2027-28 SAI and Pell Grant Eligibility Guide, which sets the 2027-28 income protection allowance for a family of four at $46,590 and the employment expense allowance at $5,200. A family of four with $85,000 of wages and $12,000 in the bank lands at an SAI of about $5,548 — and, as the worked example below shows, the same family lowers that figure by moving $6,000 into a 401(k) but not by putting it into a deductible IRA.

The prior-prior year, and why 2026 does not count

The FAFSA uses what the Department calls prior-prior year income. The 2026-27 form used 2024 returns; the 2027-28 form uses 2025 returns; the 2028-29 form will use 2026 returns. The rule exists so that the tax data is already final, already filed and already sitting at the IRS when the form opens on October 1 — which is what makes the automatic transfer possible. The consequence is that a raise, a layoff or a retirement in 2026 is invisible to the 2027-28 formula. If income fell, the remedy is not to type 2026 numbers into the form (the IRS transfer will override them or flag them) but to file with the 2025 data and then request a professional-judgment review from each school’s financial aid office, which can substitute current-year income on documented evidence.

The transfer itself is consent-based. Every contributor — the student, each parent listed for a dependent student, and a spouse where applicable — must give consent for the IRS to share tax information; without that consent the form cannot calculate an index at all. The Application and Verification Guide spells out exactly which fields arrive from the IRS and which few the family still types by hand, and that split is the map this guide follows.

The lines the FAFSA pulls from your 2025 return

Here is the correspondence between the FAFSA data elements and the 2025 Form 1040, as documented in the Application and Verification Guide. The line numbers are those of the 2025 form; the 2027-28 cycle relies on the same fields.

FAFSA data element	2025 Form 1040 source	What it does in the formula
Adjusted gross income	Line 11	Starting point of “total income”; can be negative
Income tax paid	Line 24 (total tax)	Allowance subtracted from income
Income earned from work	Line 1z plus Schedule 1 lines 3 and 6	Used only to compute the payroll-tax allowance
Tax-exempt interest	Line 2a	Added back to income
Untaxed portions of IRA distributions	Line 4a minus line 4b	Added back, net of any rollover you flag
Untaxed portions of pensions	Line 5a minus line 5b	Added back, net of any rollover you flag
IRA deductions and self-employed plan payments	Schedule 1 lines 16 and 20	Added back to income
Education credits	Schedule 3 line 3 (plus line 29 of the 1040)	Subtracted from income as an offset
Foreign earned income exclusion	Schedule 1 line 8d	Added back; also added to AGI for the Pell test
Net business profit or loss	Schedule C line 31	Feeds the earned-income figure; can be negative
Schedule indicators	Schedules A, B, D, E, F, H	Trigger follow-up questions, no dollar amount

Two things stand out in that table. First, the FAFSA reads total tax from line 24, not the withholding on line 25 or the refund on line 35 — a family that owed more tax in 2025 gets a larger allowance, and a family that got a big refund gets no credit for it. Second, the untaxed IRA and pension lines are gross-minus-taxable arithmetic. A parent who rolled a $60,000 401(k) balance into an IRA in 2025 has $60,000 on line 4a and $0 on line 4b; unless the family answers the rollover question on the form, the formula treats that $60,000 as untaxed income and the Student Aid Index jumps by thousands of dollars. The rollover question is one of the few manual entries left, and it is the single most expensive one to miss.

What the form no longer asks

The FAFSA Simplification Act deleted most of the old untaxed-income questions, and the deletions matter as much as the lines that remain. Pre-tax contributions to a 401(k), 403(b), 457 or TSP, once reported from box 12 of the W-2 and added back, are gone: a dollar deferred into a workplace plan lowers box 1 wages, lowers line 11, and stays lowered on the FAFSA. Cash support from relatives, veterans’ non-education benefits, housing allowances and untaxed Social Security benefits are no longer reported. Child support received moved out of income and into assets, counted at its annual amount for the last complete calendar year. The number of family members in college, which used to divide the parent contribution, is no longer part of the federal formula at all.

The One Big Beautiful Bill Act, signed July 4, 2025, made three further changes that took effect with the 2026-27 form and carry into 2027-28, per the Department’s electronic announcement APP-25-23. The net worth of a family business with 100 or fewer full-time employees, of a family farm the family lives on, and of a family commercial-fishing operation is excluded from assets — though the income those businesses produce still flows through the tax lines above. The foreign earned income exclusion is now added to AGI when testing for a maximum or minimum Pell Grant. And any applicant whose SAI is at least twice the maximum Pell award is ineligible for a Pell Grant regardless of other criteria; for 2026-27 that cutoff is $14,790.

The worked family: $85,000 of wages, one student, Formula A

Take a married couple filing jointly, both 48, with two children: an 18-year-old starting college in fall 2027 and a 15-year-old at home. In 2025 they earned $85,000 in W-2 wages, had no other income, took the $31,500 standard deduction and claimed the $2,200 child tax credit for the younger child plus the $500 credit for the older one. Their 2025 return shows $85,000 on line 11 and $3,243 of total tax on line 24 (tax of $5,943 on $53,500 of taxable income, minus $2,700 of credits). They hold $12,000 in savings, no investments, no business. The student earned nothing and has no assets.

The 2027-28 guide’s Formula A runs like this for the parents:

With no student income and no student assets, the family’s Student Aid Index is $5,548. That number does not tell you what college will cost; it tells the financial aid office how much need-based aid you are eligible for at each school’s own cost of attendance. For the Pell Grant specifically, the guide’s Step 2 test is whether the SAI is below the maximum Pell award minus the minimum award — $7,395 minus $740, or $6,655, if Congress holds the maximum where it has sat since 2023-24. An SAI of $5,548 clears that bar, and the scheduled Pell award is roughly the maximum minus the SAI, about $1,850 a year. Notice what did the work: the income protection allowance of $46,590 shelters more than half the family’s wages, the two payroll allowances take out another $6,503 even though no one typed in a FICA figure, and the asset protection allowance for parents is zero at every age in the 2027-28 table, so every dollar of savings is assessed at 12%.

The $6,000 that changes the answer — and the $6,000 that does not

Now rerun the family twice. In the first version, the parents defer $6,000 into a 401(k) during 2025. Box 1 wages fall to $79,000, so line 11 and line 1z both read $79,000; total tax falls to $2,523. The payroll allowances shrink slightly ($1,146 and $4,898) because they are computed on the lower earned-income figure, but the income protection and employment expense allowances stay put. Available income drops to $18,643, adjusted available income to $20,083, and because that lands in the 22% band, the parent contribution is $4,418. The SAI falls by $1,130, and the Pell award rises by the same amount, to roughly $2,975.

In the second version, the parents put the same $6,000 into a deductible traditional IRA instead. Line 11 again reads $79,000 and total tax is again $2,523 — but Schedule 1 line 16 shows $6,000, and the FAFSA adds it straight back. Total income is $85,000 again. Earned income stays at $85,000, so the payroll allowances are the original $1,233 and $5,270. The only thing that changed is that the tax-paid allowance fell by $720, which means fewer allowances against the same income. Adjusted available income comes out at $25,624 and the parent contribution at $5,728 — higher than the $5,548 the family started with. The deductible IRA saved $720 of federal income tax and cost $180 of Student Aid Index; the 401(k) deferral saved the same tax and cut the index by $1,130.

The lesson generalizes. Anything that lowers line 11 without appearing on the add-back lines — workplace plan deferrals, HSA contributions made through payroll, the health-insurance premiums an employer deducts pre-tax — reduces the index. Anything that lowers line 11 but is explicitly added back — traditional IRA deductions, SEP and SIMPLE contributions on Schedule 1 line 20, the foreign earned income exclusion — does not. Families with a self-employed parent should read that second list twice, because a SEP-IRA is the most common retirement vehicle in a Schedule C household and it is added back in full.

Three line-11 questions that come up every October

Excluded Medicaid waiver payments. A parent paid under a state Medicaid waiver program to care for a family member at home reports the W-2 wages on line 1a and removes them with a negative entry on Schedule 1 line 8s under IRS Notice 2014-7, as our guide to reporting Medicaid waiver payments walks through. Because the exclusion happens before line 11, the payments are not in the AGI the FAFSA imports, and none of the remaining add-back lines restores them. The one place they can surface is income earned from work, since line 1z sits above the Schedule 1 subtraction — and that figure only feeds the payroll-tax allowance, which if anything increases the allowances against income. The family’s aid position is not harmed by having reported the payments correctly.

Taxable scholarships. A student whose 1098-T box 5 exceeds box 1 reports the excess as income on line 8r of Schedule 1, which raises the student’s own AGI; the FAFSA then asks for the amount of college grant and scholarship aid that was reported as income and subtracts it as an offset, so the taxable scholarship does not inflate the index. The offset is a manual entry, which means a student who leaves it blank pays for it. The mechanics of the 1098-T side are in our guide to what happens when box 5 exceeds box 1.

Negative AGI and the −1,500 floor. Line 11 can be negative, typically from a Schedule C loss, and the FAFSA accepts it as negative. Allowances then push available income further below zero, and Table A5 assigns a contribution of −$1,958 to any adjusted available income under −$8,900. The Student Aid Index itself is floored at −1,500; a calculated −2,000 becomes −1,500, and any index at or below zero qualifies the student for a maximum Pell Grant. The formula was rebuilt precisely so that a bad business year shows up as need rather than being zeroed out, as it was under the old Expected Family Contribution.

What to have on the desk on October 1

The practical checklist is short. Pull the 2025 Form 1040 for each contributor and note line 11, line 24 and line 1z; if any of lines 4a, 4b, 5a or 5b has a figure, work out whether a rollover explains the gap, because that is a question you will be asked. Check Schedule 1 for lines 16, 20 and 8d, and Schedule 3 for line 3, so nothing the IRS transfers surprises you. Gather the last complete calendar year of child support received and the balances of cash, savings and investment accounts as of the day you file — assets are reported at filing-date values, not year-end. Then create or confirm the StudentAid.gov account for every contributor, because the consent step is what lets the 2025 return flow into the form. The definitions of adjusted gross income the FAFSA leans on are the same ones that govern your Roth eligibility and your premium tax credit, and our line-by-line guide to AGI on Form 1040 covers how line 11 is built from the lines above it.