The Free Application for Federal Student Aid, or FAFSA, is a form that can be filled out by students who attend colleges and universities in the U.S. The information on the form is used to determine the student's eligibility for various types of federal student financial aid. Because the amount of financial aid a person may obtain can be substantial, it’s important to remember that you must report your FAFSA money on your federal income tax return. Doing this involves merely knowing how much FAFSA money you received and knowing where to enter the amount on your tax return.

Wait to receive a Form 1098-T from your school. This form reports the federal grants and loans you received during a given school year. You do not report the full amount of FAFSA financial aid you received on your income taxes – report only the amount of money listed on Form 1098-T.

Write the amount of money you received as shown on Form 1098-T under the "Income" portion of your federal tax return. Again, do not write the full amount of financial aid you received.

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Add the amount from Step 2 to your other income reported on W-2 forms provided by your employers and 1099 forms that you receive from other payers to determine your taxable income for a given year. Then, fill out the remainder of the tax form to determine the tax refund that you will receive or your tax liability that you will owe to the IRS for that year.

About the Author

Stephen Lilley is a freelance writer who hopes to one day make a career writing for film and television. His articles have appeared on a variety of websites. Lilley holds a Bachelor of Arts in film and video production from the University of Toledo in Ohio.