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The money you earn from Federal Work-Study is generally subject to federal and state income tax, but exempt from FICA taxes (provided you are enrolled full time and work less than half-time).

Federal Work-Study earnings during the calendar year should be included in the totals for AGI and Worksheet C on the FAFSA. Work-study earnings should be included in Worksheet C only when they represent financial aid to the student, since the answer to this question is used as an exclusion from taxed income. The student should also remember to report amounts based on the calendar year, not the school year.