Does my kid's business income affect financial aid?

It can, and the honest version of this answer is that the amounts involved in most kid businesses are too small to matter while the habits they build are not.

Here is the shape of it without pretending to precision that does not survive a year. Aid formulas look at both student income and student assets, and they treat student money less favorably than parent money. Student assets in particular are assessed at a higher rate than parent assets. There is an income protection allowance below which student earnings are disregarded, and it is not a small number.

Two reasons not to act on that.

The federal aid formula was substantially overhauled in recent years and the figures change annually, so anything specific you read, including anything specific here, has a short shelf life. Verify against the current year before making a decision.

And more importantly: a kid earning a few hundred or a few thousand dollars is usually well inside the protection allowance. The scenario where a lawn business meaningfully reduces aid is one where the business has become substantial, which is a good problem.

Where it gets worth a real conversation is timing. Aid calculations look at specific years, so a large amount of money sitting in a kid's name during an assessment year is a different situation from the same money earned earlier. Families with a college-bound teenager running something genuinely profitable should ask a financial aid advisor rather than guessing, because the answer depends on amounts, timing, and which year is being measured.

One thing worth weighing against all of it. A kid who ran a business through high school has something to write about, something to talk about in an interview, and a demonstrated work history. Those are not nothing in the same process.

This is a starting point rather than a ruling. Check the current year's rules, and talk to a financial aid professional if the numbers are real.