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Does Military Pay State Taxes

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Does Military Pay State Taxes

Does military pay state taxes Index C Change in classification Disregarded entity to corporation, Subsequent Elections Disregarded entity to partnership, Change in default classification. Does military pay state taxes , Subsequent Elections Partnership to corporation, Subsequent Elections Partnership to disregarded entity, Change in default classification. Does military pay state taxes , Subsequent Elections Recognition of gain or loss, Change in default classification. Does military pay state taxes , Change in default classification. Does military pay state taxes , Subsequent Elections Classification as a corporation, LLCs Classified as Corporations Classification as a Disregarded Entity, LLCs Classified as Disregarded Entities Classification as a Partnership, LLCs Classified as Partnerships Classification Election, LLCs Classified as Corporations Classification of an LLC Default classification, Classification of an LLC Elected classification, Classification of an LLC Comments on publication, Comments and suggestions. Does military pay state taxes E Employer identification number (see Taxpayer identification number) Employment tax, Employment tax and certain excise taxes. Does military pay state taxes Excise taxes, Employment tax and certain excise taxes. Does military pay state taxes I Information, How to get more, How To Get More Information S Self-employment tax, Self-employment tax rule for disregarded entity LLCs. Does military pay state taxes Small Business Administration, Small Business Administration Social security number (see Taxpayer identification number) Subchapter S election, LLCs Classified as Corporations Suggestions for publication, Comments and suggestions. Does military pay state taxes T Tax help (see Information, How to get more) Taxpayer Advocate, Contacting your Taxpayer Advocate. Does military pay state taxes Taxpayer identification number, Taxpayer identification number. Does military pay state taxes Prev  Up     Home   More Online Publications
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The Does Military Pay State Taxes

Does military pay state taxes 4. Does military pay state taxes   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. Does military pay state taxes However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Does military pay state taxes For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. Does military pay state taxes This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Does military pay state taxes The student loan interest deduction is taken as an adjustment to income. Does military pay state taxes This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). Does military pay state taxes This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. Does military pay state taxes Table 4-1. Does military pay state taxes Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. Does military pay state taxes Do not rely on this table alone. Does military pay state taxes Refer to the text for complete details. Does military pay state taxes Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. Does military pay state taxes Loan qualifications   Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. Does military pay state taxes Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. Does military pay state taxes Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. Does military pay state taxes Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). Does military pay state taxes Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Does military pay state taxes It includes both required and voluntary interest payments. Does military pay state taxes Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. Does military pay state taxes Loans from the following sources are not qualified student loans. Does military pay state taxes A related person. Does military pay state taxes A qualified employer plan. Does military pay state taxes Your dependent. Does military pay state taxes   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. Does military pay state taxes You can find more information about dependents in Publication 501. Does military pay state taxes Exceptions. Does military pay state taxes   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. Does military pay state taxes An individual can be your dependent even if you are the dependent of another taxpayer. Does military pay state taxes An individual can be your dependent even if the individual files a joint return with a spouse. Does military pay state taxes An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). Does military pay state taxes Reasonable period of time. Does military pay state taxes   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. Does military pay state taxes   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. Does military pay state taxes The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. Does military pay state taxes   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. Does military pay state taxes Academic period. Does military pay state taxes   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Does military pay state taxes In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Does military pay state taxes Eligible student. Does military pay state taxes   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Does military pay state taxes Enrolled at least half-time. Does military pay state taxes   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. Does military pay state taxes   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Does military pay state taxes However, the standard may not be lower than any of those established by the U. Does military pay state taxes S. Does military pay state taxes Department of Education under the Higher Education Act of 1965. Does military pay state taxes Related person. Does military pay state taxes   You cannot deduct interest on a loan you get from a related person. Does military pay state taxes Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Does military pay state taxes ), Your lineal descendants (children, grandchildren, etc. Does military pay state taxes ), and Certain corporations, partnerships, trusts, and exempt organizations. Does military pay state taxes Qualified employer plan. Does military pay state taxes   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Does military pay state taxes Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. Does military pay state taxes They include amounts paid for the following items. Does military pay state taxes Tuition and fees. Does military pay state taxes Room and board. Does military pay state taxes Books, supplies, and equipment. Does military pay state taxes Other necessary expenses (such as transportation). Does military pay state taxes The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Does military pay state taxes Eligible educational institution. Does military pay state taxes   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Does military pay state taxes S. Does military pay state taxes Department of Education. Does military pay state taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Does military pay state taxes   Certain educational institutions located outside the United States also participate in the U. Does military pay state taxes S. Does military pay state taxes Department of Education's Federal Student Aid (FSA) programs. Does military pay state taxes   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. Does military pay state taxes   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Does military pay state taxes The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Does military pay state taxes    The educational institution should be able to tell you if it is an eligible educational institution. Does military pay state taxes Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. Does military pay state taxes Employer-provided educational assistance. Does military pay state taxes See chapter 11, Employer-Provided Educational Assistance . Does military pay state taxes Tax-free distribution of earnings from a Coverdell education savings account (ESA). Does military pay state taxes See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. Does military pay state taxes Tax-free distribution of earnings from a qualified tuition program (QTP). Does military pay state taxes See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. Does military pay state taxes U. Does military pay state taxes S. Does military pay state taxes savings bond interest that you exclude from income because it is used to pay qualified education expenses. Does military pay state taxes See chapter 10, Education Savings Bond Program . Does military pay state taxes The tax-free part of scholarships and fellowships. Does military pay state taxes See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Does military pay state taxes Veterans' educational assistance. Does military pay state taxes See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Does military pay state taxes Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Does military pay state taxes Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. Does military pay state taxes Loan origination fee. Does military pay state taxes   In general, this is a one-time fee charged by the lender when a loan is made. Does military pay state taxes To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. Does military pay state taxes A loan origination fee treated as interest accrues over the term of the loan. Does military pay state taxes   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. Does military pay state taxes If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. Does military pay state taxes The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. Does military pay state taxes A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. Does military pay state taxes Example. Does military pay state taxes In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. Does military pay state taxes The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. Does military pay state taxes Bill began making payments on his student loan in 2013. Does military pay state taxes Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. Does military pay state taxes Bill's loan is payable in 120 equal monthly payments. Does military pay state taxes He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). Does military pay state taxes Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. Does military pay state taxes To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. Does military pay state taxes Capitalized interest. Does military pay state taxes   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Does military pay state taxes Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. Does military pay state taxes No deduction for capitalized interest is allowed in a year in which no loan payments were made. Does military pay state taxes Interest on revolving lines of credit. Does military pay state taxes   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. Does military pay state taxes See Qualified Education Expenses , earlier. Does military pay state taxes Interest on refinanced student loans. Does military pay state taxes   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. Does military pay state taxes    If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. Does military pay state taxes Voluntary interest payments. Does military pay state taxes   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. Does military pay state taxes Example. Does military pay state taxes The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. Does military pay state taxes He began making payments as required. Does military pay state taxes In September 2013, Roger enrolled in graduate school on a full-time basis. Does military pay state taxes He applied for and was granted deferment of his loan payments while in graduate school. Does military pay state taxes Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. Does military pay state taxes Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. Does military pay state taxes Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. Does military pay state taxes To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. Does military pay state taxes Example. Does military pay state taxes In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. Does military pay state taxes The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. Does military pay state taxes The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. Does military pay state taxes At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. Does military pay state taxes The loan is payable over 60 months, with a payment of $200. Does military pay state taxes 51 due on the first of each month, beginning November 2013. Does military pay state taxes Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. Does military pay state taxes However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). Does military pay state taxes Payment Date   Payment   Stated Interest   Principal November 2013   $200. Does military pay state taxes 51   $44. Does military pay state taxes 27   $156. Does military pay state taxes 24 December 2013   $200. Does military pay state taxes 51   $43. Does military pay state taxes 62   $156. Does military pay state taxes 89 Totals   $401. Does military pay state taxes 02   $87. Does military pay state taxes 89   $313. Does military pay state taxes 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. Does military pay state taxes 89. Does military pay state taxes Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). Does military pay state taxes A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. Does military pay state taxes Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. Does military pay state taxes Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. Does military pay state taxes 02 ($87. Does military pay state taxes 89 + $10 + $303. Does military pay state taxes 13). Does military pay state taxes For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. Does military pay state taxes She also will apply the remaining amount of capitalized interest ($625 − $303. Does military pay state taxes 13 = $321. Does military pay state taxes 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. Does military pay state taxes Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. Does military pay state taxes Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Does military pay state taxes Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Does military pay state taxes Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. Does military pay state taxes For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. Does military pay state taxes When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. Does military pay state taxes Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Does military pay state taxes Your filing status is any filing status except married filing separately. Does military pay state taxes No one else is claiming an exemption for you on his or her tax return. Does military pay state taxes You are legally obligated to pay interest on a qualified student loan. Does military pay state taxes You paid interest on a qualified student loan. Does military pay state taxes Claiming an exemption for you. Does military pay state taxes   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. Does military pay state taxes Example 1. Does military pay state taxes During 2013, Josh paid $600 interest on his qualified student loan. Does military pay state taxes Only he is legally obligated to make the payments. Does military pay state taxes No one claimed an exemption for Josh for 2013. Does military pay state taxes Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. Does military pay state taxes Example 2. Does military pay state taxes During 2013, Jo paid $1,100 interest on her qualified student loan. Does military pay state taxes Only she is legally obligated to make the payments. Does military pay state taxes Jo's parents claimed an exemption for her on their 2013 tax return. Does military pay state taxes In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. Does military pay state taxes Interest paid by others. Does military pay state taxes   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. Does military pay state taxes Example 1. Does military pay state taxes Darla obtained a qualified student loan to attend college. Does military pay state taxes After Darla's graduation from college, she worked as an intern for a nonprofit organization. Does military pay state taxes As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. Does military pay state taxes This payment was treated as additional compensation and reported in box 1 of her Form W-2. Does military pay state taxes Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. Does military pay state taxes Example 2. Does military pay state taxes Ethan obtained a qualified student loan to attend college. Does military pay state taxes After graduating from college, the first monthly payment on his loan was due in December. Does military pay state taxes As a gift, Ethan's mother made this payment for him. Does military pay state taxes No one is claiming a dependency exemption for Ethan on his or her tax return. Does military pay state taxes Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. Does military pay state taxes No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). Does military pay state taxes Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Does military pay state taxes However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. Does military pay state taxes You can use Worksheet 4-1. Does military pay state taxes Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. Does military pay state taxes Form 1098-E. Does military pay state taxes   To help you figure your student loan interest deduction, you should receive Form 1098-E. Does military pay state taxes Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. Does military pay state taxes   For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. Does military pay state taxes Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Does military pay state taxes However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Does military pay state taxes See Allocating Payments Between Interest and Principal , earlier. Does military pay state taxes    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. Does military pay state taxes The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. Does military pay state taxes Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). Does military pay state taxes You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). Does military pay state taxes Modified adjusted gross income (MAGI). Does military pay state taxes   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. Does military pay state taxes However, as discussed below, there may be other modifications. Does military pay state taxes Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. Does military pay state taxes Table 4-2. Does military pay state taxes Effect of MAGI on Student Loan Interest Deduction IF your filing status is. Does military pay state taxes . Does military pay state taxes . Does military pay state taxes AND your MAGI is. Does military pay state taxes . Does military pay state taxes . Does military pay state taxes THEN your student loan interest deduction is. Does military pay state taxes . Does military pay state taxes . Does military pay state taxes single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. Does military pay state taxes more than $60,000  but less than $75,000 reduced because of the phaseout. Does military pay state taxes $75,000 or more eliminated by the phaseout. Does military pay state taxes married filing joint return not more than $125,000 not affected by the phaseout. Does military pay state taxes more than $125,000 but less than $155,000 reduced because of the phaseout. Does military pay state taxes $155,000 or more eliminated by the phaseout. Does military pay state taxes MAGI when using Form 1040A. Does military pay state taxes   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). Does military pay state taxes MAGI when using Form 1040. Does military pay state taxes   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Does military pay state taxes MAGI when using Form 1040NR. Does military pay state taxes   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). Does military pay state taxes MAGI when using Form 1040NR-EZ. Does military pay state taxes   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). Does military pay state taxes Phaseout. Does military pay state taxes   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. Does military pay state taxes To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. Does military pay state taxes The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). Does military pay state taxes The denominator is $15,000 ($30,000 in the case of a joint return). Does military pay state taxes Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. Does military pay state taxes Example 1. Does military pay state taxes During 2013 you paid $800 interest on a qualified student loan. Does military pay state taxes Your 2013 MAGI is $145,000 and you are filing a joint return. Does military pay state taxes You must reduce your deduction by $533, figured as follows. Does military pay state taxes   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). Does military pay state taxes Example 2. Does military pay state taxes The facts are the same as in Example 1 except that you paid $2,750 interest. Does military pay state taxes Your maximum deduction for 2013 is $2,500. Does military pay state taxes You must reduce your maximum deduction by $1,667, figured as follows. Does military pay state taxes   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). Does military pay state taxes Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. Does military pay state taxes However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. Does military pay state taxes Student Loan Interest Deduction Worksheet at the end of this chapter. Does military pay state taxes Claiming the Deduction The student loan interest deduction is an adjustment to income. Does military pay state taxes To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). Does military pay state taxes Worksheet 4-1. Does military pay state taxes Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Does military pay state taxes Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. Does military pay state taxes 1. Does military pay state taxes Enter the total interest you paid in 2013 on qualified student loans. Does military pay state taxes Do not enter  more than $2,500 1. Does military pay state taxes   2. Does military pay state taxes Enter the amount from Form 1040, line 22 2. Does military pay state taxes       3. Does military pay state taxes Enter the total of the amounts from Form 1040,  lines 23 through 32 3. Does military pay state taxes           4. Does military pay state taxes Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. Does military pay state taxes           5. Does military pay state taxes Add lines 3 and 4 5. Does military pay state taxes       6. Does military pay state taxes Subtract line 5 from line 2 6. Does military pay state taxes       7. Does military pay state taxes Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. Does military pay state taxes       8. Does military pay state taxes Enter any foreign housing deduction (Form 2555, line 50) 8. Does military pay state taxes       9. Does military pay state taxes Enter the amount of income from Puerto Rico you are excluding 9. Does military pay state taxes       10. Does military pay state taxes Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. Does military pay state taxes       11. Does military pay state taxes Add lines 6 through 10. Does military pay state taxes This is your modified adjusted gross income 11. Does military pay state taxes   12. Does military pay state taxes Enter the amount shown below for your filing status 12. Does military pay state taxes     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. Does military pay state taxes Is the amount on line 11 more than the amount on line 12?       □ No. Does military pay state taxes Skip lines 13 and 14, enter -0- on line 15, and go to line 16. Does military pay state taxes       □ Yes. Does military pay state taxes Subtract line 12 from line 11 13. Does military pay state taxes   14. Does military pay state taxes Divide line 13 by $15,000 ($30,000 if married filing jointly). Does military pay state taxes Enter the result as a decimal  (rounded to at least three places). Does military pay state taxes If the result is 1. Does military pay state taxes 000 or more, enter 1. Does military pay state taxes 000 14. Does military pay state taxes . Does military pay state taxes 15. Does military pay state taxes Multiply line 1 by line 14 15. Does military pay state taxes   16. Does military pay state taxes Student loan interest deduction. Does military pay state taxes Subtract line 15 from line 1. Does military pay state taxes Enter the result here  and on Form 1040, line 33. Does military pay state taxes Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. Does military pay state taxes ) 16. Does military pay state taxes   Prev  Up  Next   Home   More Online Publications