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Federal Tax Forms

Federal tax forms 1. Federal tax forms   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. Federal tax forms General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. Federal tax forms There are exceptions to this rule, discussed under Exceptions , later. Federal tax forms Generally, you must include the canceled debt in your income. Federal tax forms However, you may be able to exclude the canceled debt. Federal tax forms See Exclusions , later. Federal tax forms Example. Federal tax forms John owed $1,000 to Mary. Federal tax forms Mary agreed to accept and John paid $400 in satisfaction of the entire debt. Federal tax forms John has canceled debt of $600. Federal tax forms Example. Federal tax forms Margaret owed $1,000 to Henry. Federal tax forms Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. Federal tax forms Margaret does not have canceled debt. Federal tax forms Instead, she has income from services. Federal tax forms A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. Federal tax forms Debt for which you are personally liable is recourse debt. Federal tax forms All other debt is nonrecourse debt. Federal tax forms If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. Federal tax forms See Discounts and loan modifications , later. Federal tax forms However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. Federal tax forms As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. Federal tax forms For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. Federal tax forms There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. Federal tax forms See Exceptions and Exclusions, later. Federal tax forms You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. Federal tax forms Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. Federal tax forms The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. Federal tax forms For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. Federal tax forms Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. Federal tax forms An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. Federal tax forms Identifiable event codes. Federal tax forms    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. Federal tax forms The codes shown in box 6 are explained below. Federal tax forms Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. Federal tax forms Note. Federal tax forms Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. Federal tax forms However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. Federal tax forms Code A — Bankruptcy. Federal tax forms Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. Federal tax forms See Bankruptcy , later. Federal tax forms Code B — Other judicial debt relief. Federal tax forms Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. Federal tax forms Code C — Statute of limitations or expiration of deficiency period. Federal tax forms Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Federal tax forms In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. Federal tax forms Code D — Foreclosure election. Federal tax forms Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. Federal tax forms This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. Federal tax forms Code E — Debt relief from probate or similar proceeding. Federal tax forms Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. Federal tax forms Code F — By agreement. Federal tax forms Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. Federal tax forms Code G — Decision or policy to discontinue collection. Federal tax forms Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. Federal tax forms For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. Federal tax forms Code H — Expiration of nonpayment testing period. Federal tax forms Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. Federal tax forms The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. Federal tax forms This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. Federal tax forms Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. Federal tax forms Code I — Other actual discharge before identifiable event. Federal tax forms Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. Federal tax forms Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. Federal tax forms Amount of canceled debt. Federal tax forms    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. Federal tax forms The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). Federal tax forms Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. Federal tax forms Interest included in canceled debt. Federal tax forms    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. Federal tax forms Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. Federal tax forms See Deductible Debt under Exceptions, later. Federal tax forms Persons who each receive a Form 1099-C showing the full amount of debt. Federal tax forms    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Federal tax forms However, you may not have to report that entire amount as income. Federal tax forms The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. Federal tax forms See Example 3 under Insolvency, later. Federal tax forms Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. Federal tax forms However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. Federal tax forms The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. Federal tax forms For more details, see Exceptions and Exclusions, later. Federal tax forms Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. Federal tax forms   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. Federal tax forms The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. Federal tax forms The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. Federal tax forms If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. Federal tax forms The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. Federal tax forms For more details, see Exceptions and Exclusions, later. Federal tax forms Nonrecourse debt. Federal tax forms   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. Federal tax forms The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. Federal tax forms The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. Federal tax forms The character of the gain or loss is determined by the character of the property. Federal tax forms More information. Federal tax forms    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. Federal tax forms Abandonments Recourse debt. Federal tax forms   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. Federal tax forms You must report this income on your tax return unless one of the exceptions or exclusions described later applies. Federal tax forms For more details, see Exceptions and Exclusions, later. Federal tax forms This income is separate from any amount realized from the abandonment of the property. Federal tax forms For more details, see chapter 3. Federal tax forms Nonrecourse debt. Federal tax forms   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. Federal tax forms Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. Federal tax forms For more information, see Publication 542, Corporations. Federal tax forms Prev  Up  Next   Home   More Online Publications
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The Federal Tax Forms

Federal tax forms 19. Federal tax forms   Education- Related Adjustments Table of Contents Introduction Useful Items - You may want to see: Student Loan Interest DeductionStudent Loan Interest Defined Can You Claim the Deduction How Much Can You Deduct How Do You Figure the Deduction Tuition and Fees DeductionCan You Claim the Deduction What Expenses Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses How Much Can You Deduct Educator Expenses Introduction This chapter discusses the education-related adjustment you can deduct in figuring your adjusted gross income. Federal tax forms This chapter covers the student loan interest deduction, tuition and fees deduction, and the deduction for educator expenses. Federal tax forms Useful Items - You may want to see: Publication 970 Tax Benefits for Education Student Loan Interest Deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. Federal tax forms 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. Federal tax forms 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. Federal tax forms This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Federal tax forms Table 19-1 summarizes the features of the student loan interest deduction. Federal tax forms Table 19-1. Federal tax forms Student Loan Interest Deduction at a Glance Do not rely on this table alone. Federal tax forms Refer to the text for more details. Federal tax forms Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. Federal tax forms 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. Federal tax forms Student qualifications The student must be: • you, your spouse, or your dependent, and   • enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. Federal tax forms Time limit on deduction You can deduct interest paid during the remaining period of your student loan. Federal tax forms Phaseout The amount of your deduction depends on your income level. Federal tax forms Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Federal tax forms It includes both required and voluntary interest payments. Federal tax forms 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 (defined in chapter 3) 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 when the student is an eligible student. Federal tax forms Loans from the following sources are not qualified student loans. Federal tax forms A related person. Federal tax forms A qualified employer plan. Federal tax forms Exceptions. Federal tax forms   For purposes of the student loan interest deduction, the following are exceptions to the general rules for dependents. Federal tax forms An individual can be your dependent even if you are the dependent of another taxpayer. Federal tax forms An individual can be your dependent even if the individual files a joint return with a spouse. Federal tax forms 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). Federal tax forms    Reasonable period of time. Federal tax forms   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. Federal tax forms   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. Federal tax forms The expenses relate to a specific academic period. Federal tax forms 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. Federal tax forms   If neither of the above situations applies, the reasonable period of time is determined based on all the relevant facts and circumstances. Federal tax forms Academic period. Federal tax forms   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. Federal tax forms 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. Federal tax forms Eligible student. Federal tax forms   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Federal tax forms Enrolled at least half-time. Federal tax forms   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. Federal tax forms   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Federal tax forms However, the standard may not be lower than any of those established by the U. Federal tax forms S. Federal tax forms Department of Education under the Higher Education Act of 1965. Federal tax forms Related person. Federal tax forms   You cannot deduct interest on a loan you get from a related person. Federal tax forms Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Federal tax forms ), Your lineal descendants (children, grandchildren, etc. Federal tax forms ), and Certain corporations, partnerships, trusts, and exempt organizations. Federal tax forms Qualified employer plan. Federal tax forms   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Federal tax forms 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. Federal tax forms They include amounts paid for the following items. Federal tax forms Tuition and fees. Federal tax forms Room and board. Federal tax forms Books, supplies, and equipment. Federal tax forms Other necessary expenses (such as transportation). Federal tax forms The cost of room and board qualifies only to the extent that it is not more than: 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 If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Federal tax forms Eligible educational institution. Federal tax forms   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. Federal tax forms S. Federal tax forms Department of Education. Federal tax forms It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Federal tax forms   Certain educational institutions located outside the United States also participate in the U. Federal tax forms S. Federal tax forms Department of Education's Federal Student Aid (FSA) programs. Federal tax forms   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. Federal tax forms   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Federal tax forms The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Federal tax forms    The educational institution should be able to tell you if it is an eligible educational institution. Federal tax forms Adjustments to qualified education expenses. Federal tax forms   You must reduce your qualified education expenses by certain tax-free items (such as the tax-free part of scholarships and fellowships). Federal tax forms See chapter 4 of Publication 970 for details. Federal tax forms Include as Interest In addition to simple interest on the loan, certain loan origination fees, capitalized interest, interest on revolving lines of credit, and interest on refinanced student loans can be student loan interest if all other requirements are met. Federal tax forms Loan origination fee. Federal tax forms   In general, this is a one-time fee charged by the lender when a loan is made. Federal tax forms To be deductible as interest, the 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. Federal tax forms A loan origination fee treated as interest accrues over the life of the loan. Federal tax forms Capitalized interest. Federal tax forms    This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Federal tax forms Interest on revolving lines of credit. Federal tax forms   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. Federal tax forms See Qualified Education Expenses , earlier. Federal tax forms Interest on refinanced student loans. Federal tax forms   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. Federal tax forms 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. Federal tax forms Voluntary interest payments. Federal tax forms   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. Federal tax forms Do Not Include as Interest You cannot claim a student loan interest deduction for any of the following items. Federal tax forms Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Federal tax forms Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Federal tax forms 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. Federal tax forms For more information, see Student Loan Repayment Assistance in chapter 5 of Publication 970. Federal tax forms Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Federal tax forms Your filing status is any filing status except married filing separately. Federal tax forms No one else is claiming an exemption for you on his or her tax return. Federal tax forms You are legally obligated to pay interest on a qualified student loan. Federal tax forms You paid interest on a qualified student loan. Federal tax forms Interest paid by others. Federal tax forms   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. Federal tax forms See chapter 4 of Publication 970 for more information. Federal tax forms 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, home mortgage interest). Federal tax forms How Much Can You Deduct Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Federal tax forms However, the amount determined above 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). Federal tax forms 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). Federal tax forms For details on figuring your MAGI, see chapter 4 of Publication 970. Federal tax forms How Do You Figure the Deduction Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the Form 1040 or Form 1040A instructions. Federal tax forms However, if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1 in chapter 4 of Publication 970. Federal tax forms To help you figure your student loan interest deduction, you should receive Form 1098-E, Student Loan Interest Statement. Federal tax forms 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. Federal tax forms 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. Federal tax forms Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Federal tax forms However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Federal tax forms For information on allocating payments between interest and principal, see chapter 4 of Publication 970. Federal tax forms To claim the deduction, enter the allowable amount on Form 1040, line 33, or Form 1040A, line 18. Federal tax forms Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). Federal tax forms You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. Federal tax forms The qualified expenses must be for higher education, as explained later under What Expenses Qualify . Federal tax forms The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. Federal tax forms Table 19-2 summarizes the features of the tuition and fees deduction. Federal tax forms You may be able to take a credit for your education expenses instead of a deduction. Federal tax forms You can choose the one that will give you the lower tax. Federal tax forms See chapter 35, Education Credits, for details about the credits. Federal tax forms Can You Claim the Deduction The following rules will help you determine if you can claim the tuition and fees deduction. Federal tax forms Who Can Claim the Deduction Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. Federal tax forms You paid qualified education expenses of higher education in 2013 for academic periods beginning in 2013 and those beginning in the first three months of 2014. Federal tax forms You paid the education expenses for an eligible student. Federal tax forms The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption (defined in chapter 3) on your tax return. Federal tax forms Qualified education expenses are defined under What Expenses Qualify . Federal tax forms Eligible students are defined later under Who Is an Eligible Student . Federal tax forms Who Cannot Claim the Deduction You cannot claim the tuition and fees deduction if any of the following apply. Federal tax forms Your filing status is married filing separately. Federal tax forms Another person can claim an exemption for you as a dependent on his or her tax return. Federal tax forms You cannot take the deduction even if the other person does not actually claim that exemption. Federal tax forms Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). Federal tax forms You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. Federal tax forms More information on nonresident aliens can be found in Publication 519, U. Federal tax forms S. Federal tax forms Tax Guide for Aliens. Federal tax forms You or anyone else claims an American opportunity or lifetime learning credit in 2013 with respect to expenses of the student for whom the qualified education expenses were paid. Federal tax forms However, a state tax credit will not disqualify you from claiming a tuition and fees deduction. Federal tax forms Table 19-2. Federal tax forms Tuition and Fees Deduction at a Glance Do not rely on this table alone. Federal tax forms Refer to the text for more details. Federal tax forms Question   Answer What is the maximum benefit?   You can reduce your income subject to tax by up to $4,000. Federal tax forms Where is the deduction taken?   As an adjustment to income on Form 1040, line 34, or Form 1040A, line 19. Federal tax forms For whom must the expenses be paid?   A student enrolled in an eligible educational institution who is either: you, your spouse, or your dependent for whom you claim an exemption. Federal tax forms What tuition and fees are deductible?   Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. Federal tax forms What Expenses Qualify The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Federal tax forms Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period (defined earlier under Student Loan Interest Deduction ) beginning in 2013 or in the first 3 months of 2014. Federal tax forms Payments with borrowed funds. Federal tax forms   You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. Federal tax forms Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. Federal tax forms Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Federal tax forms Student withdraws from class(es). Federal tax forms   You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws. Federal tax forms Qualified Education Expenses For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Federal tax forms Eligible educational institution. Federal tax forms   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. Federal tax forms S. Federal tax forms Department of Education. Federal tax forms It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Federal tax forms The educational institution should be able to tell you if it is an eligible educational institution. Federal tax forms   Certain educational institutions located outside the United States also participate in the U. Federal tax forms S. Federal tax forms Department of Education's Federal Student Aid (FSA) programs. Federal tax forms Academic period. Federal tax forms    An academic period is any quarter, semester, trimester, or any other period of study as reasonably determined by an eligible educational institution. Federal tax forms If an eligible educational institution uses credit hours and does not have academic terms, each payment period may be treated as an academic period. Federal tax forms Related expenses. Federal tax forms   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses for the tuition and fees deduction only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Federal tax forms Prepaid expenses. Federal tax forms   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring the tuition and fees deduction. Federal tax forms See Academic period, earlier. Federal tax forms For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring the tuition and fees deduction for 2013 only if you meet all the other requirements. Federal tax forms    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 tuition and fees deduction. Federal tax forms No Double Benefit Allowed You cannot do any of the following. Federal tax forms Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense. Federal tax forms Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year. Federal tax forms Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). Federal tax forms For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Federal tax forms See Figuring the Taxable Portion of a Distribution in chapter 7 (Coverdell ESA) and chapter 8 (QTP) of Publication 970. Federal tax forms Deduct qualified education expenses that have been paid with tax-free interest on U. Federal tax forms S. Federal tax forms savings bonds (Form 8815). Federal tax forms See Figuring the Tax-Free Amount in chapter 10 of Publication 970. Federal tax forms Deduct qualified education expenses that have been paid with tax-free educational assistance such as a scholarship, grant, or employer-provided educational assistance. Federal tax forms See Adjustments to qualified education expenses, later. Federal tax forms Adjustments to qualified education expenses. Federal tax forms   For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Federal tax forms The result is the amount of adjusted qualified education expenses for each student. Federal tax forms Tax-free educational assistance. Federal tax forms   For tax-free educational assistance you received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance to that academic period. Federal tax forms See Academic period, earlier. Federal tax forms   This includes: The tax-free part of scholarships and fellowships, including Pell grants (see chapter 1 of Publication 970), The tax-free part of any employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Federal tax forms Generally, any scholarship or fellowship you receive is treated as tax-free educational assistance. Federal tax forms However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent you include it in gross income (if you are required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Federal tax forms 970, chapter 1. Federal tax forms The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Federal tax forms 970, chapter 1. Federal tax forms You may be able to increase the combined value of your tuition and fees deduction and certain educational assistance if you include some or all of the educational assistance in income in the year it is received. Federal tax forms For details, see Adjustments to Qualified Education Expenses in chapter 6 of Pub. Federal tax forms 970. Federal tax forms Some tax-free educational assistance received in 2013 may be treated as a refund of qualified education expenses paid in 2013. Federal tax forms This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). Federal tax forms If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. Federal tax forms If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. Federal tax forms Refunds. Federal tax forms   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or may require you to include some or all of the refund in your gross income for the year the refund is received. Federal tax forms See chapter 6 of Pub. Federal tax forms 970 for more information. Federal tax forms Some tax-free educational assistance received after 2013 may be treated as a refund. Federal tax forms See Tax-free educational assistance, earlier. Federal tax forms Refunds received in 2013. Federal tax forms    For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Federal tax forms Refunds received after 2013 but before your income tax return is filed. Federal tax forms   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. Federal tax forms Refunds received after 2013 and after your income tax return is filed. Federal tax forms   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received after you file your 2013 income tax return, you may need to include some or all of the refund in your gross income for the year the refund is received. Federal tax forms See chapter 6 of Pub. Federal tax forms 970 for more information. Federal tax forms Coordination with Coverdell education savings accounts and qualified tuition programs. Federal tax forms    Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). Federal tax forms For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Federal tax forms Amounts that do not reduce qualified education expenses. Federal tax forms   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Federal tax forms   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. Federal tax forms The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses. Federal tax forms The use of the money is not restricted. Federal tax forms Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. Federal tax forms This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Federal tax forms Sports, games, hobbies, and noncredit courses. Federal tax forms   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. Federal tax forms However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Federal tax forms Comprehensive or bundled fees. Federal tax forms   Some eligible educational institutions combine all of their fees for an academic period into one amount. Federal tax forms If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. Federal tax forms The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. Federal tax forms See How Do You Figure the Deduction , later, for more information about Form 1098-T. Federal tax forms Who Is an Eligible Student For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (defined earlier). Federal tax forms Who Can Claim a Dependent's Expenses Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must: Have paid the expenses, and Claim an exemption for the student as a dependent. Federal tax forms Table 19-3 summarizes who can claim the deduction. Federal tax forms How Much Can You Deduct The maximum tuition and fees deduction in 2013 is $4,000, $2,000, or $0, depending on the amount of your MAGI. Federal tax forms For details on figuring your MAGI, see chapter 6 of Publication 970. Federal tax forms How Do You Figure the Deduction Figure the deduction using Form 8917. Federal tax forms To help you figure your tuition and fees deduction, you should receive Form 1098-T, Tuition Statement. Federal tax forms Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. Federal tax forms To claim the deduction, enter the allowable amount on Form 1040, line 34, or Form 1040A, line 19, and attach your completed Form 8917. Federal tax forms Table 19-3. Federal tax forms Who Can Claim a Dependent's Expenses Do not rely on this table alone. Federal tax forms See Who Can Claim a Dependent's Expenses in chapter 6 of Publication 970. Federal tax forms IF your dependent is an eligible student and you. Federal tax forms . Federal tax forms . Federal tax forms AND. Federal tax forms . Federal tax forms . Federal tax forms THEN. Federal tax forms . Federal tax forms . Federal tax forms claim an exemption for your dependent you paid all qualified education expenses for your dependent only you can deduct the qualified education expenses that you paid. Federal tax forms Your dependent cannot take a deduction. Federal tax forms claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Federal tax forms do not claim an exemption for your dependent you paid all qualified education expenses no one is allowed to take a deduction. Federal tax forms do not claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Federal tax forms Educator Expenses If you were an eligible educator in 2013, you can deduct on Form 1040, line 23, or Form 1040A, line 16, up to $250 of qualified expenses you paid in 2013. Federal tax forms If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Federal tax forms However, neither spouse can deduct more than $250 of his or her qualified expenses on Form 1040, line 23, or Form 1040A, line 16. Federal tax forms You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A (Form 1040), line 21. Federal tax forms Eligible educator. Federal tax forms   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. Federal tax forms Qualified expenses. Federal tax forms   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Federal tax forms An ordinary expense is one that is common and accepted in your educational field. Federal tax forms A necessary expense is one that is helpful and appropriate for your profession as an educator. Federal tax forms An expense does not have to be required to be considered necessary. Federal tax forms   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Federal tax forms   You must reduce your qualified expenses by the following amounts. Federal tax forms Excludable U. Federal tax forms S. Federal tax forms series EE and I savings bond interest from Form 8815. Federal tax forms See Figuring the Tax-Free Amount in chapter 10 of Publication 970. Federal tax forms Nontaxable qualified tuition program earnings or distributions. Federal tax forms See Figuring the Taxable Portion of a Distribution in chapter 8 of Publication 970. Federal tax forms Nontaxable distribution of earnings from a Coverdell education savings account. Federal tax forms See Figuring the Taxable Portion of a Distribution in chapter 7 of Publication 970. Federal tax forms Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2. 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