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Filing State Income Taxes

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Filing State Income Taxes

Filing state income taxes 2. Filing state income taxes   American Opportunity Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible StudentException. Filing state income taxes Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Refundable Part of Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. Filing state income taxes They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). Filing state income taxes This chapter explains: Who can claim the American opportunity credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. Filing state income taxes What is the tax benefit of the American opportunity credit. Filing state income taxes   For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student. Filing state income taxes   A tax credit reduces the amount of income tax you may have to pay. Filing state income taxes Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Filing state income taxes Forty percent of the American opportunity credit may be refundable. Filing state income taxes This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. Filing state income taxes   Your allowable American opportunity credit may be limited by the amount of your income. Filing state income taxes Also, the nonrefundable part of the credit may be limited by the amount of your tax. Filing state income taxes Overview of the American opportunity credit. Filing state income taxes   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. Filing state income taxes The details are discussed in this chapter. Filing state income taxes Can you claim more than one education credit this year. Filing state income taxes   For each student, you can elect for any year only one of the credits. Filing state income taxes For example, if you elect to take the American opportunity credit for a child on your 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013. Filing state income taxes   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. Filing state income taxes If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. Filing state income taxes This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. Filing state income taxes Differences between the American opportunity and lifetime learning credits. Filing state income taxes   There are several differences between these two credits. Filing state income taxes For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope Scholarship Credit for that student. Filing state income taxes However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. Filing state income taxes The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. Filing state income taxes If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. Filing state income taxes If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. Filing state income taxes Table 2-1. Filing state income taxes Overview of the American Opportunity Credit Maximum credit Up to $2,500 credit per eligible student Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship Credit was claimed) Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return. Filing state income taxes Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. Filing state income taxes You pay qualified education expenses of higher education. Filing state income taxes You pay the education expenses for an eligible student. Filing state income taxes The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Filing state income taxes Student qualifications. Filing state income taxes   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. Filing state income taxes As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. Filing state income taxes For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. Filing state income taxes Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. Filing state income taxes If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. Filing state income taxes For at least one academic period beginning (or treated as beginning) in 2013, the student both: Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and Carried at least one-half the normal full-time workload for his or her course of study. Filing state income taxes The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Filing state income taxes However, the standard may not be lower than any of those established by the U. Filing state income taxes S. Filing state income taxes Department of Education under the Higher Education Act of 1965. Filing state income taxes For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. Filing state income taxes See Prepaid expenses, later. Filing state income taxes As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. Filing state income taxes Example 1. Filing state income taxes Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. Filing state income taxes Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. Filing state income taxes Sharon claimed the American opportunity credit on her 2012 tax return. Filing state income taxes The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. Filing state income taxes Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. Filing state income taxes If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. Filing state income taxes Example 2. Filing state income taxes Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. Filing state income taxes His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. Filing state income taxes No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. Filing state income taxes The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. Filing state income taxes Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. Filing state income taxes If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. Filing state income taxes If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. Filing state income taxes Example 3. Filing state income taxes Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. Filing state income taxes Glenda pays her tuition for the 2014 Spring semester in December 2013. Filing state income taxes Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. Filing state income taxes If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. Filing state income taxes You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Filing state income taxes Note. Filing state income taxes Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. Filing state income taxes “Qualified education expenses” are defined later under Qualified Education Expenses . Filing state income taxes “Eligible students” are defined later under Who Is an Eligible Student . Filing state income taxes A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Filing state income taxes You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2013 , later, helpful in determining if you can claim an American opportunity credit on your tax return. Filing state income taxes This image is too large to be displayed in the current screen. Filing state income taxes Please click the link to view the image. Filing state income taxes Figure 2-1 Can you claim the American opportunity credit for 2012? Who Cannot Claim the Credit You cannot claim the American opportunity credit for 2013 if any of the following apply. Filing state income taxes Your filing status is married filing separately. Filing state income taxes You are listed as a dependent on another person's tax return (such as your parents'). Filing state income taxes See Who Can Claim a Dependent's Expenses , later. Filing state income taxes Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). Filing state income taxes MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Filing state income taxes 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. Filing state income taxes More information on nonresident aliens can be found in Publication 519, U. Filing state income taxes S. Filing state income taxes Tax Guide for Aliens. Filing state income taxes What Expenses Qualify The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Filing state income taxes Generally, the credit is allowed for adjusted qualified education expenses paid in 2013 for an academic period beginning in 2013 or beginning in the first three months of 2014. Filing state income taxes For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning January 2014, you can use that $1,500 in figuring your 2013 credit. Filing state income taxes Academic period. Filing state income 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. Filing state income 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. Filing state income taxes Paid with borrowed funds. Filing state income taxes   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Filing state income taxes Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. Filing state income taxes Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Filing state income taxes Student withdraws from class(es). Filing state income taxes   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. Filing state income taxes Qualified Education Expenses For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Filing state income taxes Eligible educational institution. Filing state income 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. Filing state income taxes S. Filing state income taxes Department of Education. Filing state income taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Filing state income taxes The educational institution should be able to tell you if it is an eligible educational institution. Filing state income taxes   Certain educational institutions located outside the United States also participate in the U. Filing state income taxes S. Filing state income taxes Department of Education's Federal Student Aid (FSA) programs. Filing state income taxes Related expenses. Filing state income taxes   Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Filing state income taxes   However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. Filing state income taxes Prepaid expenses. Filing state income taxes   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. Filing state income taxes See Academic period, earlier. Filing state income taxes 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 an education credit for 2013 only (if you meet all the other requirements). Filing state income taxes    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Filing state income taxes   In the following examples, assume that each student is an eligible student at an eligible educational institution. Filing state income taxes Example 1. Filing state income taxes Jefferson is a sophomore in University V's degree program in dentistry. Filing state income taxes This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Filing state income taxes Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. Filing state income taxes Example 2. Filing state income taxes Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. Filing state income taxes The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Filing state income taxes William bought his books from a friend; Grace bought hers at College W's bookstore. Filing state income taxes Both are qualified education expenses for the American opportunity credit. Filing state income taxes Example 3. Filing state income taxes When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Filing state income taxes This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. Filing state income taxes No portion of the fee covers personal expenses. Filing state income taxes Although labeled as a student activity fee, the fee is required for Kelly's enrollment and attendance at College X and is a qualified expense. Filing state income taxes No Double Benefit Allowed You cannot do any of the following. Filing state income taxes Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an American opportunity credit based on those same expenses. Filing state income taxes Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. Filing state income taxes Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. Filing state income taxes Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. Filing state income taxes See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. Filing state income taxes Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. Filing state income taxes See Adjustments to Qualified Education Expenses, next. Filing state income taxes Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Filing state income taxes The result is the amount of adjusted qualified education expenses for each student. Filing state income taxes Tax-free educational assistance. Filing state income taxes   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Filing state income taxes See Academic period, earlier. Filing state income taxes   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Filing state income taxes 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). Filing state income taxes   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. Filing state income taxes 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. Filing state income taxes   Tax-free educational assistance includes: The tax-free parts of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). Filing state income taxes Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Filing state income taxes Generally, any scholarship or fellowship is treated as tax free. Filing state income taxes However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. Filing state income taxes 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Filing state income taxes 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Filing state income taxes You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. Filing state income taxes For examples, see Coordination with Pell grants and other scholarships, later. Filing state income taxes Refunds. Filing state income taxes   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Filing state income taxes Some tax-free educational assistance received after 2013 may be treated as a refund. Filing state income taxes See Tax-free educational assistance, earlier. Filing state income taxes Refunds received in 2013. Filing state income taxes   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Filing state income taxes Refunds received after 2013 but before your income tax return is filed. Filing state income taxes   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. Filing state income taxes Refunds received after 2013 and after your income tax return is filed. Filing state income taxes   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. Filing state income taxes See Credit recapture, next. Filing state income taxes Credit recapture. Filing state income taxes    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Filing state income taxes You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. Filing state income taxes You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you claimed the refigured credit(s). Filing state income taxes Include that amount as an additional tax for the year the refund or tax-free assistance was received. Filing state income taxes Example. Filing state income taxes   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. Filing state income taxes You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. Filing state income taxes After you filed your return, you received a refund of $4,000. Filing state income taxes You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. Filing state income taxes The refigured credit is $2,250. Filing state income taxes The increase to your tax liability is also $250. Filing state income taxes Include the difference of $250 as additional tax on your 2014 tax return. Filing state income taxes See the instructions for your 2014 income tax return to determine where to include this tax. Filing state income taxes If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. Filing state income taxes Amounts that do not reduce qualified education expenses. Filing state income taxes   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. Filing state income taxes   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. Filing state income taxes 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 as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Filing state income taxes The use of the money is not restricted. Filing state income taxes Example 1. Filing state income taxes Joan paid $3,000 for tuition and $5,000 for room and board at University X. Filing state income taxes The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. Filing state income taxes To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. Filing state income taxes The terms of the scholarship state that it can be used to pay any of Joan's college expenses. Filing state income taxes University X applies the $2,000 scholarship against Joan's $8,000 total bill, and Joan pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. Filing state income taxes Joan does not report any portion of the scholarship as income on her tax return. Filing state income taxes In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. Filing state income taxes The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. Filing state income taxes Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). Filing state income taxes Example 2. Filing state income taxes The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. Filing state income taxes Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Filing state income taxes Joan is treated as having paid $3,000 in qualified education expenses. Filing state income taxes Coordination with Pell grants and other scholarships. Filing state income taxes   In some cases, you may be able to reduce your tax liability by including scholarships in income. Filing state income taxes If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. Filing state income taxes The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Filing state income taxes Example 1—No scholarship. Filing state income taxes Bill Pass, age 28 and unmarried, enrolled full-time in 2013 as a first-year student at a local college to earn a degree in law enforcement. Filing state income taxes This was his first year of postsecondary education. Filing state income taxes During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. Filing state income taxes He and the college meet all the requirements for the American opportunity credit. Filing state income taxes Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. Filing state income taxes Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. Filing state income taxes His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. Filing state income taxes He figures his American opportunity credit based on qualified education expenses of $4,000, which results in a credit of $2,500 and tax after credits of $99. Filing state income taxes Example 2—Scholarship excluded from income. Filing state income taxes The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. Filing state income taxes Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. Filing state income taxes If Bill excludes the scholarship from income, he will be deemed (for purposes of computing his education credit) to have used the scholarship to pay for tuition, required fees, and course materials. Filing state income taxes His adjusted qualified education expenses will be zero and he will not have an education credit. Filing state income taxes Therefore, Bill's tax after credits would be $2,599. Filing state income taxes Example 3—Scholarship partially included in income. Filing state income taxes The facts are the same as in Example 2—Scholarship excluded from income. Filing state income taxes If, unlike Example 2, Bill includes $4,000 of the scholarship in income, he will be deemed to have used that amount to pay for room and board. Filing state income taxes The remaining $1,600 of the $5,600 scholarship will reduce his qualified education expenses and his adjusted qualified education expenses will be $4,000. Filing state income taxes Bill's AGI will increase to $34,000, his taxable income will increase to $24,250, and his tax before credits will increase to $3,199. Filing state income taxes Based on his adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity tax credit of $2,500 and his tax after credits would be $699. Filing state income taxes 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. Filing state income taxes This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Filing state income taxes Sports, games, hobbies, and noncredit courses. Filing state income taxes   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. Filing state income taxes However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Filing state income taxes Comprehensive or bundled fees. Filing state income taxes   Some eligible educational institutions combine all of their fees for an academic period into one amount. Filing state income taxes 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 earlier, contact the institution. Filing state income taxes 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. Filing state income taxes See Figuring the Credit , later, for more information about Form 1098-T. Filing state income taxes Who Is an Eligible Student To claim the American opportunity credit, the student for whom you pay qualified education expenses must be an eligible student. Filing state income taxes This is a student who meets all of the following requirements. Filing state income taxes The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. Filing state income taxes This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. Filing state income taxes The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. Filing state income taxes For at least one academic period beginning in 2013, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Filing state income taxes The student has not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2013. Filing state income taxes These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. Filing state income taxes Completion of first 4 years. Filing state income taxes   A student has completed the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4 years of academic credit at that institution for coursework completed by the student before 2013. Filing state income taxes This student generally would not be an eligible student for purposes of the American opportunity credit. Filing state income taxes Exception. Filing state income taxes   Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education. Filing state income taxes Enrolled at least half-time. Filing state income 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. Filing state income taxes   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Filing state income taxes However, the standard may not be lower than any of those established by the U. Filing state income taxes S. Filing state income taxes Department of Education under the Higher Education Act of 1965. Filing state income taxes Please click here for the text description of the image. Filing state income taxes Figure 2-2 Example 1. Filing state income taxes Mack graduated from high school in June 2012. Filing state income taxes In September, he enrolled in an undergraduate degree program at College U, and attended full-time for both the 2012 fall and 2013 spring semesters. Filing state income taxes For the 2013 fall semester, Mack was enrolled less than half-time. Filing state income taxes Because Mack was enrolled in an undergraduate degree program on at least a half-time basis for at least one academic period that began during 2012 and at least one academic period that began during 2013, he is an eligible student for tax years 2012 and 2013 (including the 2013 fall semester when he enrolled at College U on less than a half-time basis). Filing state income taxes Example 2. Filing state income taxes After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2013 spring semester. Filing state income taxes College V classified Shelly as a second-semester senior (fourth year) for the 2013 spring semester and as a first-semester graduate student (fifth year) for the 2013 fall semester. Filing state income taxes Because College V did not classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2013, Shelly is an eligible student for tax year 2013. Filing state income taxes Therefore, the qualified education expenses paid for the 2013 spring semester and the 2013 fall semester are taken into account in calculating the American opportunity credit for 2013. Filing state income taxes Example 3. Filing state income taxes During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. Filing state income taxes Larry was not enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. Filing state income taxes Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. Filing state income taxes Example 4. Filing state income taxes The facts are the same as in Example 3. Filing state income taxes During the 2013 spring semester, Larry again attended College X but not as part of a degree program. Filing state income taxes Larry graduated from high school in June 2013. Filing state income taxes For the 2013 fall semester, Larry enrolled as a full-time student in College X as part of a degree program, and College X awarded Larry credit for his prior coursework at College X. Filing state income taxes Because Larry was enrolled in a degree program at College X for the 2013 fall term on at least a half-time basis, Larry is an eligible student for all of tax year 2013. Filing state income taxes Therefore, the qualified education expenses paid for classes taken at College X during both the 2013 spring semester (during which Larry was not enrolled in a degree program) and the 2013 fall semester are taken into account in computing any American opportunity credit. Filing state income taxes Example 5. Filing state income taxes Dee graduated from high school in June 2012. Filing state income taxes In January 2013, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a travel agent. Filing state income taxes Dee completed the program in December 2013, and was awarded a certificate. Filing state income taxes In January 2014, she enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a computer programmer. Filing state income taxes Dee is an eligible student for both tax years 2013 and 2014 because she meets the degree requirement, the work load requirement, and the year of study requirement for those years. Filing state income taxes Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim an American opportunity credit for your dependent's expenses for that year. Filing state income taxes For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. Filing state income taxes You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Filing state income taxes IF you. Filing state income taxes . Filing state income taxes . Filing state income taxes THEN only. Filing state income taxes . Filing state income taxes . Filing state income taxes claim an exemption on  your tax return for a  dependent who is an  eligible student you can claim the American opportunity credit based on that dependent's expenses. Filing state income taxes The dependent cannot claim the credit. Filing state income taxes do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the American opportunity credit. Filing state income taxes You cannot claim the credit based on this dependent's expenses. Filing state income taxes Expenses paid by dependent. Filing state income taxes   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Filing state income taxes Include these expenses when figuring the amount of your American opportunity credit. Filing state income taxes    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. Filing state income taxes Expenses paid by you. Filing state income taxes   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the American opportunity credit. Filing state income taxes If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the American opportunity credit. Filing state income taxes Expenses paid by others. Filing state income taxes   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. Filing state income taxes In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Filing state income taxes If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Filing state income taxes Example. Filing state income taxes In 2013, Ms. Filing state income taxes Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Filing state income taxes For purposes of claiming an American opportunity credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. Filing state income taxes Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim an American opportunity credit. Filing state income taxes If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim an American opportunity credit. Filing state income taxes If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. Filing state income taxes Tuition reduction. Filing state income taxes    When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. Filing state income taxes If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. Filing state income taxes For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Filing state income taxes Figuring the Credit The amount of the American opportunity credit (per eligible student) is the sum of: 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and 25% of the next $2,000 of qualified education expenses you paid for that student. Filing state income taxes The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. Filing state income taxes You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. Filing state income taxes However, the credit may be reduced based on your MAGI. Filing state income taxes See Effect of the Amount of Your Income on the Amount of Your Credit , later. Filing state income taxes Example. Filing state income taxes Jack and Kay Ford are married and file a joint tax return. Filing state income taxes For 2013, they claim an exemption for their dependent daughter on their tax return. Filing state income taxes Their MAGI is $70,000. Filing state income taxes Their daughter is in her junior (third) year of studies at the local university. Filing state income taxes Jack and Kay paid qualified education expenses of $4,300 in 2013. Filing state income taxes Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. Filing state income taxes Jack and Kay can claim a $2,500 American opportunity credit in 2013. Filing state income taxes This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. Filing state income taxes Form 1098-T. Filing state income taxes   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. Filing state income taxes 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. Filing state income taxes An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Filing state income taxes However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. Filing state income taxes When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Filing state income taxes   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. Filing state income taxes    The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. Filing state income taxes Effect of the Amount of Your Income on the Amount of Your Credit The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). Filing state income taxes You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). Filing state income taxes Modified adjusted gross income (MAGI). Filing state income taxes   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Filing state income taxes MAGI when using Form 1040A. Filing state income taxes   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Filing state income taxes MAGI when using Form 1040. Filing state income taxes   If you file Form 1040, your MAGI is the AGI on line 38 of that form, 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. Filing state income taxes You can use Worksheet 2-1, next, to figure your MAGI. Filing state income taxes    Worksheet 2-1. Filing state income taxes MAGI for the American Opportunity Credit 1. Filing state income taxes Enter your adjusted gross income  (Form 1040, line 38)   1. Filing state income taxes   2. Filing state income taxes Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Filing state income taxes       3. Filing state income taxes Enter your foreign housing deduction (Form 2555, line 50)   3. Filing state income taxes       4. Filing state income taxes Enter the amount of income from Puerto Rico you are excluding   4. Filing state income taxes       5. Filing state income taxes Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Filing state income taxes       6. Filing state income taxes Add the amounts on lines 2, 3, 4, and 5   6. Filing state income taxes   7. Filing state income taxes Add the amounts on lines 1 and 6. Filing state income taxes  This is your modified adjusted  gross income. Filing state income taxes Enter here and  on Form 8863, line 3   7. Filing state income taxes   Phaseout. Filing state income taxes   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2-7, of Form 8863, Part I. Filing state income taxes The same method is shown in the following example. Filing state income taxes Example. Filing state income taxes You are filing a joint return and your MAGI is $165,000. Filing state income taxes In 2013, you paid $5,000 of qualified education expenses. Filing state income taxes You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses). Filing state income taxes Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. Filing state income taxes The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. Filing state income taxes The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). Filing state income taxes The result is the amount of your phased out (reduced) American opportunity credit ($1,875). Filing state income taxes      $2,500 × $180,000 − $165,000  $20,000 = $1,875   Refundable Part of Credit Forty percent of the American opportunity credit is refundable for most taxpayers. Filing state income taxes However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Filing state income taxes Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. Filing state income taxes You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. Filing state income taxes You were: Under age 18 at the end of 2013, or Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). Filing state income taxes At least one of your parents was alive at the end of 2013. Filing state income taxes You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. Filing state income taxes Earned income. Filing state income taxes   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Filing state income taxes Earned income includes the part of any scholarship or fellowship that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship. Filing state income taxes Earned income does not include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. Filing state income taxes   If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). Filing state income taxes However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. Filing state income taxes Support. Filing state income taxes   Your support includes food, shelter, clothing, medical and dental care, education, and the like. Filing state income taxes Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. Filing state income taxes If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. Filing state income taxes However, a scholarship received by you is not considered support if you are a full-time student. Filing state income taxes See Publication 501 for details. Filing state income taxes Full-time student. Filing state income taxes   You are a full-time student for 2013 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. Filing state income taxes Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Filing state income taxes Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. Filing state income taxes Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. Filing state income taxes A filled-in Form 8863 is shown at the end of this publication. Filing state income taxes Note. Filing state income taxes In Appendix A. Filing state income taxes at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. Filing state income taxes Prev  Up  Next   Home   More Online Publications
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The Filing State Income Taxes

Filing state income taxes Publication 3 - Main Content Table of Contents Gross IncomeForeign Source Income Military Spouses Residency Relief Act (MSRRA) Community Property Form W-2 Codes Adjustments to IncomeArmed Forces Reservists Individual Retirement Arrangements Moving Expenses Combat Zone ExclusionCombat Zone Serving in a Combat Zone Amount of Exclusion Alien StatusResident Aliens Nonresident Aliens Dual-Status Aliens Sale of HomePeriod of suspension. Filing state income taxes Qualified official extended duty. Filing state income taxes ForeclosuresLump Sum Portion of Settlement Payment. Filing state income taxes Interest Payment on Lump Sum Portion of Settlement Payment. Filing state income taxes Lost Equity Portion of Settlement Payment. Filing state income taxes The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Filing state income taxes Interest Payment on Lost Equity Portion of Settlement Payment. Filing state income taxes Itemized DeductionsEmployee Business Expenses Repayments CreditsFirst-Time Homebuyer Credit Child Tax Credit Earned Income Credit Credit for Excess Social Security Tax Withheld Forgiveness of Decedent's Tax LiabilityCombat Zone Related Forgiveness Terrorist or Military Action Related Forgiveness Claims for Tax Forgiveness Filing ReturnsSame-Sex Marriage Where To File When To File Signing Returns Extension of DeadlinesService That Qualifies for an Extension of Deadline Length of Extension Actions for Which Deadlines Are Extended Deferral of Payment Maximum Rate of Interest How To Get Tax HelpLow Income Taxpayer Clinics Gross Income Members of the Armed Forces receive many different types of pay and allowances. Filing state income taxes Some are included in gross income while others are excluded from gross income. Filing state income taxes Included items (Table 1) are subject to tax and must be reported on your tax return. Filing state income taxes Excluded items (Table 2) are not subject to tax, but may have to be shown on your tax return. Filing state income taxes For information on the exclusion of pay for service in a combat zone and other tax benefits for combat zone participants, see Combat Zone Exclusion and Extension of Deadlines , later. Filing state income taxes Table 1. Filing state income taxes Included Items These items are included in gross income, unless the pay is for service in a combat zone. Filing state income taxes Basic pay • Active duty   Bonus pay • Career status   • Attendance at a designated service school     • Enlistment  • Officer   • Back wages     • Overseas extension   • CONUS COLA       • Reenlistment   • Drills         • Reserve training         • Training duty   Other pay  • Accrued leave          • High deployment per diem Special • Aviation career incentives      • Personal money allowances paid to pay • Career sea     high-ranking officers   • Diving duty      • Student loan repayment from programs   • Foreign duty (outside the 48 contiguous     such as the Department of Defense   states and the District of Columbia)     Educational Loan Repayment Program   • Foreign language proficiency     when year's service (requirement) is not   • Hardship duty     attributable to a combat zone   • Hostile fire or imminent danger         • Medical and dental officers   Incentive pay  • Submarine   • Nuclear-qualified officers      • Flight   • Optometry      • Hazardous duty   • Pharmacy      • High altitude/Low Opening (HALO)   • Special compensation for assistance with activities of daily living (SCAADL)         • Special duty assignment pay         • Veterinarian         • Voluntary Separation Incentive       Basic allowance for housing (BAH). Filing state income taxes   You can still deduct mortgage interest and real estate taxes on your home if you pay these expenses with your BAH. Filing state income taxes Table 2. Filing state income taxes Excluded Items The exclusion for certain items applies whether the item is furnished in kind or is a reimbursement or allowance. Filing state income taxes There is no exclusion for the personal use of a government-provided vehicle. Filing state income taxes Combat  zone pay • Compensation for active service while in a combat zone Note: Limited amount for officers     • Housing and cost-of-living allowances abroad paid by the U. Filing state income taxes S. Filing state income taxes Government or by a foreign government         • OHA (Overseas Housing Allowance)                     Other pay • Defense counseling         • Disability, including payments received for injuries incurred as a direct result of a terrorist or military action         • Group-term life insurance   Moving • Dislocation   • Professional education   allowances • Military base realignment and   • ROTC educational and subsistence     closure benefit    allowances     (the exclusion is limited as   • State bonus pay for service in a     described above)   combat zone     • Move-in housing   • Survivor and retirement protection     • Moving household and   plan premiums     personal items   • Uniform allowances     • Moving trailers or mobile homes   • Uniforms furnished to enlisted     • Storage   personnel     • Temporary lodging and         temporary lodging expenses                 Travel • Annual round trip for dependent Death • Burial services   allowances students allowances • Death gratuity payments to     • Leave between consecutive   eligible survivors     overseas tours   • Travel of dependents to burial site     • Reassignment in a dependent         restricted status Family • Certain educational expenses for     • Transportation for you or your allowances dependents     dependents during ship overhaul   • Emergencies     or inactivation   • Evacuation to a place of safety     • Per diem   • Separation             In-kind military • Dependent-care assistance program Living • BAH (Basic Allowance for Housing)   benefits • Legal assistance allowances • BAS (Basic Allowance for Subsistence)     • Medical/dental care         • Commissary/exchange discounts         • Space-available travel on government aircraft           Death gratuity. Filing state income taxes   Any death gratuity paid to a survivor of a member of the Armed Forces is excluded from gross income. Filing state income taxes Differential wage payments. Filing state income taxes   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and that represent all or a portion of the wages the individual would have received from the employer if the individual was performing services for the employer. Filing state income taxes These amounts are taxable and cannot be excluded as combat pay. Filing state income taxes Military base realignment and closure benefit. Filing state income taxes   Payments made under the Homeowners Assistance Program (HAP) generally are excluded from income. Filing state income taxes However, the excludable amount cannot be more than the maximum amount described in subsection (c) of 42 USC 3374 as in effect on November 6, 2009. Filing state income taxes Any part of the payment that is more than this limit is included in gross income. Filing state income taxes For more information about the HAP, see http://hap. Filing state income taxes usace. Filing state income taxes army. Filing state income taxes mil/Overview. Filing state income taxes html. Filing state income taxes Qualified reservist distribution (QRD). Filing state income taxes   A QRD is a distribution to an individual of all or part of the individual's balance in a cafeteria plan or health flexible spending arrangement if: The individual was a reservist who was ordered or called to active duty for more than 179 days or for an indefinite period, and The distribution is made no sooner than the date the reservist was ordered or called to active duty and no later than the last day reimbursements could otherwise be made under the arrangement for the plan year which includes the date of the order or the call to duty. Filing state income taxes A QRD is included in gross income and is subject to employment taxes. Filing state income taxes The employer must include the QRD (reduced by after-tax contributions to the health flexible spending arrangement) as wages on Form W-2, Wage and Tax Statement. Filing state income taxes Thrift Savings Plan (TSP) distributions. Filing state income taxes   If you participate in the Uniformed Services TSP and receive a distribution from your account, the distribution is generally included in your taxable income. Filing state income taxes   If your contributions included tax-exempt combat zone pay, the part of the distribution attributable to those contributions is tax exempt. Filing state income taxes However, the earnings on the tax-exempt portion of the distribution are taxable. Filing state income taxes The TSP will provide a statement showing the taxable and non-taxable portions of the distribution. Filing state income taxes Roth Thrift Savings Plan (TSP) balance. Filing state income taxes   You may be able to contribute to a designated Roth Account through the TSP known as the Roth TSP. Filing state income taxes Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. Filing state income taxes Qualified distributions from a Roth TSP are not included in your income. Filing state income taxes For more details, see Thrift Savings Accounts in Part II of Publication 721, Tax Guide to U. Filing state income taxes S. Filing state income taxes Civil Service Retirement Benefits. Filing state income taxes State bonus payments. Filing state income taxes   Bonus payments made by a state (or a political subdivision thereof) to a member or former member of the uniformed services of the United States or to a dependent of such member are considered combat pay (and therefore may not be taxable) if the payments are made only because of the member's service in a combat zone. Filing state income taxes See Combat Zone , later, for a list of designated combat zones. Filing state income taxes Foreign Source Income If you are a U. Filing state income taxes S. Filing state income taxes citizen with income from sources outside the United States (foreign income), you must report all of that income (except for amounts that U. Filing state income taxes S. Filing state income taxes law allows you to exclude) on your tax return. Filing state income taxes This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or a Form 1099. Filing state income taxes This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Filing state income taxes Certain taxpayers can exclude income earned in foreign countries. Filing state income taxes For 2013, this exclusion amount can be as much as $97,600. Filing state income taxes However, the foreign earned income exclusion does not apply to the wages and salaries of military and civilian employees of the U. Filing state income taxes S. Filing state income taxes Government. Filing state income taxes Employees of the U. Filing state income taxes S. Filing state income taxes Government include those who work at United States Armed Forces exchanges, commissioned and noncommissioned officers' messes, Armed Forces motion picture services, and similar personnel. Filing state income taxes Other foreign income earned by military personnel or their spouses may be eligible for the foreign earned income exclusion. Filing state income taxes For more information on the exclusion, see Publication 54. Filing state income taxes Residents of American Samoa may be able to exclude income from American Samoa. Filing state income taxes This possession exclusion does not apply to wages and salaries of military and civilian employees of the U. Filing state income taxes S. Filing state income taxes Government. Filing state income taxes If you need information on the possession exclusion, see Publication 570, Tax Guide for Individuals With Income From U. Filing state income taxes S. Filing state income taxes Possessions. Filing state income taxes Military Spouses Residency Relief Act (MSRRA) If you are the civilian spouse of an active duty U. Filing state income taxes S. Filing state income taxes military servicemember and your domicile is the same as the servicemember's, you can choose to keep your prior residence or domicile for tax purposes when you accompany the servicemember spouse, who is relocating under military orders to a new duty station in one of the 50 states, the District of Columbia, or a U. Filing state income taxes S. Filing state income taxes possession. Filing state income taxes See Publication 570 for more information. Filing state income taxes Domicile. Filing state income taxes   Your domicile is the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. Filing state income taxes It is not always where you presently live. Filing state income taxes Community Property The pay you earn as a member of the Armed Forces may be subject to community property laws depending on your marital status, your domicile, and the nature of the payment. Filing state income taxes The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Filing state income taxes Marital status. Filing state income taxes   Community property rules apply to married persons whose domicile during the tax year was in a community property state. Filing state income taxes The rules may affect your tax liability if you file separate returns or are divorced during the year. Filing state income taxes Nevada, Washington, and California domestic partners. Filing state income taxes   A registered domestic partner in Nevada, Washington, or California generally must report half the combined income of the individual and his or her domestic partner. Filing state income taxes See Form 8958 and Publication 555, Community Property. Filing state income taxes Nature of the payment. Filing state income taxes   Active duty military pay is subject to community property laws. Filing state income taxes Armed Forces retired or retainer pay may be subject to community property laws. Filing state income taxes   For more information on community property laws, see Publication 555. Filing state income taxes Form W-2 Codes Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Filing state income taxes Form W-2 also shows other amounts that you may find important in box 12. Filing state income taxes The amounts shown in box 12 are generally preceded by a code. Filing state income taxes A list of codes used in box 12 is shown, next. Filing state income taxes Form W-2 Reference Guide for Box 12 Codes A Uncollected social security or RRTA J Nontaxable sick pay T Adoption benefits   tax on tips             K 20% excise tax on excess golden V Income from exercise of B Uncollected Medicare tax on tips   parachute payments   nonstatutory stock option(s)             C Taxable cost of group-term life L Substantiated employee business W Employer contributions (including   insurance over $50,000   expense reimbursements   employee contributions through a           cafeteria plan) to an employee's D Elective deferrals under a section M Uncollected social security or RRTA   health savings account (HSA)   401(k) cash or deferred arrangement   tax on taxable cost of group-term life       plan (including a SIMPLE 401(k)   insurance over $50,000 (former Y Deferrals under a section 409A   arrangement)   employees only)   nonqualified deferred           compensation plan E Elective deferrals under a section N Uncollected Medicare tax on taxable       403(b) salary reduction agreement   cost of group-term life insurance Z Income under section 409A on a       over $50,000 (former employees only)   nonqualified deferred F Elective deferrals under a section       compensation plan   408(k)(6) salary reduction SEP P Excludable moving expense           reimbursements paid directly to AA Designated Roth contributions G Elective deferrals and employer   employee   under a section 401(k) plan   contributions (including nonelective           deferrals) to a section 457(b) Q Nontaxable combat pay BB Designated Roth contributions   deferred compensation plan       under a section 403(b) plan     R Employer contributions to an Archer     H Elective deferrals to a section   MSA DD Cost of employer-sponsored   501(c)(18)(D) tax-exempt       health coverage   organization plan S Employee salary reduction contributions under a section 408(p) SIMPLE  EE  Designated Roth contributions under a governmental section 457(b) plan  Note. Filing state income taxes For more information on these codes, see your Form(s) W-2. Filing state income taxes Adjustments to Income Adjusted gross income is your total income minus certain adjustments. Filing state income taxes The following adjustments are of particular interest to members of the Armed Forces. Filing state income taxes Armed Forces Reservists If you are a member of a reserve component of the Armed Forces and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your unreimbursed travel expenses as an adjustment to income on line 24 of Form 1040, U. Filing state income taxes S. Filing state income taxes Individual Income Tax Return, rather than as a miscellaneous itemized deduction. Filing state income taxes Include all unreimbursed expenses from the time you leave home until the time you return home. Filing state income taxes The deduction is limited to the amount the federal government generally reimburses its employees for travel expenses. Filing state income taxes For more information about this limit, see Per Diem and Car Allowances in chapter 6 of Publication 463. Filing state income taxes Member of a reserve component. Filing state income taxes   You are a member of a reserve component of the Armed Forces if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Filing state income taxes How to report. Filing state income taxes   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Filing state income taxes Then enter on Form 1040, line 24, the part of your expenses, up to the federal rate, included on Form 2106, line 10, or Form 2106-EZ, line 6, that is for reserve-related travel more than 100 miles from your home. Filing state income taxes Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. Filing state income taxes Example. Filing state income taxes Captain Harris, a member of the Army Reserve, traveled to a location 220 miles from his home to perform his work in the reserves in April 2013. Filing state income taxes He incurred $1,549 of unreimbursed expenses consisting of $249 for mileage (440 miles × 56. Filing state income taxes 5 cents per mile), $300 for meals, and $1,000 for lodging. Filing state income taxes He also had other deductible mileage expenses of $110 for several trips to a location 20 miles from his home. Filing state income taxes Only 50% of his meal expenses are deductible. Filing state income taxes He shows his total deductible travel expenses of $1,509 ($249 + $150 (50% of $300) + $1,000 + $110) on Form 2106, line 10. Filing state income taxes He enters the $1,399 ($249 + $150 + $1,000) for travel over 100 miles from home on Form 1040, line 24. Filing state income taxes He then subtracts that $1,399 from the amount on Form 2106, $1,509, and enters $110 on Schedule A (Form 1040), line 21. Filing state income taxes Individual Retirement Arrangements Generally, you can deduct the lesser of the contributions to your traditional individual retirement arrangement (IRA) for the year or the general limit (or spousal IRA limit, if applicable). Filing state income taxes However, if you or your spouse was covered by an employer-maintained retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Filing state income taxes The Form W-2 you or your spouse receives from an employer has a box used to indicate whether you were covered for the year. Filing state income taxes The “Retirement plan” box should have a mark in it if you were covered. Filing state income taxes For purposes of a deduction for contributions to a traditional IRA, Armed Forces members (including reservists on active duty for more than 90 days during the year) are considered covered by an employer-maintained retirement plan. Filing state income taxes Individuals serving in the U. Filing state income taxes S. Filing state income taxes Armed Forces or in support of the U. Filing state income taxes S. Filing state income taxes Armed Forces in designated combat zones have additional time to make a qualified retirement contribution to an IRA. Filing state income taxes For more information on this extension of deadline provision, see Extension of Deadlines , later. Filing state income taxes For more information on IRAs, see Publication 590. Filing state income taxes Combat Pay For IRA purposes, your compensation includes nontaxable combat pay. Filing state income taxes This means that even though you do not have to include the combat pay in your gross income, you do include it in your compensation when figuring the limits on contributions and deductions of contributions to IRAs. Filing state income taxes Qualified Reservist Distributions A qualified reservist distribution is defined below. Filing state income taxes It is not subject to the 10% additional tax on early distributions from certain retirement plans. Filing state income taxes Definition. Filing state income taxes   A distribution you receive is a qualified reservist distribution if the following requirements are met. Filing state income taxes You were ordered or called to active duty after September 11, 2001. Filing state income taxes You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component (see Member of a reserve component , earlier, under Armed Forces Reservists. Filing state income taxes ) The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement. Filing state income taxes The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period. Filing state income taxes Qualified Reservist Repayments You may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined earlier) you received. Filing state income taxes You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Filing state income taxes You make these repayment contributions to an IRA, even if you received the qualified reservist distribution from a section 401(k) or 403(b) plan or a similar arrangement. Filing state income taxes Limit. Filing state income taxes   Your qualified reservist repayments cannot be more than your qualified reservist distributions. Filing state income taxes When repayment contributions can be made. Filing state income taxes   You cannot make these repayment contributions after the date that is 2 years after your active duty period ends. Filing state income taxes No deduction. Filing state income taxes   You cannot deduct qualified reservist repayments. Filing state income taxes Figuring your IRA deduction. Filing state income taxes   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Filing state income taxes Reporting the repayment. Filing state income taxes   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606, Nondeductible IRAs. Filing state income taxes Moving Expenses To deduct moving expenses, you generally must meet certain time and distance tests. Filing state income taxes However, if you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet these tests. Filing state income taxes You can deduct your unreimbursed moving expenses on Form 3903. Filing state income taxes Permanent change of station. Filing state income taxes   A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. Filing state income taxes The move must occur within 1 year of ending your active duty or within the period allowed under the Joint Federal Travel Regulations. Filing state income taxes Spouse and dependents. Filing state income taxes   If you are the spouse or dependent of a member of the Armed Forces who deserts, is imprisoned, or dies, a permanent change of station for you includes a move to: The member's place of enlistment or induction, Your, or the member's, home of record, or A nearer point in the United States. Filing state income taxes   If the military moves you to or from a different location than the member, the moves are treated as a single move to your new main job location. Filing state income taxes Services or reimbursements provided by the government. Filing state income taxes   Do not include in your income the value of moving and storage services provided by the government because of a permanent change of station. Filing state income taxes Similarly, do not include in income amounts received as a dislocation allowance, temporary lodging expense, temporary lodging allowance, or move-in housing allowance. Filing state income taxes   Generally, if the total reimbursements or allowances that you receive from the government because of the move are more than your actual moving expenses, the excess is included in your wages on Form W-2. Filing state income taxes However, if any reimbursements or allowances (other than dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess still must be included in gross income on Form 1040, line 7. Filing state income taxes   Use Form 3903 to deduct qualified expenses that exceed your reimbursements and allowances (including dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances that are excluded from gross income). Filing state income taxes   If you must relocate and your spouse and dependents move to or from a different location, do not include in income reimbursements, allowances, or the value of moving and storage services provided by the government to move you and your spouse and dependents to and from the separate locations. Filing state income taxes   Do not deduct any expenses for moving services that were provided by the government. Filing state income taxes Also, do not deduct any expenses that were reimbursed by an allowance you did not include in income. Filing state income taxes Deductible Moving Expenses If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. Filing state income taxes You can deduct expenses (if not reimbursed or furnished in kind) for: Moving household goods and personal effects, and Travel. Filing state income taxes Moving household goods and personal effects. Filing state income taxes   You can deduct the expenses of moving your household goods and personal effects, including expenses for hauling a trailer, packing, crating, in-transit storage, and insurance. Filing state income taxes You cannot deduct expenses for moving furniture or other goods you bought on the way from your old home to your new home. Filing state income taxes Storing and insuring household goods and personal effects. Filing state income taxes   You can include only the cost of storing and insuring your household goods and personal effects within any period of 30 consecutive days after the day these goods and effects are moved from your former home and before they are delivered to your new home. Filing state income taxes Travel. Filing state income taxes   You can deduct the expenses of traveling (including lodging but not meals) from your old home to your new home, including car expenses and air fare. Filing state income taxes You can deduct as car expenses either: Your actual out-of-pocket expenses such as gas and oil, or The standard mileage rate of 24 cents a mile. Filing state income taxes   You can add parking fees and tolls to the amount claimed under either method. Filing state income taxes You cannot deduct any expenses for meals. Filing state income taxes You cannot deduct the cost of unnecessary side trips or lavish and extravagant lodging. Filing state income taxes Member of your household. Filing state income taxes   A member of your household is anyone who has both your former home and your new home as his or her main home. Filing state income taxes It does not include a tenant or employee unless you can claim that person as a dependent. Filing state income taxes Foreign Moves A foreign move is a move from the United States or its possessions to a foreign country or from one foreign country to another foreign country. Filing state income taxes A move from a foreign country to the United States or its possessions is not a foreign move. Filing state income taxes For a foreign move, the deductible moving expenses described earlier are expanded to include the reasonable expenses of: Moving your household goods and personal effects to and from storage, and Storing these items for part or all of the time the new job location remains your main job location. Filing state income taxes The new job location must be outside the United States. Filing state income taxes Reporting Moving Expenses Figure moving expense deductions on Form 3903. Filing state income taxes Carry the deduction from Form 3903 to Form 1040, line 26. Filing state income taxes For more information, see Publication 521 and Form 3903. Filing state income taxes Combat Zone Exclusion If you are a member of the U. Filing state income taxes S. Filing state income taxes Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. Filing state income taxes This pay is generally referred to as “combat pay. Filing state income taxes ” You do not actually need to show the exclusion on your tax return because income that qualifies for the combat zone exclusion is not included in the wages reported on your Form W-2. Filing state income taxes (See Form W-2 , later. Filing state income taxes ) The month for which you receive the pay must be a month in which you either served in a combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. Filing state income taxes You do not have to receive the excluded pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. Filing state income taxes If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income. Filing state income taxes (Other officer personnel are discussed under Amount of Exclusion , later. Filing state income taxes ) Active duty pay earned in any month you served in a combat zone. Filing state income taxes Imminent danger/hostile fire pay. Filing state income taxes A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. Filing state income taxes Pay for accrued leave earned in any month you served in a combat zone. Filing state income taxes The Department of Defense must determine that the unused leave was earned during that period. Filing state income taxes Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. Filing state income taxes The pay must be earned in a month you served in a combat zone. Filing state income taxes Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone. Filing state income taxes Student loan repayments. Filing state income taxes If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. Filing state income taxes If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. Filing state income taxes For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion. Filing state income taxes Retirement pay and pensions do not qualify for the combat zone exclusion. Filing state income taxes Partial (month) service. Filing state income taxes   If you serve in a combat zone for any part of one or more days during a particular month, you are entitled to an exclusion for that entire month. Filing state income taxes Form W-2. Filing state income taxes   The wages shown in box 1 of your 2013 Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. Filing state income taxes If it does, you will need to get a corrected Form W-2 from your finance office. Filing state income taxes   You cannot exclude as combat pay any wages shown in box 1 of Form W-2. Filing state income taxes Combat Zone A combat zone is any area the President of the United States designates by Executive Order as an area in which the U. Filing state income taxes S. Filing state income taxes Armed Forces are engaging or have engaged in combat. Filing state income taxes An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order. Filing state income taxes Afghanistan area. Filing state income taxes   By Executive Order No. Filing state income taxes 13239, Afghanistan (and airspace above) was designated as a combat zone beginning September 19, 2001. Filing state income taxes On December 14, 2001, the following countries were certified by the Department of Defense for combat zone tax benefits due to their direct support of military operations in the Afghanistan combat zone. Filing state income taxes Djibouti. Filing state income taxes Jordan. Filing state income taxes Kyrgyzstan. Filing state income taxes Pakistan. Filing state income taxes Somalia. Filing state income taxes Syria. Filing state income taxes Tajikistan. Filing state income taxes Uzbekistan. Filing state income taxes Yemen. Filing state income taxes The Philippines. Filing state income taxes  Note. Filing state income taxes For the Philippines only, the personnel must be deployed in conjunction with Operation Enduring Freedom supporting military operations in the Afghanistan combat zone. Filing state income taxes The Kosovo area. Filing state income taxes   By Executive Order No. Filing state income taxes 13119, the following locations (including airspace above) were designated as a combat zone beginning March 24, 1999. Filing state income taxes Federal Republic of Yugoslavia (Serbia/Montenegro). Filing state income taxes Albania. Filing state income taxes Kosovo. Filing state income taxes The Adriatic Sea. Filing state income taxes The Ionian Sea—north of the 39th parallel. Filing state income taxes Note. Filing state income taxes The combat zone designation for Montenegro and Kosovo (previously a province within Serbia) under Executive Order 13119 remains in force even though Montenegro and Kosovo became independent nations since EO 13119 was signed. Filing state income taxes Arabian peninsula. Filing state income taxes   By Executive Order No. Filing state income taxes 12744, the following locations (and airspace above) were designated as a combat zone beginning January 17, 1991. Filing state income taxes The Persian Gulf. Filing state income taxes The Red Sea. Filing state income taxes The Gulf of Oman. Filing state income taxes The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude. Filing state income taxes The Gulf of Aden. Filing state income taxes The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates. Filing state income taxes Jordan which is in direct support of the Arabian Peninsula. Filing state income taxes Serving in a Combat Zone You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone. Filing state income taxes Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. Filing state income taxes If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes. Filing state income taxes Hospitalized While Serving in a Combat Zone If you are hospitalized while serving in a combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary. Filing state income taxes Example. Filing state income taxes You are hospitalized for a specific disease in a combat zone where you have been serving for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. Filing state income taxes The disease is presumed to have been incurred while you were serving in the combat zone. Filing state income taxes On the other hand, if the incubation period of the disease is 1 year, the disease would not have been incurred while you were serving in the combat zone. Filing state income taxes Hospitalized After Leaving a Combat Zone In some cases, the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left. Filing state income taxes In that case, you can exclude military pay earned while you are hospitalized as a result of the wound, disease, or injury. Filing state income taxes Example. Filing state income taxes You were hospitalized for a specific disease 3 weeks after you left the combat zone. Filing state income taxes The incubation period of the disease is from 2 to 4 weeks. Filing state income taxes The disease is presumed to have been incurred while serving in the combat zone. Filing state income taxes Nonqualifying Presence in Combat Zone None of the following types of military service qualify as service in a combat zone. Filing state income taxes Presence in a combat zone while on leave from a duty station located outside the combat zone. Filing state income taxes Passage over or through a combat zone during a trip between two points that are outside a combat zone. Filing state income taxes Presence in a combat zone solely for your personal convenience. Filing state income taxes Service Outside Combat Zone Considered Service in Combat Zone Military service outside a combat zone is considered to be performed in a combat zone if: The Department of Defense designates that the service is in direct support of military operations in the combat zone, and The service qualifies you for special military pay for duty subject to hostile fire or imminent danger. Filing state income taxes Military pay received for this service will qualify for the combat zone exclusion if all of the requirements (other than service in a combat zone) are met and the pay is verifiable by reference to military pay records. Filing state income taxes Amount of Exclusion If you are an enlisted member, warrant officer, or commissioned warrant officer and you serve in a combat zone during any part of a month, you can exclude all of your military pay for that month. Filing state income taxes It should not be included in the wages reported on your Form W-2. Filing state income taxes You also can exclude military pay earned while you are hospitalized as a result of wounds, disease, or injury incurred in the combat zone. Filing state income taxes If you are hospitalized, you cannot exclude any military pay received for any month of service that begins more than 2 years after the end of combat activities in the combat zone. Filing state income taxes Your hospitalization does not have to be in the combat zone. Filing state income taxes If you are a commissioned officer (other than a commissioned warrant officer), you can exclude your pay according to the rules just discussed. Filing state income taxes However, the amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. Filing state income taxes Alien Status For tax purposes, an alien is an individual who is not a U. Filing state income taxes S. Filing state income taxes citizen. Filing state income taxes An alien is in one of three categories: resident, nonresident, or dual-status. Filing state income taxes Placement in the correct category is crucial in determining what income to report and what forms to file. Filing state income taxes Under peacetime enlistment rules, you generally cannot enlist in the Armed Forces unless you are a citizen or have been legally admitted to the United States for permanent residence. Filing state income taxes If you are an alien enlistee in the Armed Forces, you are probably a resident alien. Filing state income taxes If, under an income tax treaty, you are considered a resident of a foreign country, see your base legal officer. Filing state income taxes Other aliens who are in the United States only because of military assignments and who have a home outside the United States are nonresident aliens. Filing state income taxes Guam and Puerto Rico have special rules. Filing state income taxes Residents of those areas should contact their taxing authority with their questions. Filing state income taxes Most members of the Armed Forces are U. Filing state income taxes S. Filing state income taxes citizens or resident aliens. Filing state income taxes However, if you have questions about your alien status or the alien status of your dependents or spouse, you should read the information in the following paragraphs and see Publication 519. Filing state income taxes Resident Aliens You are considered a resident alien of the United States for tax purposes if you meet either the “green card test” or the “substantial presence test” for the calendar year (January 1–December 31). Filing state income taxes If you meet the substantial presence test for 2014, you did not meet either the green card test or the substantial presence test for 2012 or 2013, and you did not choose to be treated as a resident for part of 2012, you may be able to choose to be treated as a U. Filing state income taxes S. Filing state income taxes resident for part of 2013. Filing state income taxes See First-Year Choice in Publication 519. Filing state income taxes These tests are explained in Publication 519. Filing state income taxes Generally, resident aliens are taxed on their worldwide income and file the same tax forms as U. Filing state income taxes S. Filing state income taxes citizens. Filing state income taxes Treating nonresident alien spouse as resident alien. Filing state income taxes   A nonresident alien spouse can be treated as a resident alien if all the following conditions are met. Filing state income taxes One spouse is a U. Filing state income taxes S. Filing state income taxes citizen or resident alien at the end of the tax year. Filing state income taxes That spouse is married to the nonresident alien at the end of the tax year. Filing state income taxes You both choose to treat the nonresident alien spouse as a resident alien. Filing state income taxes Making the choice. Filing state income taxes   Both you and your spouse must sign a statement and attach it to your joint return for the first tax year for which the choice applies. Filing state income taxes Include in the statement: A declaration that one spouse was a nonresident alien and the other was a U. Filing state income taxes S. Filing state income taxes citizen or resident alien on the last day of the year, A declaration that both spouses choose to be treated as U. Filing state income taxes S. Filing state income taxes residents for the entire tax year, and The name, address, and taxpayer identification number (social security number or individual taxpayer identification number) of each spouse. Filing state income taxes If the nonresident alien spouse is not eligible to get a social security number, he or she should file Form W-7, Application for IRS Individual Taxpayer Identification Number. Filing state income taxes    Once you make this choice, the nonresident alien spouse's worldwide income is subject to U. Filing state income taxes S. Filing state income taxes tax. Filing state income taxes If the nonresident alien spouse has substantial foreign income, there may be no advantage to making this choice. Filing state income taxes Ending the choice. Filing state income taxes   Once you make this choice, it applies to all later years unless one of the following situations occurs. Filing state income taxes You or your spouse revokes the choice. Filing state income taxes You or your spouse dies. Filing state income taxes You and your spouse become legally separated under a decree of divorce or separate maintenance. Filing state income taxes The Internal Revenue Service ends the choice because you or your spouse kept inadequate records. Filing state income taxes For specific details on these situations, see Publication 519. Filing state income taxes   If the choice is ended for any of these reasons, neither spouse can make the choice for any later year. Filing state income taxes Choice not made. Filing state income taxes   If you and your nonresident alien spouse do not make this choice: You cannot file a joint return. Filing state income taxes You can file as married filing separately, or head of household if you qualify. Filing state income taxes You can claim an exemption for your nonresident alien spouse if he or she has no gross income for U. Filing state income taxes S. Filing state income taxes tax purposes and is not another taxpayer's dependent. Filing state income taxes The nonresident alien spouse generally does not have to file a federal income tax return if he or she had no income from sources in the United States. Filing state income taxes If a return has to be filed, see the next discussion. Filing state income taxes The nonresident alien spouse is not eligible for the earned income credit if he or she has to file a return. Filing state income taxes Nonresident Aliens If you are an alien who does not meet the requirements discussed earlier to be a resident alien, you are a nonresident alien. Filing state income taxes If you are required to file a federal tax return, you must file either Form 1040NR, U. Filing state income taxes S. Filing state income taxes Nonresident Alien Income Tax Return, or Form 1040NR-EZ, U. Filing state income taxes S. Filing state income taxes Income Tax Return for Certain Nonresident Aliens With No Dependents. Filing state income taxes See the form instructions for information on who must file and filing status. Filing state income taxes If you are a nonresident alien, you generally must pay tax on income from sources in the United States. Filing state income taxes Your income from conducting a trade or business in the United States is taxed at graduated U. Filing state income taxes S. Filing state income taxes tax rates. Filing state income taxes Other income from U. Filing state income taxes S. Filing state income taxes sources is taxed at a flat 30% (or lower treaty) rate. Filing state income taxes For example, dividends from a U. Filing state income taxes S. Filing state income taxes corporation paid to a nonresident alien generally are subject to a 30% (or lower treaty) rate. Filing state income taxes Dual-Status Aliens You can be both a nonresident and resident alien during the same tax year. Filing state income taxes This usually occurs in the year you arrive in or depart from the United States. Filing state income taxes If you are a dual-status alien, you are taxed on income from all sources for the part of the year you are a resident alien. Filing state income taxes Generally, for the part of the year you are a nonresident alien, you are taxed only on income from sources in the United States. Filing state income taxes Sale of Home You may not have to pay tax on all or part of the gain from the sale of your main home. Filing state income taxes Usually, your main home is the one you live in most of the time. Filing state income taxes It can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Filing state income taxes You generally can exclude up to $250,000 of gain ($500,000, in most cases, if married filing a joint return) realized on the sale or exchange of a main home in 2013. Filing state income taxes The exclusion is allowed each time you sell or exchange a main home, but generally not more than once every 2 years. Filing state income taxes To be eligible, during the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years (the ownership test), and lived in the home as your main home for at least 2 years (the use test). Filing state income taxes Exception to ownership and use tests. Filing state income taxes   You can exclude gain, but the maximum amount of gain you can exclude will be reduced if you do not meet the ownership and use tests due to a move to a new permanent duty station. Filing state income taxes 5-year test period suspended. Filing state income taxes   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty as a member of the Armed Forces. Filing state income taxes This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Filing state income taxes Example. Filing state income taxes David bought and moved into a home in 2005. Filing state income taxes He lived in it as his main home for 2½ years. Filing state income taxes For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Filing state income taxes He then sold the home at a gain in 2013. Filing state income taxes To meet the use test, David chooses to suspend the 5-year test period for the 6 years he was on qualifying official extended duty. Filing state income taxes This means he can disregard those 6 years. Filing state income taxes Therefore, David's 5-year test period consists of the 5 years before he went on qualifying official extended duty. Filing state income taxes He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Filing state income taxes Period of suspension. Filing state income taxes   The period of suspension cannot last more than 10 years. Filing state income taxes You cannot suspend the 5-year period for more than one property at a time. Filing state income taxes You can revoke your choice to suspend the 5-year period at any time. Filing state income taxes Qualified official extended duty. Filing state income taxes   You are on qualified official extended duty if you serve on extended duty either: At a duty station at least 50 miles from your main home, or While you live in Government quarters under Government orders. Filing state income taxes   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Filing state income taxes Property used for rental or business. Filing state income taxes   You may be able to exclude your gain from the sale of a home that you have used as a rental property or for business. Filing state income taxes However, you must meet the ownership and use tests discussed in Publication 523. Filing state income taxes Nonqualified use. Filing state income taxes   If the sale of your main home results in a gain that is allocated to one or more period(s) of nonqualified use, you cannot exclude that gain from your income. Filing state income taxes   Nonqualified use means any period after 2008 when neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions. Filing state income taxes For example, a period of nonqualified use does not include any period (not to exceed a total of 10 years) during which you or your spouse is serving on qualified official extended duty. Filing state income taxes Loss. Filing state income taxes   You cannot deduct a loss from the sale of your main home. Filing state income taxes More information. Filing state income taxes   For more information, see Publication 523. Filing state income taxes Foreclosures There may be tax consequences as a result of compensation payments for foreclosures. Filing state income taxes Payments made for violations of the Service Members Civil Relief Act (SCRA). Filing state income taxes   All service members who received a settlement payment reported on a Form 1099 may need to report the amount on their tax return. Filing state income taxes Generally, you must include settlement payments in income. Filing state income taxes However, the tax treatment of settlement payments will depend on the facts and circumstances. Filing state income taxes Lump Sum Portion of Settlement Payment. Filing state income taxes    Generally, you must include the lump sum payment in gross income. Filing state income taxes In limited circumstances you may be able to exclude part or all of the lump sum payment from gross income. Filing state income taxes For example, you may qualify to exclude part or all of the payment from gross income if you can show that the payment was made to reimburse specific nondeductible expenses (such as living expenses) you incurred because of the SCRA violation. Filing state income taxes Interest Payment on Lump Sum Portion of Settlement Payment. Filing state income taxes    You must include any interest on the lump sum portion of your settlement payment in your income. Filing state income taxes Lost Equity Portion of Settlement Payment. Filing state income taxes    If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. Filing state income taxes You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. Filing state income taxes In many cases, this gain may be excluded from income. Filing state income taxes For more information on the rules for excluding all or part of any gain from the sale (including a foreclosure) of a main home, see Pub. Filing state income taxes 523, Selling Your Home. Filing state income taxes The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Filing state income taxes    To find rules for reporting gain or loss on the foreclosure of property that was not your main home, see Pub. Filing state income taxes 544, Sales and Other Dispositions of Assets. Filing state income taxes Interest Payment on Lost Equity Portion of Settlement Payment. Filing state income taxes    You must include any interest on the lost equity portion of your settlement payment in your income. Filing state income taxes Itemized Deductions To figure your taxable income, you must subtract either your standard deduction or your itemized deductions from adjusted gross income. Filing state income taxes For information on the standard deduction, see Publication 501. Filing state income taxes Itemized deductions are figured on Schedule A (Form 1040). Filing state income taxes This chapter discusses miscellaneous itemized deductions of particular interest to members of the Armed Forces. Filing state income taxes For information on other itemized deductions, see the publications listed below. Filing state income taxes Publication 502, Medical and Dental Expenses. Filing state income taxes Publication 526, Charitable Contributions. Filing state income taxes Publication 547, Casualties, Disasters, and Thefts. Filing state income taxes Publication 550, Investment Income and Expenses. Filing state income taxes You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Filing state income taxes For information on deductions that are not subject to the 2% limit, see Publication 529. Filing state income taxes Employee Business Expenses Deductible employee business expenses generally are miscellaneous itemized deductions subject to the 2% limit. Filing state income taxes Certain employee business expenses are deductible as adjustments to income. Filing state income taxes For information on many employee business expenses, see Publication 463. Filing state income taxes Generally, you must file Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to claim these expenses. Filing state income taxes You do not have to file Form 2106 or Form 2106-EZ if you are claiming only unreimbursed expenses for uniforms, professional society dues, and work-related educational expenses (all discussed later). Filing state income taxes You can deduct these expenses directly on Schedule A (Form 1040). Filing state income taxes Reimbursement. Filing state income taxes   Generally, to receive advances, reimbursements, or other allowances from the government, you must adequately account for your expenses and return any excess reimbursement. Filing state income taxes Your reimbursed expenses are not deductible. Filing state income taxes   If your expenses are more than your reimbursement, the excess expenses are deductible (subject to the 2% limit) if you can prove them. Filing state income taxes You must file Form 2106 to report these expenses. Filing state income taxes   You can use the shorter Form 2106-EZ if you meet all three of the following conditions. Filing state income taxes You are an employee deducting expenses related to your job. Filing state income taxes You were not reimbursed by your employer for your expenses. Filing state income taxes (Amounts included in box 1 of Form W-2 are not considered reimbursements. Filing state income taxes ) If you claim car expenses, you use the standard mileage rate. Filing state income taxes    For 2013, the standard mileage rate is 56. Filing state income taxes 5 cents a mile for all business miles driven. Filing state income taxes This rate is adjusted periodically. Filing state income taxes Travel Expenses You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home. Filing state income taxes If you are a member of the U. Filing state income taxes S. Filing state income taxes Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Filing state income taxes You cannot deduct your expenses for meals and lodging while at your permanent duty station. Filing state income taxes You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Filing state income taxes A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a home aboard ship for travel expense purposes. Filing state income taxes To be deductible, your travel expenses must be work related. Filing state income taxes You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty. Filing state income taxes Away from home. Filing state income taxes   Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. Filing state income taxes You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home. Filing state income taxes   Examples of deductible travel expenses include: Expenses for business-related meals (generally limited to 50% of your unreimbursed cost), lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary duty or temporary additional duty, and Expenses of carrying out official business while on “No Cost” orders. Filing state income taxes    You cannot deduct any expenses for travel away from home if the temporary assignment in a single location is realistically expected to last (and does in fact last) for more than 1 year. Filing state income taxes This rule may not apply if you are participating in a federal crime investigation or prosecution. Filing state income taxes For more information, see Publication 463 and the Form 2106 instructions. Filing state income taxes Transportation Expenses These expenses include the ordinary and necessary costs of: Getting from one workplace to another when you are not away from home, Going to a business meeting away from your regular workplace, and Getting from your home to a temporary workplace when you have a regular place of work. Filing state income taxes These expenses include the costs of transportation by air, bus, rail, taxi, and driving and maintaining your car. Filing state income taxes Transportation expenses incurred while traveling away from home are included with your travel expenses, discussed earlier. Filing state income taxes However, if you use your car while traveling away from home overnight, see the rules in chapter 4 of Publication 463 to figure your car expense deduction. Filing state income taxes If you must go from one workplace to another while on duty (for example, as a courier or to attend meetings) without being away from home, your unreimbursed transportation expenses are deductible. Filing state income taxes However, the expenses of getting to and from your regular place of work (commuting) are not deductible. Filing state income taxes Temporary work location. Filing state income taxes   If you have one or more regular places of business away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location. Filing state income taxes   Generally, if your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary. Filing state income taxes   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Filing state income taxes If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Filing state income taxes    If you do not have a regular place of business, but you ordinarily work in the metropolitan area where you live, you can deduct daily transportation expenses between your home and a temporary work site outside your metropolitan area. Filing state income taxes However, you cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Filing state income taxes These are nondeductible commuting costs. Filing state income taxes Armed Forces reservists. Filing state income taxes   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Filing state income taxes You can deduct the expense of getting from one workplace to the other. Filing state income taxes You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Filing state income taxes In this case, your transportation generally is a nondeductible commuting expense. Filing state income taxes However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Filing state income taxes   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Filing state income taxes If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Filing state income taxes See Armed Forces Reservists under Adjustments to Income, earlier. Filing state income taxes Uniforms You usually cannot deduct the expenses for uniform cost and upkeep. Filing state income taxes Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty. Filing state income taxes If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. Filing state income taxes Unreimbursed expenses for the cost and upkeep of the following articles are deductible. Filing state income taxes Military battle dress uniforms and utility uniforms that you cannot wear when off duty. Filing state income taxes Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords. Filing state income taxes Reservists' uniforms if you can wear the uniform only while performing duties as a reservist. Filing state income taxes Professional Dues You can deduct unreimbursed dues paid to professional societies directly related to your military position. Filing state income taxes However, you cannot deduct amounts paid to an officers' club or a noncommissioned officers' club. Filing state income taxes Example. Filing state income taxes Lieutenant Margaret Allen, an electrical engineer at Maxwell Air Force Base, can deduct professional dues paid to the American Society of Electrical Engineers. Filing state income taxes Educational Expenses You can deduct the unreimbursed costs of qualifying work-related education. Filing state income taxes This is education that meets at least one of the following two tests. Filing state income taxes The education is required by your employer or the law to keep your present salary, status, or job. Filing state income taxes The required education must serve a bona fide business purpose of your employer. Filing state income taxes The education maintains or improves skills needed in your present work. Filing state income taxes However, even if the education meets one or both of the above tests, it is not qualifying education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Filing state income taxes You can deduct the expenses for qualifying work-related education even if the education could lead to a degree. Filing state income taxes Example 1. Filing state income taxes Lieutenant Colonel Mason has a degree in financial management and is in charge of base finances at her post of duty. Filing state income taxes She took an advanced finance course. Filing state income taxes She already meets the minimum qualifications for her job. Filing state income taxes By taking the course, she is improving skills in her current position. Filing state income taxes The course does not qualify her for a new trade or business. Filing state income taxes She can deduct educational expenses that are more than the educational allowance she received. Filing state income taxes Example 2. Filing state income taxes Major Williams worked in the military base legal office as a legal intern. Filing state income taxes He was placed in excess leave status by his employer to attend law school. Filing state income taxes He paid all his educational expenses and was not reimbursed. Filing state income taxes After obtaining his law degree, he passed the state bar exam and worked as a judge advocate. Filing state income taxes His educational expenses are not deductible because the law degree qualified him for a new trade or business, even though the education maintained and improved his skills in his work. Filing state income taxes Travel to obtain education. Filing state income taxes   If your work-related education qualifies, you can deduct the costs of travel, including meals (subject to the 50% limit), and lodging, if the main purpose of the trip is to obtain the education. Filing state income taxes   You cannot deduct the cost of travel that is itself a form of education, even if it is directly related to your duties in your work or business. Filing state income taxes Transportation for education. Filing state income taxes   If your work-related education qualifies for a deduction, you can deduct the costs of transportation to obtain that education. Filing state income taxes However, you cannot deduct the cost of services provided in kind, such as base-provided transportation to or from class. Filing state income taxes Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Filing state income taxes   If you need more information on educational expenses, see Publication 970. Filing state income taxes Repayments If you had to repay to your employer an amount that you included in your income in an earlier year, you may be able to deduct the repaid amount from your income for the year in which you repaid it. Filing state income taxes Repayment of $3,000 or less. Filing state income taxes   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Filing state income taxes If you reported it as wages, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Filing state income taxes Repayment over $3,000. Filing state income taxes   If the amount you repaid was more than $3,000, see Repayments in Publication 525. Filing state income taxes Credits After you have figured your taxable income and tax liability, you can determine if you are entitled to any tax credits. Filing state income taxes This publication discusses the first-time homebuyer credit, child tax credit, earned income credit, and credit for excess social security tax withheld. Filing state income taxes For information on other credits, see your tax form instructions. Filing state income taxes First-Time Homebuyer Credit The first-time homebuyer credit is not available for homes purchased after 2011. Filing state income taxes In 2011, this credit had already expired for most taxpayers, however, certain members of the uniformed services and Foreign Service and certain employees of the intelligence community could claim the credit for homes purchased in 2011. Filing state income taxes If you bought the home (and claimed the credit) after 2008, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. Filing state income taxes If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit. Filing state income taxes If you bought your home in 2008, you generally must repay the credit over a 15-year period in 15 equal installments. Filing state income taxes For more information, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. Filing state income taxes Child Tax Credit The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. Filing state income taxes The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. Filing state income taxes The child tax credit is not the same as the credit for child and dependent care expenses. Filing state income taxes See Publication 503 for information on the credit for child and dependent care expenses. Filing state income taxes Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you, later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. Filing state income taxes S. Filing state income taxes citizen, a U. Filing state income taxes S. Filing state income taxes national, or a U. Filing state income taxes S. Filing state income taxes resident alien. Filing state income taxes If the child was adopted, see Adopted child . Filing state income taxes For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c, column (4). Filing state income taxes Exceptions to time lived with you. Filing state income taxes   A child is considered to have lived with you for all of 2013 if the child was born or died in 2013 and your home was this child's home for the entire time he or she was alive. Filing state income taxes Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. Filing state income taxes   There are also exceptions for kidnapped children and children of divorced or separated parents. Filing state income taxes For details, see Publication 501. Filing state income taxes Qualifying child of more than one person. Filing state income taxes   A special rule applies if your qualifying child is the qualifying child of more than one person. Filing state income taxes For details, see Publication 501. Filing state income taxes Adopted child. Filing state income taxes   An adopted child is always treated as your own child. Filing state income taxes An adopted child includes a child lawfully placed with you for legal adoption. Filing state income taxes   If you are a U. Filing state income taxes S. Filing state income taxes citizen or U. Filing state income taxes S. Filing state income taxes national and your adopted child lived with you as a member of your household all year, that child meets condition (7) above to be a qualifying child for the child tax credit. Filing state income taxes Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. Filing state income taxes Limits on the credit. Filing state income taxes   You must reduce your child tax credit if either (1) or (2), below, applies. Filing state income taxes The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. Filing state income taxes If the amount is zero, you cannot take this credit because there is no tax to reduce. Filing state income taxes However, you may be able to take the additional child tax credit. Filing state income taxes See Additional Child Tax Credit , later. Filing state income taxes Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. Filing state income taxes Married filing jointly — $110,000. Filing state income taxes Single, head of household,  or qualifying widow(er) — $75,000. Filing state income taxes Married filing separately — $55,000. Filing state income taxes Modified AGI. Filing state income taxes   For purposes of the child tax credit, your modified AGI is the amount on Form 1040, line 38, or Form 1040A, line 22, plus the following amounts that may apply to you. Filing state income taxes Any amount excluded from income because of the exclusion of income from Puerto Rico. Filing state income taxes Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. Filing state income taxes Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. Filing state income taxes Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Filing state income taxes   If you do not have any of the above, your modified AGI is the same as your AGI. Filing state income taxes Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. Filing state income taxes For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A. Filing state income taxes Also attach Schedule 8812, Child Tax Credit, if required. Filing state income taxes Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. Filing state income taxes The additional child tax credit may give you a refund even if you do not owe any tax. Filing state income taxes For more information, see the instructions for Form 1040 or Form 1040A, and Schedule 8812. Filing state income taxes Earned Income Credit The earned income credit (EIC) is a cr