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Form 1040x 2008

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Form 1040x 2008

Form 1040x 2008 20. Form 1040x 2008   Standard Deduction Table of Contents What's New Introduction Standard Deduction Amount Standard Deduction for Dependents Who Should ItemizeWhen to itemize. Form 1040x 2008 Married persons who filed separate returns. Form 1040x 2008 What's New Standard deduction increased. Form 1040x 2008  The standard deduction for some taxpayers who do not itemize their deductions on Schedule A (Form 1040) is higher for 2013 than it was for 2012. Form 1040x 2008 The amount depends on your filing status. Form 1040x 2008 You can use the 2013 Standard Deduction Tables in this chapter to figure your standard deduction. Form 1040x 2008 Introduction This chapter discusses the following topics. Form 1040x 2008 How to figure the amount of your standard deduction. Form 1040x 2008 The standard deduction for dependents. Form 1040x 2008 Who should itemize deductions. Form 1040x 2008 Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. Form 1040x 2008 If you have a choice, you can use the method that gives you the lower tax. Form 1040x 2008 The standard deduction is a dollar amount that reduces your taxable income. Form 1040x 2008 It is a benefit that eliminates the need for many taxpayers to itemize actual deductions, such as medical expenses, charitable contributions, and taxes, on Schedule A (Form 1040). Form 1040x 2008 The standard deduction is higher for taxpayers who: Are 65 or older, or Are blind. Form 1040x 2008 You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions. Form 1040x 2008 Persons not eligible for the standard deduction. Form 1040x 2008   Your standard deduction is zero and you should itemize any deductions you have if: Your filing status is married filing separately, and your spouse itemizes deductions on his or her return, You are filing a tax return for a short tax year because of a change in your annual accounting period, or You are a nonresident or dual-status alien during the year. Form 1040x 2008 You are considered a dual-status alien if you were both a nonresident and resident alien during the year. Form 1040x 2008 Note. Form 1040x 2008 If you are a nonresident alien who is married to a U. Form 1040x 2008 S. Form 1040x 2008 citizen or resident alien at the end of the year, you can choose to be treated as a U. Form 1040x 2008 S. Form 1040x 2008 resident. Form 1040x 2008 (See Publication 519, U. Form 1040x 2008 S. Form 1040x 2008 Tax Guide for Aliens. Form 1040x 2008 ) If you make this choice, you can take the standard deduction. Form 1040x 2008 If an exemption for you can be claimed on another person's return (such as your parents' return), your standard deduction may be limited. Form 1040x 2008 See Standard Deduction for Dependents, later. Form 1040x 2008 Standard Deduction Amount The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. Form 1040x 2008 Generally, the standard deduction amounts are adjusted each year for inflation. Form 1040x 2008 The standard deduction amounts for most people are shown in Table 20-1. Form 1040x 2008 Decedent's final return. Form 1040x 2008   The standard deduction for a decedent's final tax return is the same as it would have been had the decedent continued to live. Form 1040x 2008 However, if the decedent was not 65 or older at the time of death, the higher standard deduction for age cannot be claimed. Form 1040x 2008 Higher Standard Deduction for Age (65 or Older) If you are age 65 or older on the last day of the year and do not itemize deductions, you are entitled to a higher standard deduction. Form 1040x 2008 You are considered 65 on the day before your 65th birthday. Form 1040x 2008 Therefore, you can take a higher standard deduction for 2013 if you were born before January 2, 1949. Form 1040x 2008 Use Table 20-2 to figure the standard deduction amount. Form 1040x 2008 Higher Standard Deduction for Blindness If you are blind on the last day of the year and you do not itemize deductions, you are entitled to a higher standard deduction. Form 1040x 2008 Not totally blind. Form 1040x 2008   If you are not totally blind, you must get a certified statement from an eye doctor (ophthalmologist or optometrist) that: You cannot see better than 20/200 in the better eye with glasses or contact lenses, or Your field of vision is 20 degrees or less. Form 1040x 2008   If your eye condition is not likely to improve beyond these limits, the statement should include this fact. Form 1040x 2008 You must keep the statement in your records. Form 1040x 2008   If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify. Form 1040x 2008 Spouse 65 or Older or Blind You can take the higher standard deduction if your spouse is age 65 or older or blind and: You file a joint return, or You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and cannot be claimed as a dependent by another taxpayer. Form 1040x 2008 You cannot claim the higher standard deduction for an individual other than yourself and your spouse. Form 1040x 2008 Examples The following examples illustrate how to determine your standard deduction using Tables 20-1 and 20-2. Form 1040x 2008 Example 1. Form 1040x 2008 Larry, 46, and Donna, 33, are filing a joint return for 2013. Form 1040x 2008 Neither is blind, and neither can be claimed as a dependent. Form 1040x 2008 They decide not to itemize their deductions. Form 1040x 2008 They use Table 20-1. Form 1040x 2008 Their standard deduction is $12,200. Form 1040x 2008 Example 2. Form 1040x 2008 The facts are the same as in Example 1 except that Larry is blind at the end of 2013. Form 1040x 2008 Larry and Donna use Table 20-2. Form 1040x 2008 Their standard deduction is $13,400. Form 1040x 2008 Example 3. Form 1040x 2008 Bill and Lisa are filing a joint return for 2013. Form 1040x 2008 Both are over age 65. Form 1040x 2008 Neither is blind, and neither can be claimed as a dependent. Form 1040x 2008 If they do not itemize deductions, they use Table 20-2. Form 1040x 2008 Their standard deduction is $14,600. Form 1040x 2008 Standard Deduction for Dependents The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the greater of: $1,000, or The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,100). Form 1040x 2008 However, if the individual is 65 or older or blind, the standard deduction may be higher. Form 1040x 2008 If you (or your spouse, if filing jointly) can be claimed as a dependent on someone else's return, use Table 20-3 to determine your standard deduction. Form 1040x 2008 Earned income defined. Form 1040x 2008   Earned income is salaries, wages, tips, professional fees, and other amounts received as pay for work you actually perform. Form 1040x 2008    For purposes of the standard deduction, earned income also includes any part of a scholarship or fellowship grant that you must include in your gross income. Form 1040x 2008 See Scholarships and fellowships in chapter 12 for more information on what qualifies as a scholarship or fellowship grant. Form 1040x 2008 Example 1. Form 1040x 2008 Michael is single. Form 1040x 2008 His parents can claim an exemption for him on their 2013 tax return. Form 1040x 2008 He has interest income of $780 and wages of $150. Form 1040x 2008 He has no itemized deductions. Form 1040x 2008 Michael uses Table 20-3 to find his standard deduction. Form 1040x 2008 He enters $150 (his earned income) on line 1, $500 ($150 + $350) on line 3, $1,000 (the larger of $500 and $1,000) on line 5, and $6,100 on line 6. Form 1040x 2008 His standard deduction, on line 7a, is $1,000 (the smaller of $1,000 and $6,100). Form 1040x 2008 Example 2. Form 1040x 2008 Joe, a 22-year-old full-time college student, can be claimed as a dependent on his parents' 2013 tax return. Form 1040x 2008 Joe is married and files a separate return. Form 1040x 2008 His wife does not itemize deductions on her separate return. Form 1040x 2008 Joe has $1,500 in interest income and wages of $3,800. Form 1040x 2008 He has no itemized deductions. Form 1040x 2008 Joe finds his standard deduction by using Table 20-3. Form 1040x 2008 He enters his earned income, $3,800 on line 1. Form 1040x 2008 He adds lines 1 and 2 and enters $4,150 on line 3. Form 1040x 2008 On line 5, he enters $4,150, the larger of lines 3 and 4. Form 1040x 2008 Because Joe is married filing a separate return, he enters $6,100 on line 6. Form 1040x 2008 On line 7a he enters $4,150 as his standard deduction because it is smaller than $6,100, the amount on line 6. Form 1040x 2008 Example 3. Form 1040x 2008 Amy, who is single, can be claimed as a dependent on her parents' 2013 tax return. Form 1040x 2008 She is 18 years old and blind. Form 1040x 2008 She has interest income of $1,300 and wages of $2,900. Form 1040x 2008 She has no itemized deductions. Form 1040x 2008 Amy uses Table 20-3 to find her standard deduction. Form 1040x 2008 She enters her wages of $2,900 on line 1. Form 1040x 2008 She adds lines 1 and 2 and enters $3,250 on line 3. Form 1040x 2008 On line 5, she enters $3,250, the larger of lines 3 and 4. Form 1040x 2008 Because she is single, Amy enters $6,100 on line 6. Form 1040x 2008 She enters $3,250 on line 7a. Form 1040x 2008 This is the smaller of the amounts on lines 5 and 6. Form 1040x 2008 Because she checked one box in the top part of the worksheet, she enters $1,500 on line 7b. Form 1040x 2008 She then adds the amounts on lines 7a and 7b and enters her standard deduction of $4,750 on line 7c. Form 1040x 2008 Example 4. Form 1040x 2008 Ed is single. Form 1040x 2008 His parents can claim an exemption for him on their 2013 tax return. Form 1040x 2008 He has wages of $7,000, interest income of $500, and a business loss of $3,000. Form 1040x 2008 He has no itemized deductions. Form 1040x 2008 Ed uses Table 20-3 to figure his standard deduction. Form 1040x 2008 He enters $4,000 ($7,000 - $3,000) on line 1. Form 1040x 2008 He adds lines 1 and 2 and enters $4,350 on line 3. Form 1040x 2008 On line 5 he enters $4,350, the larger of lines 3 and 4. Form 1040x 2008 Because he is single, Ed enters $6,100 on line 6. Form 1040x 2008 On line 7a he enters $4,350 as his standard deduction because it is smaller than $6,100, the amount on line 6. Form 1040x 2008 Who Should Itemize You should itemize deductions if your total deductions are more than the standard deduction amount. Form 1040x 2008 Also, you should itemize if you do not qualify for the standard deduction, as discussed earlier under Persons not eligible for the standard deduction . Form 1040x 2008 You should first figure your itemized deductions and compare that amount to your standard deduction to make sure you are using the method that gives you the greater benefit. Form 1040x 2008 You may be subject to a limit on some of your itemized deductions if your adjusted gross income is more than: $250,000 if single ($275,000 if head of household, $300,000 if married filing jointly or qualifying widow(er); or $150,000 if married filing separately). Form 1040x 2008 See chapter 29 or the instructions for Schedule A (Form 1040) for more information on figuring the correct amount of your itemized deductions. Form 1040x 2008 When to itemize. Form 1040x 2008   You may benefit from itemizing your deductions on Schedule A (Form 1040) if you: Do not qualify for the standard deduction, or the amount you can claim is limited, Had large uninsured medical and dental expenses during the year, Paid interest and taxes on your home, Had large unreimbursed employee business expenses or other miscellaneous deductions, Had large uninsured casualty or theft losses, Made large contributions to qualified charities, or Have total itemized deductions that are more than the standard deduction to which you otherwise are entitled. Form 1040x 2008 These deductions are explained in chapters 21–28. Form 1040x 2008    If you decide to itemize your deductions, complete Schedule A and attach it to your Form 1040. Form 1040x 2008 Enter the amount from Schedule A, line 29, on Form 1040, line 40. Form 1040x 2008 Electing to itemize for state tax or other purposes. Form 1040x 2008   Even if your itemized deductions are less than your standard deduction, you can elect to itemize deductions on your federal return rather than take the standard deduction. Form 1040x 2008 You may want to do this if, for example, the tax benefit of itemizing your deductions on your state tax return is greater than the tax benefit you lose on your federal return by not taking the standard deduction. Form 1040x 2008 To make this election, you must check the box on line 30 of Schedule A. Form 1040x 2008 Changing your mind. Form 1040x 2008   If you do not itemize your deductions and later find that you should have itemized — or if you itemize your deductions and later find you should not have — you can change your return by filing Form 1040X, Amended U. Form 1040x 2008 S. Form 1040x 2008 Individual Income Tax Return. Form 1040x 2008 See Amended Returns and Claims for Refund in chapter 1 for more information on amended returns. Form 1040x 2008 Married persons who filed separate returns. Form 1040x 2008   You can change methods of taking deductions only if you and your spouse both make the same changes. Form 1040x 2008 Both of you must file a consent to assessment for any additional tax either one may owe as a result of the change. Form 1040x 2008    You and your spouse can use the method that gives you the lower total tax, even though one of you may pay more tax than you would have paid by using the other method. Form 1040x 2008 You both must use the same method of claiming deductions. Form 1040x 2008 If one itemizes deductions, the other should itemize because he or she will not qualify for the standard deduction. Form 1040x 2008 See Persons not eligible for the standard deduction , earlier. Form 1040x 2008 2013 Standard Deduction Tables If you are married filing a separate return and your spouse itemizes deductions, or if you are a dual-status alien, you cannot take the standard deduction even if you were born before January 2, 1949, or are blind. Form 1040x 2008 Table 20-1. Form 1040x 2008 Standard Deduction Chart for Most People* If your filing status is. Form 1040x 2008 . Form 1040x 2008 . Form 1040x 2008 Your standard deduction is: Single or Married filing separately $6,100 Married filing jointly or Qualifying widow(er) with dependent child 12,200 Head of household 8,950 *Do not use this chart if you were born before January 2, 1949, are blind, or if someone else can claim you (or your spouse if filing jointly) as a dependent. Form 1040x 2008 Use Table 20-2 or 20-3 instead. Form 1040x 2008 Table 20-2. Form 1040x 2008 Standard Deduction Chart for People Born Before January 2, 1949, or Who are Blind Check the correct number of boxes below. Form 1040x 2008 Then go to the chart. Form 1040x 2008 You: Born before January 2, 1949 □ Blind □ Your spouse, if claiming spouse's exemption: Born before January 2, 1949 □ Blind □ Total number of boxes checked   IF  your filing status is. Form 1040x 2008 . Form 1040x 2008 . Form 1040x 2008 AND the number in the box above is. Form 1040x 2008 . Form 1040x 2008 . Form 1040x 2008 THEN your standard deduction is. Form 1040x 2008 . Form 1040x 2008 . Form 1040x 2008 Single 1 $7,600   2 9,100 Married filing jointly 1 $13,400 or Qualifying 2 14,600 widow(er) with 3 15,800 dependent child 4 17,000 Married filing 1 $7,300 separately 2 8,500   3 9,700   4 10,900 Head of household 1 $10,450   2 11,950 *If someone else can claim you (or your spouse if filing jointly) as a dependent, use Table 20-3 instead. Form 1040x 2008 Table 20-3. Form 1040x 2008 Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse if filing jointly) as a dependent. Form 1040x 2008 Check the correct number of boxes below. Form 1040x 2008 Then go to the worksheet. Form 1040x 2008 You:   Born before January 2, 1949 □ Blind □ Your spouse, if claiming spouse's exemption: Born before January 2, 1949 □ Blind □ Total number of boxes checked 1. Form 1040x 2008 Enter your earned income (defined below). Form 1040x 2008 If none, enter -0-. Form 1040x 2008 1. Form 1040x 2008   2. Form 1040x 2008 Additional amount. Form 1040x 2008 2. Form 1040x 2008 $350 3. Form 1040x 2008 Add lines 1 and 2. Form 1040x 2008 3. Form 1040x 2008   4. Form 1040x 2008 Minimum standard deduction. Form 1040x 2008 4. Form 1040x 2008 $1,000 5. Form 1040x 2008 Enter the larger of line 3 or line 4. Form 1040x 2008 5. Form 1040x 2008   6. Form 1040x 2008 Enter the amount shown below for your filing status. Form 1040x 2008 Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 6. Form 1040x 2008   7. Form 1040x 2008 Standard deduction. Form 1040x 2008         a. Form 1040x 2008 Enter the smaller of line 5 or line 6. Form 1040x 2008 If born after January 1, 1949, and not blind, stop here. Form 1040x 2008 This is your standard deduction. Form 1040x 2008 Otherwise, go on to line 7b. Form 1040x 2008 7a. Form 1040x 2008     b. Form 1040x 2008 If born before January 2, 1949, or blind, multiply $1,500 ($1,200 if married) by the number in the box above. Form 1040x 2008 7b. Form 1040x 2008     c. Form 1040x 2008 Add lines 7a and 7b. Form 1040x 2008 This is your standard deduction for 2013. Form 1040x 2008 7c. Form 1040x 2008   Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Form 1040x 2008 It also includes any amount received as a scholarship that you must include in your income. Form 1040x 2008 Prev  Up  Next   Home   More Online Publications
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The Form 1040x 2008

Form 1040x 2008 8. Form 1040x 2008   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. Form 1040x 2008 Half-time student. Form 1040x 2008 How Much Can You Contribute Are Distributions TaxableFiguring the Taxable Portion of a Distribution Additional Tax on Taxable Distributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Introduction Qualified tuition programs (QTPs) are also called “529 plans. Form 1040x 2008 ” States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. Form 1040x 2008 Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. Form 1040x 2008 If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. Form 1040x 2008 You cannot deduct either payments or contributions to a QTP. Form 1040x 2008 For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. Form 1040x 2008 What is the tax benefit of a QTP. Form 1040x 2008   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. Form 1040x 2008 See Are Distributions Taxable , later, for more information. Form 1040x 2008    Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American opportunity credit or the lifetime learning credit. Form 1040x 2008 See Coordination With American Opportunity and Lifetime Learning Credits, later. Form 1040x 2008 What Is a Qualified Tuition Program A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. Form 1040x 2008 QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. Form 1040x 2008 The program must meet certain requirements. Form 1040x 2008 Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. Form 1040x 2008 Qualified education expenses. Form 1040x 2008   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). Form 1040x 2008 As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. Form 1040x 2008 See Half-time student , later. Form 1040x 2008 The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. Form 1040x 2008 Tuition and fees. Form 1040x 2008 Books, supplies, and equipment. Form 1040x 2008 Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution. Form 1040x 2008 Expenses for room and board must be incurred by students who are enrolled at least half-time. Form 1040x 2008 The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Form 1040x 2008 The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Form 1040x 2008 The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Form 1040x 2008 You will need to contact the eligible educational institution for qualified room and board costs. Form 1040x 2008    For tax years after 2010, the purchase of computer technology or equipment is only a qualified education expense if the computer technology or equipment is required for enrollment or attendance at an eligible institution. Form 1040x 2008 Designated beneficiary. Form 1040x 2008   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. Form 1040x 2008 The designated beneficiary can be changed after participation in the QTP begins. Form 1040x 2008 If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship. Form 1040x 2008 Half-time student. Form 1040x 2008   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Form 1040x 2008 Eligible educational institution. Form 1040x 2008   For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Form 1040x 2008 S. Form 1040x 2008 Department of Education. Form 1040x 2008 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Form 1040x 2008 The educational institution should be able to tell you if it is an eligible educational institution. Form 1040x 2008   Certain educational institutions located outside the United States also participate in the U. Form 1040x 2008 S. Form 1040x 2008 Department of Education's Federal Student Aid (FSA) programs. Form 1040x 2008   How Much Can You Contribute Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary. Form 1040x 2008 There are no income restrictions on the individual contributors. Form 1040x 2008 You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. Form 1040x 2008   Are Distributions Taxable The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. Form 1040x 2008 This is a return of the investment in the plan. Form 1040x 2008 The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution , later). Form 1040x 2008 Earnings and return of investment. Form 1040x 2008    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. Form 1040x 2008 The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment (box 3). Form 1040x 2008 Form 1099-Q should be sent to you by January 31, 2014. Form 1040x 2008 Figuring the Taxable Portion of a Distribution To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses. Form 1040x 2008 Adjusted qualified education expenses. Form 1040x 2008   This amount is the total qualified education expenses reduced by any tax-free educational assistance. Form 1040x 2008 Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits 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), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Form 1040x 2008 Taxable earnings. Form 1040x 2008   Use the following steps to figure the taxable part. Form 1040x 2008 Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. Form 1040x 2008 The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. Form 1040x 2008 Subtract the amount figured in (1) from the total distributed earnings. Form 1040x 2008 The result is the amount the beneficiary must include in income. Form 1040x 2008 Report it on Form 1040 or Form 1040NR, line 21. Form 1040x 2008 Example 1. Form 1040x 2008 In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. Form 1040x 2008 Over the years they contributed $18,000 to the account. Form 1040x 2008 The total balance in the account was $27,000 on the date the distribution was made. Form 1040x 2008 In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. Form 1040x 2008 She paid her college expenses from the following sources. Form 1040x 2008   Gift from parents $1,600     Partial tuition scholarship (tax-free) 3,100     QTP distribution 5,300           Before Sara can determine the taxable part of her QTP distribution, she must reduce her total qualified education expenses by any tax-free educational assistance. Form 1040x 2008   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Equals: Adjusted qualified  education expenses (AQEE) $5,200   Since the remaining expenses ($5,200) are less than the QTP distribution, part of the earnings will be taxable. Form 1040x 2008 Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. Form 1040x 2008 Sara figures the taxable part of the distributed earnings as follows. Form 1040x 2008   1. Form 1040x 2008 $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. Form 1040x 2008 $950 (earnings)−$932 (tax-free earnings)     =$18 (taxable earnings)  Sara must include $18 in income (Form 1040, line 21) as distributed QTP earnings not used for adjusted qualified education expenses. Form 1040x 2008 Coordination With American Opportunity and Lifetime Learning Credits An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Form 1040x 2008 This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit. Form 1040x 2008 Example 2. Form 1040x 2008 Assume the same facts as in Example 1 , except that Sara's parents claimed an American opportunity credit of $2,500 (based on $4,000 expenses). Form 1040x 2008   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Minus: Expenses taken into account  in figuring American opportunity credit −4,000     Equals: Adjusted qualified  education expenses (AQEE) $1,200           The taxable part of the distribution is figured as follows. Form 1040x 2008   1. Form 1040x 2008 $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. Form 1040x 2008 $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). Form 1040x 2008 This represents distributed earnings not used for adjusted qualified education expenses. Form 1040x 2008 Coordination With Coverdell ESA Distributions If a designated beneficiary receives distributions from both a QTP and a Coverdell ESA in the same year, and the total of these distributions is more than the beneficiary's adjusted qualified higher education expenses, the expenses must be allocated between the distributions. Form 1040x 2008 For purposes of this allocation, disregard any qualified elementary and secondary education expenses. Form 1040x 2008 Example 3. Form 1040x 2008 Assume the same facts as in Example 2 , except that instead of receiving a $5,300 distribution from her QTP, Sara received $4,600 from that account and $700 from her Coverdell ESA. Form 1040x 2008 In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. Form 1040x 2008   $1,200 AQHEE × $700 ESA distribution  $5,300 total distribution = $158 AQHEE (ESA)     $1,200 AQHEE × $4,600 QTP distribution  $5,300 total distribution = $1,042 AQHEE (QTP)   Sara then figures the taxable portion of her Coverdell ESA distribution based on qualified higher education expenses of $158, and the taxable portion of her QTP distribution based on the other $1,042. Form 1040x 2008 Note. Form 1040x 2008 If you are required to allocate your expenses between Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary education expenses, see the examples in chapter 7, Coverdell Education Savings Account under Coordination With Qualified Tuition Program (QTP) Distributions . Form 1040x 2008 Coordination With Tuition and Fees Deduction. Form 1040x 2008   A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Form 1040x 2008 Losses on QTP Investments If you have a loss on your investment in a QTP account, you may be able to take the loss on your income tax return. Form 1040x 2008 You can take the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Form 1040x 2008 Your basis is the total amount of contributions to that QTP account. Form 1040x 2008 You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Form 1040x 2008 If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. Form 1040x 2008 ) from all such accounts in order to determine your taxable earnings for the year. Form 1040x 2008 By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. Form 1040x 2008 Example 1. Form 1040x 2008 In 2013, Taylor received a final distribution of $1,000 from QTP #1. Form 1040x 2008 His unrecovered basis in that account before the distribution was $3,000. Form 1040x 2008 If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). Form 1040x 2008 Example 2. Form 1040x 2008 Assume the same facts as in Example 1 , except that Taylor also had a distribution of $9,000 from QTP #2, giving him total distributions for 2013 of $10,000. Form 1040x 2008 His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). Form 1040x 2008 Taylor's adjusted qualified education expenses for 2013 totaled $6,000. Form 1040x 2008 In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. Form 1040x 2008   1. Form 1040x 2008 $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. Form 1040x 2008 $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. Form 1040x 2008 $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. Form 1040x 2008 Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). Form 1040x 2008 Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. Form 1040x 2008 Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Form 1040x 2008 Exceptions. Form 1040x 2008   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Form 1040x 2008 Made because the designated beneficiary is disabled. Form 1040x 2008 A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Form 1040x 2008 A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Form 1040x 2008 Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Form 1040x 2008 Made on account of the attendance of the designated beneficiary at a U. Form 1040x 2008 S. Form 1040x 2008 military academy (such as the USNA at Annapolis). Form 1040x 2008 This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Form 1040x 2008 S. Form 1040x 2008 Code) attributable to such attendance. Form 1040x 2008 Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier. Form 1040x 2008 ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Form 1040x 2008 Figuring the additional tax. Form 1040x 2008    Use Part II of Form 5329, to figure any additional tax. Form 1040x 2008 Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Form 1040x 2008 Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. Form 1040x 2008 In addition, the designated beneficiary can be changed without transferring accounts. Form 1040x 2008 Rollovers Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). Form 1040x 2008 An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. Form 1040x 2008 Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Form 1040x 2008 These are not taxable distributions. Form 1040x 2008 Members of the beneficiary's family. Form 1040x 2008   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Form 1040x 2008 Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Form 1040x 2008 Brother, sister, stepbrother, or stepsister. Form 1040x 2008 Father or mother or ancestor of either. Form 1040x 2008 Stepfather or stepmother. Form 1040x 2008 Son or daughter of a brother or sister. Form 1040x 2008 Brother or sister of father or mother. Form 1040x 2008 Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Form 1040x 2008 The spouse of any individual listed above. Form 1040x 2008 First cousin. Form 1040x 2008 Example. Form 1040x 2008 When Aaron graduated from college last year he had $5,000 left in his QTP. Form 1040x 2008 He wanted to give this money to his younger brother, who was in junior high school. Form 1040x 2008 In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his brother's QTP within 60 days of the distribution. Form 1040x 2008 If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. Form 1040x 2008 Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. Form 1040x 2008 See Members of the beneficiary's family , earlier. Form 1040x 2008 Example. Form 1040x 2008 Assume the same situation as in the last example. Form 1040x 2008 Instead of closing his QTP and paying the distribution into his brother's QTP, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his brother. Form 1040x 2008 Prev  Up  Next   Home   More Online Publications