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Free h&r block software 7. Free h&r block software   Excess Contributions Table of Contents How Do I Know If I Have Excess Contributions? What Happens If I Have Excess Contributions?Excess Annual Addition Excess Elective Deferral If your actual contributions are greater than your MAC, you have an excess contribution. Free h&r block software Excess contributions can result in income tax, additional taxes, and penalties. Free h&r block software The effect of excess contributions depends on the type of excess contribution. Free h&r block software This chapter discusses excess contributions to your 403(b) account. Free h&r block software How Do I Know If I Have Excess Contributions? At the end of the year or the beginning of the next year, you should refigure your MAC based on your actual compensation and actual contributions made to your account. Free h&r block software If the actual contributions to your account are greater than your MAC, you have excess contributions. Free h&r block software If, at any time during the year, your employment status or your compensation changes, you should refigure your MAC using a revised estimate of compensation to prevent excess contributions. Free h&r block software What Happens If I Have Excess Contributions? Certain excess contributions in a 403(b) account can be corrected. Free h&r block software The effect of an excess 403(b) contribution will depend on the type of excess contribution. Free h&r block software Types of excess contributions. Free h&r block software   If, after checking your actual contributions, you determine that you have an excess, the first thing is to identify the type of excess that you have. Free h&r block software Excess contributions to a 403(b) account are categorized as either an: Excess annual addition, or Excess elective deferral. Free h&r block software Excess Annual Addition An excess annual addition is a contribution that is more than your limit on annual additions. Free h&r block software To determine your limit on annual additions, see chapter 3 (chapter 5 for ministers or church employees). Free h&r block software In the year that your contributions are more than your limit on annual additions, the excess amount will be included in your income. Free h&r block software Excise Tax If your 403(b) account invests in mutual funds, and you exceed your limit on annual additions, you may be subject to a 6% excise tax on the excess contribution. Free h&r block software The excise tax does not apply to funds in an annuity account or to excess deferrals. Free h&r block software You must pay the excise tax each year in which there are excess contributions in your account. Free h&r block software Excess contributions can be corrected by contributing less than the applicable limit in later years or by making permissible distributions. Free h&r block software See chapter 8 for a discussion on permissible distributions. Free h&r block software You cannot deduct the excise tax. Free h&r block software Reporting requirement. Free h&r block software   You must file Form 5330 if there has been an excess contribution to a custodial account and that excess has not been corrected. Free h&r block software Excess Elective Deferral An excess elective deferral is the amount that is more than your limit on elective deferrals. Free h&r block software To determine your limit on elective deferrals, see chapter 4. Free h&r block software Your employer's 403(b) plan may contain language permitting it to distribute excess deferrals. Free h&r block software If so, it may require that in order to get a distribution of excess deferrals, you either notify the plan of the amount of excess deferrals or designate a distribution as an excess deferral. Free h&r block software The plan may require that the notification or designation be in writing and may require that you certify or otherwise establish that the designated amount is an excess deferral. Free h&r block software A plan is not required to permit distribution of excess deferrals. Free h&r block software Correction of excess deferrals during year. Free h&r block software   If you have excess deferrals for a year, a corrective distribution may be made only if both of the following conditions are satisfied. Free h&r block software The plan and either you or your employer designate the distribution as an excess deferral to the extent you have excess deferrals for the year. Free h&r block software The correcting distribution is made after the date on which the excess deferral was made. Free h&r block software Correction of excess deferrals after the year. Free h&r block software   If you have excess deferrals for a year, you may receive a correcting distribution of the excess deferral no later than April 15 of the following year. Free h&r block software The plan can distribute the excess deferral (and any income allocable to the excess) no later than April 15 of the year following the year the excess deferral was made. Free h&r block software Tax treatment of excess deferrals not attributable to Roth contributions. Free h&r block software   If the excess deferral is distributed by April 15, it is included in your income in the year contributed and the earnings on the excess deferral will be taxed in the year distributed. Free h&r block software Tax treatment of excess deferrals attributable to Roth contributions. Free h&r block software   For these rules, see Regulations section 1. Free h&r block software 402(g)-1(e). Free h&r block software Prev  Up  Next   Home   More Online Publications
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Free h&r block software 4. Free h&r block software   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. Free h&r block software However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Free h&r block software For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. Free h&r block software This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Free h&r block software The student loan interest deduction is taken as an adjustment to income. Free h&r block software This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). Free h&r block software This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. Free h&r block software Table 4-1. Free h&r block software Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. Free h&r block software Do not rely on this table alone. Free h&r block software Refer to the text for complete details. Free h&r block software Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. Free h&r block software Loan qualifications   Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. Free h&r block software Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. Free h&r block software Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. Free h&r block software Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). Free h&r block software Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Free h&r block software It includes both required and voluntary interest payments. Free h&r block software Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. Free h&r block software Loans from the following sources are not qualified student loans. Free h&r block software A related person. Free h&r block software A qualified employer plan. Free h&r block software Your dependent. Free h&r block software   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. Free h&r block software You can find more information about dependents in Publication 501. Free h&r block software Exceptions. Free h&r block software   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. Free h&r block software An individual can be your dependent even if you are the dependent of another taxpayer. Free h&r block software An individual can be your dependent even if the individual files a joint return with a spouse. Free h&r block software An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). Free h&r block software Reasonable period of time. Free h&r block software   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. Free h&r block software   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. Free h&r block software The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. Free h&r block software   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. Free h&r block software Academic period. Free h&r block software   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. Free h&r block software 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. Free h&r block software Eligible student. Free h&r block software   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Free h&r block software Enrolled at least half-time. Free h&r block software   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. Free h&r block software   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Free h&r block software However, the standard may not be lower than any of those established by the U. Free h&r block software S. Free h&r block software Department of Education under the Higher Education Act of 1965. Free h&r block software Related person. Free h&r block software   You cannot deduct interest on a loan you get from a related person. Free h&r block software Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Free h&r block software ), Your lineal descendants (children, grandchildren, etc. Free h&r block software ), and Certain corporations, partnerships, trusts, and exempt organizations. Free h&r block software Qualified employer plan. Free h&r block software   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Free h&r block software Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. Free h&r block software They include amounts paid for the following items. Free h&r block software Tuition and fees. Free h&r block software Room and board. Free h&r block software Books, supplies, and equipment. Free h&r block software Other necessary expenses (such as transportation). Free h&r block software The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Free h&r block software Eligible educational institution. Free h&r block software   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. Free h&r block software S. Free h&r block software Department of Education. Free h&r block software It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free h&r block software   Certain educational institutions located outside the United States also participate in the U. Free h&r block software S. Free h&r block software Department of Education's Federal Student Aid (FSA) programs. Free h&r block software   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. Free h&r block software   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Free h&r block software The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Free h&r block software    The educational institution should be able to tell you if it is an eligible educational institution. Free h&r block software Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. Free h&r block software Employer-provided educational assistance. Free h&r block software See chapter 11, Employer-Provided Educational Assistance . Free h&r block software Tax-free distribution of earnings from a Coverdell education savings account (ESA). Free h&r block software See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. Free h&r block software Tax-free distribution of earnings from a qualified tuition program (QTP). Free h&r block software See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. Free h&r block software U. Free h&r block software S. Free h&r block software savings bond interest that you exclude from income because it is used to pay qualified education expenses. Free h&r block software See chapter 10, Education Savings Bond Program . Free h&r block software The tax-free part of scholarships and fellowships. Free h&r block software See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Free h&r block software Veterans' educational assistance. Free h&r block software See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Free h&r block software Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free h&r block software Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. Free h&r block software Loan origination fee. Free h&r block software   In general, this is a one-time fee charged by the lender when a loan is made. Free h&r block software To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. Free h&r block software A loan origination fee treated as interest accrues over the term of the loan. Free h&r block software   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. Free h&r block software If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. Free h&r block software The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. Free h&r block software A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. Free h&r block software Example. Free h&r block software In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. Free h&r block software The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. Free h&r block software Bill began making payments on his student loan in 2013. Free h&r block software Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. Free h&r block software Bill's loan is payable in 120 equal monthly payments. Free h&r block software He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). Free h&r block software Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. Free h&r block software To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. Free h&r block software Capitalized interest. Free h&r block software   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Free h&r block software Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. Free h&r block software No deduction for capitalized interest is allowed in a year in which no loan payments were made. Free h&r block software Interest on revolving lines of credit. Free h&r block software   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. Free h&r block software See Qualified Education Expenses , earlier. Free h&r block software Interest on refinanced student loans. Free h&r block software   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. Free h&r block software    If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. Free h&r block software Voluntary interest payments. Free h&r block software   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. Free h&r block software Example. Free h&r block software The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. Free h&r block software He began making payments as required. Free h&r block software In September 2013, Roger enrolled in graduate school on a full-time basis. Free h&r block software He applied for and was granted deferment of his loan payments while in graduate school. Free h&r block software Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. Free h&r block software Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. Free h&r block software Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. Free h&r block software To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. Free h&r block software Example. Free h&r block software In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. Free h&r block software The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. Free h&r block software The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. Free h&r block software At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. Free h&r block software The loan is payable over 60 months, with a payment of $200. Free h&r block software 51 due on the first of each month, beginning November 2013. Free h&r block software Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. Free h&r block software However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). Free h&r block software Payment Date   Payment   Stated Interest   Principal November 2013   $200. Free h&r block software 51   $44. Free h&r block software 27   $156. Free h&r block software 24 December 2013   $200. Free h&r block software 51   $43. Free h&r block software 62   $156. Free h&r block software 89 Totals   $401. Free h&r block software 02   $87. Free h&r block software 89   $313. Free h&r block software 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. Free h&r block software 89. Free h&r block software Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). Free h&r block software A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. Free h&r block software Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. Free h&r block software Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. Free h&r block software 02 ($87. Free h&r block software 89 + $10 + $303. Free h&r block software 13). Free h&r block software For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. Free h&r block software She also will apply the remaining amount of capitalized interest ($625 − $303. Free h&r block software 13 = $321. Free h&r block software 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. Free h&r block software Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. Free h&r block software Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Free h&r block software Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Free h&r block software Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. Free h&r block software For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. Free h&r block software When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. Free h&r block software Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Free h&r block software Your filing status is any filing status except married filing separately. Free h&r block software No one else is claiming an exemption for you on his or her tax return. Free h&r block software You are legally obligated to pay interest on a qualified student loan. Free h&r block software You paid interest on a qualified student loan. Free h&r block software Claiming an exemption for you. Free h&r block software   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. Free h&r block software Example 1. Free h&r block software During 2013, Josh paid $600 interest on his qualified student loan. Free h&r block software Only he is legally obligated to make the payments. Free h&r block software No one claimed an exemption for Josh for 2013. Free h&r block software Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. Free h&r block software Example 2. Free h&r block software During 2013, Jo paid $1,100 interest on her qualified student loan. Free h&r block software Only she is legally obligated to make the payments. Free h&r block software Jo's parents claimed an exemption for her on their 2013 tax return. Free h&r block software In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. Free h&r block software Interest paid by others. Free h&r block software   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. Free h&r block software Example 1. Free h&r block software Darla obtained a qualified student loan to attend college. Free h&r block software After Darla's graduation from college, she worked as an intern for a nonprofit organization. Free h&r block software As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. Free h&r block software This payment was treated as additional compensation and reported in box 1 of her Form W-2. Free h&r block software Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. Free h&r block software Example 2. Free h&r block software Ethan obtained a qualified student loan to attend college. Free h&r block software After graduating from college, the first monthly payment on his loan was due in December. Free h&r block software As a gift, Ethan's mother made this payment for him. Free h&r block software No one is claiming a dependency exemption for Ethan on his or her tax return. Free h&r block software Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. Free h&r block software No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). Free h&r block software Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Free h&r block software However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. Free h&r block software You can use Worksheet 4-1. Free h&r block software Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. Free h&r block software Form 1098-E. Free h&r block software   To help you figure your student loan interest deduction, you should receive Form 1098-E. Free h&r block software Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. Free h&r block software   For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. Free h&r block software Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Free h&r block software However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Free h&r block software See Allocating Payments Between Interest and Principal , earlier. Free h&r block software    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. Free h&r block software The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. Free h&r block software Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). Free h&r block software You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). Free h&r block software Modified adjusted gross income (MAGI). Free h&r block software   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. Free h&r block software However, as discussed below, there may be other modifications. Free h&r block software Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. Free h&r block software Table 4-2. Free h&r block software Effect of MAGI on Student Loan Interest Deduction IF your filing status is. Free h&r block software . Free h&r block software . Free h&r block software AND your MAGI is. Free h&r block software . Free h&r block software . Free h&r block software THEN your student loan interest deduction is. Free h&r block software . Free h&r block software . Free h&r block software single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. Free h&r block software more than $60,000  but less than $75,000 reduced because of the phaseout. Free h&r block software $75,000 or more eliminated by the phaseout. Free h&r block software married filing joint return not more than $125,000 not affected by the phaseout. Free h&r block software more than $125,000 but less than $155,000 reduced because of the phaseout. Free h&r block software $155,000 or more eliminated by the phaseout. Free h&r block software MAGI when using Form 1040A. Free h&r block software   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). Free h&r block software MAGI when using Form 1040. Free h&r block software   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Free h&r block software MAGI when using Form 1040NR. Free h&r block software   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). Free h&r block software MAGI when using Form 1040NR-EZ. Free h&r block software   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). Free h&r block software Phaseout. Free h&r block software   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. Free h&r block software To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. Free h&r block software The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). Free h&r block software The denominator is $15,000 ($30,000 in the case of a joint return). Free h&r block software Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. Free h&r block software Example 1. Free h&r block software During 2013 you paid $800 interest on a qualified student loan. Free h&r block software Your 2013 MAGI is $145,000 and you are filing a joint return. Free h&r block software You must reduce your deduction by $533, figured as follows. Free h&r block software   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). Free h&r block software Example 2. Free h&r block software The facts are the same as in Example 1 except that you paid $2,750 interest. Free h&r block software Your maximum deduction for 2013 is $2,500. Free h&r block software You must reduce your maximum deduction by $1,667, figured as follows. Free h&r block software   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). Free h&r block software Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. Free h&r block software However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. Free h&r block software Student Loan Interest Deduction Worksheet at the end of this chapter. Free h&r block software Claiming the Deduction The student loan interest deduction is an adjustment to income. Free h&r block software To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). Free h&r block software Worksheet 4-1. Free h&r block software Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Free h&r block software Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. Free h&r block software 1. Free h&r block software Enter the total interest you paid in 2013 on qualified student loans. Free h&r block software Do not enter  more than $2,500 1. Free h&r block software   2. Free h&r block software Enter the amount from Form 1040, line 22 2. Free h&r block software       3. Free h&r block software Enter the total of the amounts from Form 1040,  lines 23 through 32 3. Free h&r block software           4. Free h&r block software Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. Free h&r block software           5. Free h&r block software Add lines 3 and 4 5. Free h&r block software       6. Free h&r block software Subtract line 5 from line 2 6. Free h&r block software       7. Free h&r block software Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. Free h&r block software       8. Free h&r block software Enter any foreign housing deduction (Form 2555, line 50) 8. Free h&r block software       9. Free h&r block software Enter the amount of income from Puerto Rico you are excluding 9. Free h&r block software       10. Free h&r block software Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. Free h&r block software       11. Free h&r block software Add lines 6 through 10. Free h&r block software This is your modified adjusted gross income 11. Free h&r block software   12. Free h&r block software Enter the amount shown below for your filing status 12. Free h&r block software     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. Free h&r block software Is the amount on line 11 more than the amount on line 12?       □ No. Free h&r block software Skip lines 13 and 14, enter -0- on line 15, and go to line 16. Free h&r block software       □ Yes. Free h&r block software Subtract line 12 from line 11 13. Free h&r block software   14. Free h&r block software Divide line 13 by $15,000 ($30,000 if married filing jointly). Free h&r block software Enter the result as a decimal  (rounded to at least three places). Free h&r block software If the result is 1. Free h&r block software 000 or more, enter 1. Free h&r block software 000 14. Free h&r block software . Free h&r block software 15. Free h&r block software Multiply line 1 by line 14 15. Free h&r block software   16. Free h&r block software Student loan interest deduction. Free h&r block software Subtract line 15 from line 1. Free h&r block software Enter the result here  and on Form 1040, line 33. Free h&r block software Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. Free h&r block software ) 16. Free h&r block software   Prev  Up  Next   Home   More Online Publications