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How To Amend Federal Tax Return

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How To Amend Federal Tax Return

How to amend federal tax return Index A Archer MSAs, Archer MSAs, Employment taxes. How to amend federal tax return Assistance (see Tax help) C Contributions to FSA, Contributions to an FSA HRA, Contributions to an HRA HSA, Contributions to an HSA MSA, Contributions to an MSA D Death of HSA holder, Death of HSA Holder MSA holder, Death of the Archer MSA Holder Distributions from FSA, Distributions From an FSA HRA, Distributions From an HRA HSA, Distributions From an HSA MSA, Distributions From an MSA E Employer participation FSA, Employer Participation HRA, Employer Participation HSA, Employer Participation MSA, Employer Participation F Flexible Spending Arrangements Grace Period, Health FSA – grace period. How to amend federal tax return Flexible spending arrangements, Flexible Spending Arrangements (FSAs), Employer Participation Balance in, Balance in an FSA Contributions to, Contributions to an FSA Distributions from, Distributions From an FSA Qualifying for, Qualifying for an FSA When to contribute, When To Contribute Form 5329, Excess contributions. How to amend federal tax return , Excess contributions. How to amend federal tax return 5498–SA, Form 8889. How to amend federal tax return , Reporting Contributions on Your Return 8853, Additional tax. How to amend federal tax return , Filing Form 8853 8889, Form 8889. How to amend federal tax return , Additional tax. How to amend federal tax return , Filing Form 8889 Free tax services, Free help with your tax return. How to amend federal tax return H Health plans, high deductible, High deductible health plan (HDHP). How to amend federal tax return , High deductible health plan (HDHP). How to amend federal tax return Health reimbursement arrangements, Health Reimbursement Arrangements (HRAs), Employer Participation Balance in, Balance in an HRA Contributions to, Contributions to an HRA Distributions from, Distributions From an HRA Qualifying for, Qualifying for an HRA Health savings accounts, Health Savings Accounts (HSAs), Employment taxes. How to amend federal tax return Balance in, Balance in an HSA Contributions to, Contributions to an HSA Deemed distributions, Deemed distributions from HSAs. How to amend federal tax return Distributions from, Distributions From an HSA Last-month rule, Last-month rule. How to amend federal tax return Partnerships, Reporting Contributions on Your Return Qualifying for, Qualifying for an HSA Rollovers, Rollovers S corporations, Reporting Contributions on Your Return When to contribute, When To Contribute Help (see Tax help) High deductible health plan, High deductible health plan (HDHP). How to amend federal tax return , High deductible health plan (HDHP). How to amend federal tax return M Medical expenses, qualified, Qualified medical expenses. How to amend federal tax return , Qualified medical expenses. How to amend federal tax return , Qualified medical expenses. How to amend federal tax return , Qualified medical expenses. How to amend federal tax return Medical savings accounts, Medical Savings Accounts (MSAs), Medicare Advantage MSAs Balance in, Balance in an Archer MSA Contributions to, Contributions to an MSA Deemed distributions, Deemed distributions from Archer MSAs. How to amend federal tax return Distributions from, Distributions From an MSA Medicare Advantage MSAs, Medicare Advantage MSAs Qualifying for, Qualifying for an Archer MSA When to contribute, When To Contribute Medicare Advantage MSAs, Medicare Advantage MSAs P Preventive care, High deductible health plan (HDHP). How to amend federal tax return Publications (see Tax help) Q Qualified HSA funding distribution, Qualified HSA funding distribution. How to amend federal tax return T Tax help, How To Get Tax Help Testing period Last-month rule, Testing period. How to amend federal tax return Qualified HSA funding distribution, Funding distribution – testing period. How to amend federal tax return TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
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The Premium Tax Credit

 

Facts about the Premium Tax Credit

 

Publication 5120 –Your Credit, Your Choice – Get it Now or Get it Later   English | Spanish

 

Publication 5121 –Need help paying for health insurance premiums?   English | Spanish

 

NOTE - The following information does not affect your 2013 tax return that you are filing in 2014. You do not need to file a 2013 federal tax return solely to establish eligibility or qualify for advance payment of the premium tax credit.
 

Basic Information

Starting in 2014, if you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit. This tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. The open enrollment period to purchase health insurance coverage for 2014 through the Marketplace runs from Oct. 1, 2013, through March 31, 2014.

The Department of Health and Human Services administers the requirements for the Marketplace and the health plans they offer. For more information about your coverage options, financial assistance and the Marketplace, visit HealthCare.gov.

Eligibility

In general, you may be eligible for the credit if you meet all of the following:

  • buy health insurance through the Marketplace;
  • are ineligible for coverage through an employer or government plan;
  • are within certain income limits;
  • do not file a Married Filing Separately tax return (unless you meet the criteria in Notice 2014-23, which allows certain victims of domestic abuse to claim the premium tax credit using the Married Filing Separately filing status for the 2014 calendar year); and
  • cannot be claimed as a dependent by another person.

Filing Status

If you file your tax return using the filing status Single, Married Filing Jointly, Head of Household (including married individuals who qualify to use the Head of Household status) or Qualifying Widow/Widower, you may be eligible for the premium tax credit if you meet the other criteria. If you are married and you file your tax return using the filing status Married Filing Separately, you will not be eligible for the premium tax credit unless you meet the criteria in Notice 2014-23, which allows certain victims of domestic abuse to claim the premium tax credit using the Married Filing Separately filing status for the 2014 calendar year.

Getting the Credit

To qualify for the credit, you must get insurance through the Marketplace.

If you are eligible for the credit, you can choose to:

  • Get It Now: have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or
  • Get It Later: wait to get all of the credit when you file your 2014 tax return in 2015.

During enrollment through the Marketplace, using information you provide about your projected income and family composition for 2014, the Marketplace will estimate the amount of the premium tax credit you will be able to claim for the 2014 tax year that you will file in 2015.

You will then decide whether you want to have all, some or none of your estimated credit paid in advance directly to your insurance company.

Change in Circumstances

Report income and family size changes to the Marketplace throughout the year. Reporting changes will help make sure you get the proper type and amount of financial assistance and will help you avoid getting too much or too little in advance. Receiving too much or too little in advance can affect your refund or balance due when you file your 2014 tax return in 2015.

For example, if you do not report income or family size changes to the Marketplace when they happen in 2014, the advance payments may not match your actual qualified credit amount on your federal tax return that you will file in 2015. This might result in a smaller refund or a balance due.

Claiming the Credit on Your Federal Tax Return

For any tax year, if you receive advance credit payments in any amount or if you plan to claim the premium tax credit, you must file a federal income tax return for that year. 

If you choose to get it now: When you file your 2014 tax return in 2015, you will subtract the total advance payments you received during the year from the amount of the premium tax credit calculated on your tax return. If the premium tax credit computed on the return is more than the advance payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. If the advance credit payments are more than the premium tax credit, the difference will increase the amount you owe and result in either a smaller refund or a balance due.

If you choose to get it later: You will claim the full amount of the premium tax credit when you file your 2014 tax return in 2015. This will either increase your refund or lower your balance due.

More Information

More detailed information about the credit is available in our Questions and Answers.
The Department of the Treasury and the IRS issued the following legal guidance related to the premium tax credit:

  • Final regulations on the rules for individuals who enroll in qualified health plans through Marketplaces and claim the premium tax credit.
  • Final regulations on the premium tax credit affordability test for related individuals.
  • Proposed regulations on determining minimum value of eligible employer-sponsored plans and other rules regarding the premium tax credit.
  • Notice 2013-41 on determining whether or when individuals are considered eligible for coverage under certain Medicaid, Medicare, CHIP, TRICARE, student health or state high risk pool programs.

An electronic flyer (Publication 5120 English | Spanish ) and trifold (Publication 5121 English | Spanish ) entitled Facts about the Premium Tax Credit are available for public use and distribution.

 

Page Last Reviewed or Updated: 26-Mar-2014

The How To Amend Federal Tax Return

How to amend federal tax return 7. How to amend federal tax return   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. How to amend federal tax return For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. How to amend federal tax return There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. How to amend federal tax return However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. How to amend federal tax return See Contributions , later. How to amend federal tax return This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. How to amend federal tax return What is the tax benefit of the Coverdell ESA. How to amend federal tax return   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. How to amend federal tax return   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. How to amend federal tax return See Tax-Free Distributions , later. How to amend federal tax return    Table 7-1 summarizes the main features of the Coverdell ESA. How to amend federal tax return Table 7-1. How to amend federal tax return Coverdell ESA at a Glance Do not rely on this table alone. How to amend federal tax return It provides only general highlights. How to amend federal tax return See the text for definitions of terms in bold type and for more complete explanations. How to amend federal tax return Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. How to amend federal tax return Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. How to amend federal tax return Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. How to amend federal tax return Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). How to amend federal tax return Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. How to amend federal tax return What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. How to amend federal tax return When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. How to amend federal tax return To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. How to amend federal tax return The document creating and governing the account must be in writing and must satisfy the following requirements. How to amend federal tax return The trustee or custodian must be a bank or an entity approved by the IRS. How to amend federal tax return The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. How to amend federal tax return The contribution is in cash. How to amend federal tax return The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. How to amend federal tax return The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. How to amend federal tax return Money in the account cannot be invested in life insurance contracts. How to amend federal tax return Money in the account cannot be combined with other property except in a common trust fund or common investment fund. How to amend federal tax return The balance in the account generally must be distributed within 30 days after the earlier of the following events. How to amend federal tax return The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. How to amend federal tax return The beneficiary's death. How to amend federal tax return Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. How to amend federal tax return For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. How to amend federal tax return Designated beneficiary. How to amend federal tax return   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. How to amend federal tax return Contributions to a qualified tuition program (QTP). How to amend federal tax return   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. How to amend federal tax return In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. How to amend federal tax return See chapter 8, Qualified Tuition Program . How to amend federal tax return Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. How to amend federal tax return Eligible postsecondary school. How to amend federal tax return   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. How to amend federal tax return S. How to amend federal tax return Department of Education. How to amend federal tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. How to amend federal tax return The educational institution should be able to tell you if it is an eligible educational institution. How to amend federal tax return   Certain educational institutions located outside the United States also participate in the U. How to amend federal tax return S. How to amend federal tax return Department of Education's Federal Student Aid (FSA) programs. How to amend federal tax return Eligible elementary or secondary school. How to amend federal tax return   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. How to amend federal tax return Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. How to amend federal tax return As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. How to amend federal tax return The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. How to amend federal tax return Tuition and fees. How to amend federal tax return Books, supplies, and equipment. How to amend federal tax return Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. How to amend federal tax return Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). How to amend federal tax return The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. How to amend federal tax return The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. How to amend federal tax return The actual amount charged if the student is residing in housing owned or operated by the school. How to amend federal tax return Half-time student. How to amend federal tax return   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. How to amend federal tax return Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. How to amend federal tax return As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. How to amend federal tax return There are special rules for computer-related expenses. How to amend federal tax return The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. How to amend federal tax return Tuition and fees. How to amend federal tax return Books, supplies, and equipment. How to amend federal tax return Academic tutoring. How to amend federal tax return Special needs services for a special needs beneficiary. How to amend federal tax return The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. How to amend federal tax return Room and board. How to amend federal tax return Uniforms. How to amend federal tax return Transportation. How to amend federal tax return Supplementary items and services (including extended day programs). How to amend federal tax return The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. How to amend federal tax return (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. How to amend federal tax return ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. How to amend federal tax return For individuals filing joint returns, that amount is $220,000. How to amend federal tax return Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. How to amend federal tax return There is no requirement that an organization's income be below a certain level. How to amend federal tax return Contributions must meet all of the following requirements. How to amend federal tax return They must be in cash. How to amend federal tax return They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. How to amend federal tax return They must be made by the due date of the contributor's tax return (not including extensions). How to amend federal tax return Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. How to amend federal tax return Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. How to amend federal tax return Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. How to amend federal tax return When contributions considered made. How to amend federal tax return   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. How to amend federal tax return They must be made by the due date (not including extensions) for filing your return for the preceding year. How to amend federal tax return   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. How to amend federal tax return Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. How to amend federal tax return Limit for each designated beneficiary. How to amend federal tax return   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. How to amend federal tax return This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. How to amend federal tax return Rollovers are discussed under Rollovers and Other Transfers , later. How to amend federal tax return Example. How to amend federal tax return When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. How to amend federal tax return In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. How to amend federal tax return For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. How to amend federal tax return Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. How to amend federal tax return These contributions could be put into any of Maria's Coverdell ESA accounts. How to amend federal tax return Limit for each contributor. How to amend federal tax return   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. How to amend federal tax return This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. How to amend federal tax return Example. How to amend federal tax return The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. How to amend federal tax return If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. How to amend federal tax return Reduced limit. How to amend federal tax return   Your contribution limit may be reduced. How to amend federal tax return If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). How to amend federal tax return If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. How to amend federal tax return Table 7-2. How to amend federal tax return Coverdell ESA Contributions at a Glance Do not rely on this table alone. How to amend federal tax return It provides only general highlights. How to amend federal tax return See the text for more complete explanations. How to amend federal tax return Question Answer Are contributions deductible? No. How to amend federal tax return What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. How to amend federal tax return What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. How to amend federal tax return What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. How to amend federal tax return Can contributions other than cash be made to a Coverdell ESA? No. How to amend federal tax return When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. How to amend federal tax return Modified adjusted gross income (MAGI). How to amend federal tax return   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. How to amend federal tax return MAGI when using Form 1040A. How to amend federal tax return   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. How to amend federal tax return MAGI when using Form 1040. How to amend federal tax return   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. How to amend federal tax return MAGI when using Form 1040NR. How to amend federal tax return   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. How to amend federal tax return MAGI when using Form 1040NR-EZ. How to amend federal tax return   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. How to amend federal tax return   If you have any of these adjustments, you can use Worksheet 7-1. How to amend federal tax return MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. How to amend federal tax return Worksheet 7-1. How to amend federal tax return MAGI for a Coverdell ESA 1. How to amend federal tax return Enter your adjusted gross income  (Form 1040, line 38)   1. How to amend federal tax return   2. How to amend federal tax return Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. How to amend federal tax return       3. How to amend federal tax return Enter your foreign housing deduction (Form 2555, line 50)   3. How to amend federal tax return         4. How to amend federal tax return Enter the amount of income from Puerto Rico you are excluding   4. How to amend federal tax return       5. How to amend federal tax return Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. How to amend federal tax return       6. How to amend federal tax return Add lines 2, 3, 4, and 5   6. How to amend federal tax return   7. How to amend federal tax return Add lines 1 and 6. How to amend federal tax return This is your  modified adjusted gross income   7. How to amend federal tax return   Figuring the limit. How to amend federal tax return    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. How to amend federal tax return The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). How to amend federal tax return The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). How to amend federal tax return Subtract the result from $2,000. How to amend federal tax return This is the amount you can contribute for each beneficiary. How to amend federal tax return You can use Worksheet 7-2. How to amend federal tax return Coverdell ESA Contribution Limit to figure the limit on contributions. How to amend federal tax return    Worksheet 7-2. How to amend federal tax return Coverdell ESA Contribution Limit 1. How to amend federal tax return Maximum contribution   1. How to amend federal tax return $2,000 2. How to amend federal tax return Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. How to amend federal tax return   3. How to amend federal tax return Enter $190,000 if married filing jointly; $95,000 for all other filers   3. How to amend federal tax return   4. How to amend federal tax return Subtract line 3 from line 2. How to amend federal tax return If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. How to amend federal tax return   5. How to amend federal tax return Enter $30,000 if married filing jointly; $15,000 for all other filers   5. How to amend federal tax return     Note. How to amend federal tax return If the amount on line 4 is greater than or equal to the amount on line 5, stop here. How to amend federal tax return You are not allowed to contribute to a Coverdell ESA for 2013. How to amend federal tax return       6. How to amend federal tax return Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. How to amend federal tax return . How to amend federal tax return 7. How to amend federal tax return Multiply line 1 by line 6   7. How to amend federal tax return   8. How to amend federal tax return Subtract line 7 from line 1   8. How to amend federal tax return   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. How to amend federal tax return Example. How to amend federal tax return Paul, who is single, had a MAGI of $96,500 for 2013. How to amend federal tax return Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. How to amend federal tax return Worksheet 7-2. How to amend federal tax return Coverdell ESA Contribution Limit—Illustrated 1. How to amend federal tax return Maximum contribution   1. How to amend federal tax return $2,000 2. How to amend federal tax return Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. How to amend federal tax return 96,500 3. How to amend federal tax return Enter $190,000 if married filing jointly; $95,000 for all other filers   3. How to amend federal tax return 95,000 4. How to amend federal tax return Subtract line 3 from line 2. How to amend federal tax return If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. How to amend federal tax return 1,500 5. How to amend federal tax return Enter $30,000 if married filing jointly; $15,000 for all other filers   5. How to amend federal tax return 15,000   Note. How to amend federal tax return If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. How to amend federal tax return You are not allowed to  contribute to a Coverdell ESA for 2013. How to amend federal tax return       6. How to amend federal tax return Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. How to amend federal tax return . How to amend federal tax return 100 7. How to amend federal tax return Multiply line 1 by line 6   7. How to amend federal tax return 200 8. How to amend federal tax return Subtract line 7 from line 1   8. How to amend federal tax return 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. How to amend federal tax return Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. How to amend federal tax return Excess contributions are the total of the following two amounts. How to amend federal tax return Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). How to amend federal tax return Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. How to amend federal tax return Exceptions. How to amend federal tax return   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). How to amend federal tax return   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. How to amend federal tax return You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. How to amend federal tax return Box 2 of that form will show the amount of earnings on your excess contributions. How to amend federal tax return Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. How to amend federal tax return See Instructions for Recipient on the back of copy B of your Form 1099-Q. How to amend federal tax return Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. How to amend federal tax return For more information, see Taxable Distributions , later. How to amend federal tax return   The excise tax does not apply to any rollover contribution. How to amend federal tax return Note. How to amend federal tax return Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. How to amend federal tax return Example. How to amend federal tax return In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. How to amend federal tax return Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. How to amend federal tax return In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. How to amend federal tax return Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. How to amend federal tax return (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. How to amend federal tax return Figuring and reporting the additional tax. How to amend federal tax return   You figure this excise tax in Part V of Form 5329. How to amend federal tax return Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). How to amend federal tax return Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. How to amend federal tax return The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. How to amend federal tax return Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. How to amend federal tax return This age limitation does not apply if the new beneficiary is a special needs beneficiary. How to amend federal tax return An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. How to amend federal tax return Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. How to amend federal tax return These are not taxable distributions. How to amend federal tax return Members of the beneficiary's family. How to amend federal tax return   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. How to amend federal tax return Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. How to amend federal tax return Brother, sister, stepbrother, or stepsister. How to amend federal tax return Father or mother or ancestor of either. How to amend federal tax return Stepfather or stepmother. How to amend federal tax return Son or daughter of a brother or sister. How to amend federal tax return Brother or sister of father or mother. How to amend federal tax return Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. How to amend federal tax return The spouse of any individual listed above. How to amend federal tax return First cousin. How to amend federal tax return Example. How to amend federal tax return When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. How to amend federal tax return He wanted to give this money to his younger sister, who was still in high school. How to amend federal tax return In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. How to amend federal tax return Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. How to amend federal tax return This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). How to amend federal tax return Military death gratuity. How to amend federal tax return   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). How to amend federal tax return Such payments are made to an eligible survivor upon the death of a member of the armed forces. How to amend federal tax return The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. How to amend federal tax return   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . How to amend federal tax return The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. How to amend federal tax return   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. How to amend federal tax return See Distributions , later. How to amend federal tax return The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. How to amend federal tax return Changing the Designated Beneficiary The designated beneficiary can be changed. How to amend federal tax return See Members of the beneficiary's family , earlier. How to amend federal tax return There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. How to amend federal tax return Example. How to amend federal tax return Assume the same situation for Aaron as in the last example (see Rollovers , earlier). How to amend federal tax return Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. How to amend federal tax return Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. How to amend federal tax return After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. How to amend federal tax return Example. How to amend federal tax return In their divorce settlement, Peg received her ex-husband's Coverdell ESA. How to amend federal tax return In this process, the account was transferred into her name. How to amend federal tax return Peg now treats the funds in this Coverdell ESA as if she were the original owner. How to amend federal tax return Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. How to amend federal tax return Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. How to amend federal tax return See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. How to amend federal tax return Table 7-3. How to amend federal tax return Coverdell ESA Distributions at a Glance Do not rely on this table alone. How to amend federal tax return It provides only general highlights. How to amend federal tax return See the text for definitions of terms in bold type and for more complete explanations. How to amend federal tax return Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. How to amend federal tax return After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. How to amend federal tax return Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. How to amend federal tax return Also, certain transfers to members of the beneficiary's family are permitted. How to amend federal tax return Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. How to amend federal tax return Adjusted qualified education expenses. How to amend federal tax return   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. How to amend federal tax return 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. How to amend federal tax return The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. How to amend federal tax return Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. How to amend federal tax return Do not report tax-free distributions (including qualifying rollovers) on your tax return. How to amend federal tax return Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. How to amend federal tax return Excess distribution. How to amend federal tax return   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. How to amend federal tax return Earnings and basis. How to amend federal tax return   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. How to amend federal tax return The amount of your gross distribution will be shown in box 1. How to amend federal tax return For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. How to amend federal tax return This will be shown in the blank box below boxes 5 and 6. How to amend federal tax return   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. How to amend federal tax return Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. How to amend federal tax return Figure the taxable portion for 2013 as shown in the following steps. How to amend federal tax return Multiply the total amount distributed by a fraction. How to amend federal tax return The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. How to amend federal tax return Subtract the amount figured in (1) from the total amount distributed during 2013. How to amend federal tax return The result is the amount of earnings included in the distribution(s). How to amend federal tax return Multiply the amount of earnings figured in (2) by a fraction. How to amend federal tax return The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. How to amend federal tax return Subtract the amount figured in (3) from the amount figured in (2). How to amend federal tax return The result is the amount the beneficiary must include in income. How to amend federal tax return The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. How to amend federal tax return Example. How to amend federal tax return You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. How to amend federal tax return There were no contributions in 2013. How to amend federal tax return This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. How to amend federal tax return The value (balance) of your account on December 31, 2013, was $950. How to amend federal tax return You had $700 of adjusted qualified education expenses (AQEE) for the year. How to amend federal tax return Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. How to amend federal tax return   1. How to amend federal tax return $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. How to amend federal tax return $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. How to amend federal tax return $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. How to amend federal tax return $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. How to amend federal tax return Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. How to amend federal tax return Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). How to amend federal tax return Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. How to amend federal tax return This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. How to amend federal tax return Example. How to amend federal tax return Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. How to amend federal tax return He paid his college expenses from the following sources. How to amend federal tax return     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. How to amend federal tax return Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. How to amend federal tax return Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. How to amend federal tax return     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. How to amend federal tax return The balance in Derek's account was $1,800 on December 31, 2013. How to amend federal tax return Prior to 2013, $2,100 had been contributed to this account. How to amend federal tax return Contributions for 2013 totaled $400. How to amend federal tax return Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. How to amend federal tax return   1. How to amend federal tax return $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. How to amend federal tax return $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. How to amend federal tax return $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. How to amend federal tax return $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). How to amend federal tax return This is the amount of distributed earnings not used for adjusted qualified higher education expenses. How to amend federal tax return Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. How to amend federal tax return The following two examples illustrate possible allocations. How to amend federal tax return Example 1. How to amend federal tax return In 2013, Beatrice graduated from high school and began her first semester of college. How to amend federal tax return That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. How to amend federal tax return To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. How to amend federal tax return No one claimed Beatrice as a dependent, nor was she eligible for an education credit. How to amend federal tax return She did not receive any tax-free educational assistance in 2013. How to amend federal tax return Beatrice must allocate her total qualified education expenses between the two distributions. How to amend federal tax return Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. How to amend federal tax return The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. How to amend federal tax return Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). How to amend federal tax return She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. How to amend federal tax return Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. How to amend federal tax return (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. How to amend federal tax return ) Example 2. How to amend federal tax return Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. How to amend federal tax return In this case, she allocates her qualified education expenses as follows. How to amend federal tax return Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. How to amend federal tax return Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). How to amend federal tax return   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). How to amend federal tax return See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. How to amend federal tax return   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). How to amend federal tax return The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. How to amend federal tax return However, you do not have to allocate your expenses in the same way. How to amend federal tax return You can use any reasonable method. How to amend federal tax return Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. How to amend federal tax return You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. How to amend federal tax return Your basis is the total amount of contributions to that Coverdell ESA. How to amend federal tax return 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. How to amend federal tax return If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. How to amend federal tax return ) from all such accounts in order to determine your taxable earnings for the year. How to amend federal tax return By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. How to amend federal tax return For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. How to amend federal tax return 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. How to amend federal tax return Exceptions. How to amend federal tax return   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. How to amend federal tax return Made because the designated beneficiary is disabled. How to amend federal tax return 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. How to amend federal tax return 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. How to amend federal tax return 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. How to amend federal tax return Made on account of the attendance of the designated beneficiary at a U. How to amend federal tax return S. How to amend federal tax return military academy (such as the USMA at West Point). How to amend federal tax return 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. How to amend federal tax return S. How to amend federal tax return Code) attributable to such attendance. How to amend federal tax return 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). How to amend federal tax return Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). How to amend federal tax return The distributed earnings must be included in gross income for the year in which the excess contribution was made. How to amend federal tax return Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. How to amend federal tax return Figuring the additional tax. How to amend federal tax return    Use Part II of Form 5329, to figure any additional tax. How to amend federal tax return Report the amount on Form 1040, line 58, or Form 1040NR, line 56. How to amend federal tax return When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. How to amend federal tax return The designated beneficiary reaches age 30. How to amend federal tax return In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. How to amend federal tax return However, this rule does not apply if the beneficiary is a special needs beneficiary. How to amend federal tax return The designated beneficiary dies before reaching age 30. How to amend federal tax return In this case, the remaining assets must generally be distributed within 30 days after the date of death. How to amend federal tax return Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. How to amend federal tax return (“Family member” was defined earlier under Rollovers . How to amend federal tax return ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. How to amend federal tax return This age limitation does not apply if the new beneficiary is a special needs beneficiary. How to amend federal tax return There are no tax consequences as a result of the transfer. How to amend federal tax return How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. How to amend federal tax return You determine these earnings as shown in the following two steps. How to amend federal tax return Multiply the amount distributed by a fraction. How to amend federal tax return The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. How to amend federal tax return Subtract the amount figured in (1) from the total amount distributed during 2013. How to amend federal tax return The result is the amount of earnings included in the distribution. How to amend federal tax return For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. How to amend federal tax return The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. How to amend federal tax return Worksheet 7-3 Instructions. How to amend federal tax return Coverdell ESA—Taxable Distributions and Basis Line G. How to amend federal tax return Enter the total distributions received from all Coverdell ESAs during 2013. How to amend federal tax return Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). How to amend federal tax return Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. How to amend federal tax return Line 2. How to amend federal tax return Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. How to amend federal tax return   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. How to amend federal tax return For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. How to amend federal tax return For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. How to amend federal tax return You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. How to amend federal tax return Line 4. How to amend federal tax return Enter the total distributions received from this Coverdell ESA in 2013. How to amend federal tax return Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). How to amend federal tax return   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. How to amend federal tax return Line 7. How to amend federal tax return Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. How to amend federal tax return A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. How to amend federal tax return   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. How to amend federal tax return An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. How to amend federal tax return Worksheet 7-3. How to amend federal tax return Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. How to amend federal tax return • • • Complete Part I, lines A through H, on only one worksheet. How to amend federal tax return  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. How to amend federal tax return  Complete Part III, the Summary (line 16), on only one worksheet. How to amend federal tax return Part I. How to amend federal tax return Qualified Education Expenses (Complete for total expenses)       A. How to amend federal tax return Enter your total qualified education expenses for 2013   A. How to amend federal tax return   B. How to amend federal tax return Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. How to amend federal tax return         C. How to amend federal tax return Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). How to amend federal tax return Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. How to amend federal tax return         D. How to amend federal tax return Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. How to amend federal tax return         E. How to amend federal tax return Add lines B, C, and D   D. How to amend federal tax return   F. How to amend federal tax return Subtract line E from line A. How to amend federal tax return This is your adjusted qualified education expense for 2013   E. How to amend federal tax return   G. How to amend federal tax return Enter your total distributions from all Coverdell ESAs during 2013. How to amend federal tax return Do not include rollovers  or the return of excess contributions (see instructions)   F. How to amend federal tax return   H. How to amend federal tax return Divide line F by line G. How to amend federal tax return Enter the result as a decimal (rounded to at least 3 places). How to amend federal tax return If the  result is 1. How to amend federal tax return 000 or more, enter 1. How to amend federal tax return 000   G. How to amend federal tax return . How to amend federal tax return Part II. How to amend federal tax return Taxable Distributions and Basis (Complete separately for each account) 1. How to amend federal tax return Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. How to amend federal tax return Do not include rollovers or the return of excess contributions   1. How to amend federal tax return   2. How to amend federal tax return Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. How to amend federal tax return   3. How to amend federal tax return Add lines 1 and 2   3. How to amend federal tax return   4. How to amend federal tax return Enter the total distributions from this Coverdell ESA during 2013. How to amend federal tax return Do not include rollovers  or the return of excess contributions (see instructions)   4. How to amend federal tax return   5. How to amend federal tax return Multiply line 4 by line H. How to amend federal tax return This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. How to amend federal tax return         6. How to amend federal tax return Subtract line 5 from line 4   6. How to amend federal tax return         7. How to amend federal tax return Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. How to amend federal tax return         8. How to amend federal tax return Add lines 4 and 7   8. How to amend federal tax return         9. How to amend federal tax return Divide line 3 by line 8. How to amend federal tax return Enter the result as a decimal (rounded to  at least 3 places). How to amend federal tax return If the result is 1. How to amend federal tax return 000 or more, enter 1. How to amend federal tax return 000   9. How to amend federal tax return . How to amend federal tax return       10. How to amend federal tax return Multiply line 4 by line 9. How to amend federal tax return This is the amount of basis allocated to your  distributions, and is tax free   10. How to amend federal tax return     Note. How to amend federal tax return If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. How to amend federal tax return       11. How to amend federal tax return Subtract line 10 from line 4   11. How to amend federal tax return   12. How to amend federal tax return Divide line 5 by line 4. How to amend federal tax return Enter the result as a decimal (rounded to  at least 3 places). How to amend federal tax return If the result is 1. How to amend federal tax return 000 or more, enter 1. How to amend federal tax return 000   12. How to amend federal tax return . How to amend federal tax return       13. How to amend federal tax return Multiply line 11 by line 12. How to amend federal tax return This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. How to amend federal tax return   14. How to amend federal tax return Subtract line 13 from line 11. How to amend federal tax return This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. How to amend federal tax return   15. How to amend federal tax return Subtract line 10 from line 3. How to amend federal tax return This is your basis in this Coverdell ESA as of December 31, 2013   15. How to amend federal tax return   Part III. How to amend federal tax return Summary (Complete only once)       16. How to amend federal tax return Taxable amount. How to amend federal tax return Add together all amounts on line 14 for all your Coverdell ESAs. How to amend federal tax return Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. How to amend federal tax return   Prev  Up  Next   Home   More Online Publications