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Hrblock freefile 19. Hrblock freefile   Education- Related Adjustments Table of Contents Introduction Useful Items - You may want to see: Student Loan Interest DeductionStudent Loan Interest Defined Can You Claim the Deduction How Much Can You Deduct How Do You Figure the Deduction Tuition and Fees DeductionCan You Claim the Deduction What Expenses Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses How Much Can You Deduct Educator Expenses Introduction This chapter discusses the education-related adjustment you can deduct in figuring your adjusted gross income. Hrblock freefile This chapter covers the student loan interest deduction, tuition and fees deduction, and the deduction for educator expenses. Hrblock freefile Useful Items - You may want to see: Publication 970 Tax Benefits for Education Student Loan Interest Deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. Hrblock freefile 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. Hrblock freefile 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. Hrblock freefile This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Hrblock freefile Table 19-1 summarizes the features of the student loan interest deduction. Hrblock freefile Table 19-1. Hrblock freefile Student Loan Interest Deduction at a Glance Do not rely on this table alone. Hrblock freefile Refer to the text for more details. Hrblock freefile Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. Hrblock freefile 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. Hrblock freefile Student qualifications The student must be: • you, your spouse, or your dependent, and   • enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. Hrblock freefile Time limit on deduction You can deduct interest paid during the remaining period of your student loan. Hrblock freefile Phaseout The amount of your deduction depends on your income level. Hrblock freefile Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Hrblock freefile It includes both required and voluntary interest payments. Hrblock freefile Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent (defined in chapter 3) when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period when the student is an eligible student. Hrblock freefile Loans from the following sources are not qualified student loans. Hrblock freefile A related person. Hrblock freefile A qualified employer plan. Hrblock freefile Exceptions. Hrblock freefile   For purposes of the student loan interest deduction, the following are exceptions to the general rules for dependents. Hrblock freefile An individual can be your dependent even if you are the dependent of another taxpayer. Hrblock freefile An individual can be your dependent even if the individual files a joint return with a spouse. Hrblock freefile 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). Hrblock freefile    Reasonable period of time. Hrblock freefile   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. Hrblock freefile   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. Hrblock freefile The expenses relate to a specific academic period. Hrblock freefile 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. Hrblock freefile   If neither of the above situations applies, the reasonable period of time is determined based on all the relevant facts and circumstances. Hrblock freefile Academic period. Hrblock freefile   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. Hrblock freefile 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. Hrblock freefile Eligible student. Hrblock freefile   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Hrblock freefile Enrolled at least half-time. Hrblock freefile   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. Hrblock freefile   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Hrblock freefile However, the standard may not be lower than any of those established by the U. Hrblock freefile S. Hrblock freefile Department of Education under the Higher Education Act of 1965. Hrblock freefile Related person. Hrblock freefile   You cannot deduct interest on a loan you get from a related person. Hrblock freefile Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Hrblock freefile ), Your lineal descendants (children, grandchildren, etc. Hrblock freefile ), and Certain corporations, partnerships, trusts, and exempt organizations. Hrblock freefile Qualified employer plan. Hrblock freefile   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Hrblock freefile 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. Hrblock freefile They include amounts paid for the following items. Hrblock freefile Tuition and fees. Hrblock freefile Room and board. Hrblock freefile Books, supplies, and equipment. Hrblock freefile Other necessary expenses (such as transportation). Hrblock freefile The cost of room and board qualifies only to the extent that it is not more than: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Hrblock freefile Eligible educational institution. Hrblock freefile   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. Hrblock freefile S. Hrblock freefile Department of Education. Hrblock freefile It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Hrblock freefile   Certain educational institutions located outside the United States also participate in the U. Hrblock freefile S. Hrblock freefile Department of Education's Federal Student Aid (FSA) programs. Hrblock freefile   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. Hrblock freefile   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Hrblock freefile The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Hrblock freefile    The educational institution should be able to tell you if it is an eligible educational institution. Hrblock freefile Adjustments to qualified education expenses. Hrblock freefile   You must reduce your qualified education expenses by certain tax-free items (such as the tax-free part of scholarships and fellowships). Hrblock freefile See chapter 4 of Publication 970 for details. Hrblock freefile Include as Interest In addition to simple interest on the loan, certain loan origination fees, capitalized interest, interest on revolving lines of credit, and interest on refinanced student loans can be student loan interest if all other requirements are met. Hrblock freefile Loan origination fee. Hrblock freefile   In general, this is a one-time fee charged by the lender when a loan is made. Hrblock freefile To be deductible as interest, the fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. Hrblock freefile A loan origination fee treated as interest accrues over the life of the loan. Hrblock freefile Capitalized interest. Hrblock freefile    This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Hrblock freefile Interest on revolving lines of credit. Hrblock freefile   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. Hrblock freefile See Qualified Education Expenses , earlier. Hrblock freefile Interest on refinanced student loans. Hrblock freefile   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. Hrblock freefile 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. Hrblock freefile Voluntary interest payments. Hrblock freefile   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. Hrblock freefile Do Not Include as Interest You cannot claim a student loan interest deduction for any of the following items. Hrblock freefile Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Hrblock freefile Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Hrblock freefile 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. Hrblock freefile For more information, see Student Loan Repayment Assistance in chapter 5 of Publication 970. Hrblock freefile Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Hrblock freefile Your filing status is any filing status except married filing separately. Hrblock freefile No one else is claiming an exemption for you on his or her tax return. Hrblock freefile You are legally obligated to pay interest on a qualified student loan. Hrblock freefile You paid interest on a qualified student loan. Hrblock freefile Interest paid by others. Hrblock freefile   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. Hrblock freefile See chapter 4 of Publication 970 for more information. Hrblock freefile No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, home mortgage interest). Hrblock freefile How Much Can You Deduct Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Hrblock freefile However, the amount determined above is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). Hrblock freefile 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). Hrblock freefile For details on figuring your MAGI, see chapter 4 of Publication 970. Hrblock freefile How Do You Figure the Deduction Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the Form 1040 or Form 1040A instructions. Hrblock freefile However, if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1 in chapter 4 of Publication 970. Hrblock freefile To help you figure your student loan interest deduction, you should receive Form 1098-E, Student Loan Interest Statement. Hrblock freefile 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. Hrblock freefile 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. Hrblock freefile Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Hrblock freefile However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Hrblock freefile For information on allocating payments between interest and principal, see chapter 4 of Publication 970. Hrblock freefile To claim the deduction, enter the allowable amount on Form 1040, line 33, or Form 1040A, line 18. Hrblock freefile Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). Hrblock freefile You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. Hrblock freefile The qualified expenses must be for higher education, as explained later under What Expenses Qualify . Hrblock freefile The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. Hrblock freefile Table 19-2 summarizes the features of the tuition and fees deduction. Hrblock freefile You may be able to take a credit for your education expenses instead of a deduction. Hrblock freefile You can choose the one that will give you the lower tax. Hrblock freefile See chapter 35, Education Credits, for details about the credits. Hrblock freefile Can You Claim the Deduction The following rules will help you determine if you can claim the tuition and fees deduction. Hrblock freefile Who Can Claim the Deduction Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. Hrblock freefile You paid qualified education expenses of higher education in 2013 for academic periods beginning in 2013 and those beginning in the first three months of 2014. Hrblock freefile You paid the education expenses for an eligible student. Hrblock freefile The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption (defined in chapter 3) on your tax return. Hrblock freefile Qualified education expenses are defined under What Expenses Qualify . Hrblock freefile Eligible students are defined later under Who Is an Eligible Student . Hrblock freefile Who Cannot Claim the Deduction You cannot claim the tuition and fees deduction if any of the following apply. Hrblock freefile Your filing status is married filing separately. Hrblock freefile Another person can claim an exemption for you as a dependent on his or her tax return. Hrblock freefile You cannot take the deduction even if the other person does not actually claim that exemption. Hrblock freefile Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). Hrblock freefile You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. Hrblock freefile More information on nonresident aliens can be found in Publication 519, U. Hrblock freefile S. Hrblock freefile Tax Guide for Aliens. Hrblock freefile You or anyone else claims an American opportunity or lifetime learning credit in 2013 with respect to expenses of the student for whom the qualified education expenses were paid. Hrblock freefile However, a state tax credit will not disqualify you from claiming a tuition and fees deduction. Hrblock freefile Table 19-2. Hrblock freefile Tuition and Fees Deduction at a Glance Do not rely on this table alone. Hrblock freefile Refer to the text for more details. Hrblock freefile Question   Answer What is the maximum benefit?   You can reduce your income subject to tax by up to $4,000. Hrblock freefile Where is the deduction taken?   As an adjustment to income on Form 1040, line 34, or Form 1040A, line 19. Hrblock freefile For whom must the expenses be paid?   A student enrolled in an eligible educational institution who is either: you, your spouse, or your dependent for whom you claim an exemption. Hrblock freefile What tuition and fees are deductible?   Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. Hrblock freefile What Expenses Qualify The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Hrblock freefile Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period (defined earlier under Student Loan Interest Deduction ) beginning in 2013 or in the first 3 months of 2014. Hrblock freefile Payments with borrowed funds. Hrblock freefile   You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. Hrblock freefile Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. Hrblock freefile Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Hrblock freefile Student withdraws from class(es). Hrblock freefile   You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws. Hrblock freefile Qualified Education Expenses For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Hrblock freefile Eligible educational institution. Hrblock freefile   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. Hrblock freefile S. Hrblock freefile Department of Education. Hrblock freefile It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Hrblock freefile The educational institution should be able to tell you if it is an eligible educational institution. Hrblock freefile   Certain educational institutions located outside the United States also participate in the U. Hrblock freefile S. Hrblock freefile Department of Education's Federal Student Aid (FSA) programs. Hrblock freefile Academic period. Hrblock freefile    An academic period is any quarter, semester, trimester, or any other period of study as reasonably determined by an eligible educational institution. Hrblock freefile If an eligible educational institution uses credit hours and does not have academic terms, each payment period may be treated as an academic period. Hrblock freefile Related expenses. Hrblock freefile   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses for the tuition and fees deduction only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Hrblock freefile Prepaid expenses. Hrblock freefile   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring the tuition and fees deduction. Hrblock freefile See Academic period, earlier. Hrblock freefile For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring the tuition and fees deduction for 2013 only if you meet all the other requirements. Hrblock freefile    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 tuition and fees deduction. Hrblock freefile No Double Benefit Allowed You cannot do any of the following. Hrblock freefile Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense. Hrblock freefile Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year. Hrblock freefile Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). Hrblock freefile For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Hrblock freefile See Figuring the Taxable Portion of a Distribution in chapter 7 (Coverdell ESA) and chapter 8 (QTP) of Publication 970. Hrblock freefile Deduct qualified education expenses that have been paid with tax-free interest on U. Hrblock freefile S. Hrblock freefile savings bonds (Form 8815). Hrblock freefile See Figuring the Tax-Free Amount in chapter 10 of Publication 970. Hrblock freefile Deduct qualified education expenses that have been paid with tax-free educational assistance such as a scholarship, grant, or employer-provided educational assistance. Hrblock freefile See Adjustments to qualified education expenses, later. Hrblock freefile Adjustments to qualified education expenses. Hrblock freefile   For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Hrblock freefile The result is the amount of adjusted qualified education expenses for each student. Hrblock freefile Tax-free educational assistance. Hrblock freefile   For tax-free educational assistance you received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance to that academic period. Hrblock freefile See Academic period, earlier. Hrblock freefile   This includes: The tax-free part of scholarships and fellowships, including Pell grants (see chapter 1 of Publication 970), The tax-free part of any employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Hrblock freefile Generally, any scholarship or fellowship you receive is treated as tax-free educational assistance. Hrblock freefile However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent you include it in gross income (if you are required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Hrblock freefile 970, chapter 1. Hrblock freefile The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Hrblock freefile 970, chapter 1. Hrblock freefile You may be able to increase the combined value of your tuition and fees deduction and certain educational assistance if you include some or all of the educational assistance in income in the year it is received. Hrblock freefile For details, see Adjustments to Qualified Education Expenses in chapter 6 of Pub. Hrblock freefile 970. Hrblock freefile Some tax-free educational assistance received in 2013 may be treated as a refund of qualified education expenses paid in 2013. Hrblock freefile This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). Hrblock freefile If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. Hrblock freefile If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. Hrblock freefile Refunds. Hrblock freefile   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or may require you to include some or all of the refund in your gross income for the year the refund is received. Hrblock freefile See chapter 6 of Pub. Hrblock freefile 970 for more information. Hrblock freefile Some tax-free educational assistance received after 2013 may be treated as a refund. Hrblock freefile See Tax-free educational assistance, earlier. Hrblock freefile Refunds received in 2013. Hrblock freefile    For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Hrblock freefile Refunds received after 2013 but before your income tax return is filed. Hrblock freefile   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. Hrblock freefile Refunds received after 2013 and after your income tax return is filed. Hrblock freefile   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received after you file your 2013 income tax return, you may need to include some or all of the refund in your gross income for the year the refund is received. Hrblock freefile See chapter 6 of Pub. Hrblock freefile 970 for more information. Hrblock freefile Coordination with Coverdell education savings accounts and qualified tuition programs. Hrblock freefile    Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). Hrblock freefile For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Hrblock freefile Amounts that do not reduce qualified education expenses. Hrblock freefile   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Hrblock freefile   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. Hrblock freefile The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses. Hrblock freefile The use of the money is not restricted. Hrblock freefile Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. Hrblock freefile This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Hrblock freefile Sports, games, hobbies, and noncredit courses. Hrblock freefile   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. Hrblock freefile However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Hrblock freefile Comprehensive or bundled fees. Hrblock freefile   Some eligible educational institutions combine all of their fees for an academic period into one amount. Hrblock freefile If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. Hrblock freefile The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. Hrblock freefile See How Do You Figure the Deduction , later, for more information about Form 1098-T. Hrblock freefile Who Is an Eligible Student For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (defined earlier). Hrblock freefile Who Can Claim a Dependent's Expenses Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must: Have paid the expenses, and Claim an exemption for the student as a dependent. Hrblock freefile Table 19-3 summarizes who can claim the deduction. Hrblock freefile How Much Can You Deduct The maximum tuition and fees deduction in 2013 is $4,000, $2,000, or $0, depending on the amount of your MAGI. Hrblock freefile For details on figuring your MAGI, see chapter 6 of Publication 970. Hrblock freefile How Do You Figure the Deduction Figure the deduction using Form 8917. Hrblock freefile To help you figure your tuition and fees deduction, you should receive Form 1098-T, Tuition Statement. Hrblock freefile Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. Hrblock freefile To claim the deduction, enter the allowable amount on Form 1040, line 34, or Form 1040A, line 19, and attach your completed Form 8917. Hrblock freefile Table 19-3. Hrblock freefile Who Can Claim a Dependent's Expenses Do not rely on this table alone. Hrblock freefile See Who Can Claim a Dependent's Expenses in chapter 6 of Publication 970. Hrblock freefile IF your dependent is an eligible student and you. Hrblock freefile . Hrblock freefile . Hrblock freefile AND. Hrblock freefile . Hrblock freefile . Hrblock freefile THEN. Hrblock freefile . Hrblock freefile . Hrblock freefile claim an exemption for your dependent you paid all qualified education expenses for your dependent only you can deduct the qualified education expenses that you paid. Hrblock freefile Your dependent cannot take a deduction. Hrblock freefile claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Hrblock freefile do not claim an exemption for your dependent you paid all qualified education expenses no one is allowed to take a deduction. Hrblock freefile do not claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Hrblock freefile Educator Expenses If you were an eligible educator in 2013, you can deduct on Form 1040, line 23, or Form 1040A, line 16, up to $250 of qualified expenses you paid in 2013. Hrblock freefile If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Hrblock freefile However, neither spouse can deduct more than $250 of his or her qualified expenses on Form 1040, line 23, or Form 1040A, line 16. Hrblock freefile You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A (Form 1040), line 21. Hrblock freefile Eligible educator. Hrblock freefile   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. Hrblock freefile Qualified expenses. Hrblock freefile   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Hrblock freefile An ordinary expense is one that is common and accepted in your educational field. Hrblock freefile A necessary expense is one that is helpful and appropriate for your profession as an educator. Hrblock freefile An expense does not have to be required to be considered necessary. Hrblock freefile   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Hrblock freefile   You must reduce your qualified expenses by the following amounts. Hrblock freefile Excludable U. Hrblock freefile S. Hrblock freefile series EE and I savings bond interest from Form 8815. Hrblock freefile See Figuring the Tax-Free Amount in chapter 10 of Publication 970. Hrblock freefile Nontaxable qualified tuition program earnings or distributions. Hrblock freefile See Figuring the Taxable Portion of a Distribution in chapter 8 of Publication 970. Hrblock freefile Nontaxable distribution of earnings from a Coverdell education savings account. Hrblock freefile See Figuring the Taxable Portion of a Distribution in chapter 7 of Publication 970. Hrblock freefile Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2. 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The Hrblock Freefile

Hrblock freefile 1. Hrblock freefile   Tax Withholding for 2014 Table of Contents Introduction Useful Items - You may want to see: Salaries and WagesDetermining Amount of Tax Withheld Using Form W-4 Completing Form W-4 and Worksheets Getting the Right Amount of Tax Withheld Rules Your Employer Must Follow Exemption From Withholding Supplemental Wages Penalties Tips Taxable Fringe BenefitsSpecial rule. Hrblock freefile Exceptions. Hrblock freefile Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. Hrblock freefile Identical wagers. Hrblock freefile Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. Hrblock freefile Underreported interest or dividends. Hrblock freefile Introduction This chapter discusses income tax withholding on: Salaries and wages, Tips, Taxable fringe benefits, Sick pay, Pensions and annuities, Gambling winnings, Unemployment compensation, and Certain federal payments. Hrblock freefile This chapter explains in detail the rules for withholding tax from each of these types of income. Hrblock freefile The discussion of salaries and wages includes an explanation of how to complete Form W-4. Hrblock freefile This chapter also covers backup withholding on interest, dividends, and other payments. Hrblock freefile Useful Items - You may want to see: Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-4S Request for Federal Income Tax Withholding From Sick Pay W-4V Voluntary Withholding Request See chapter 5 of this publication for information about getting these publications and forms. Hrblock freefile Salaries and Wages Income tax is withheld from the pay of most employees. Hrblock freefile Your pay includes your regular pay, bonuses, commissions, and vacation allowances. Hrblock freefile It also includes reimbursements and other expense allowances paid under a nonaccountable plan. Hrblock freefile See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. Hrblock freefile If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. Hrblock freefile This is explained under Exemption From Withholding , later. Hrblock freefile You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. Hrblock freefile If your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed in chapter 2. Hrblock freefile Military retirees. Hrblock freefile   Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes, even though it is treated as a pension or annuity for other tax purposes. Hrblock freefile Household workers. Hrblock freefile   If you are a household worker, you can ask your employer to withhold income tax from your pay. Hrblock freefile A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. Hrblock freefile   Tax is withheld only if you want it withheld and your employer agrees to withhold it. Hrblock freefile If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. Hrblock freefile Farmworkers. Hrblock freefile   Generally, income tax is withheld from your cash wages for work on a farm unless your employer both: Pays you cash wages of less than $150 during the year, and Has expenditures for agricultural labor totaling less than $2,500 during the year. Hrblock freefile Differential wage payments. Hrblock freefile   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. Hrblock freefile Payments to an employee who is on active duty for a period of more than 30 days will be subject to income tax withholding, but not subject to social security or Medicare taxes. Hrblock freefile The wages and withholding will be reported on Form W-2, Wage and Tax Statement. Hrblock freefile Determining Amount of Tax Withheld Using Form W-4 The amount of income tax your employer withholds from your regular pay depends on two things. Hrblock freefile The amount you earn in each payroll period. Hrblock freefile The information you give your employer on Form W-4. Hrblock freefile Form W-4 includes four types of information that your employer will use to figure your withholding. Hrblock freefile Whether to withhold at the single rate or at the lower married rate. Hrblock freefile How many withholding allowances you claim (each allowance reduces the amount withheld). Hrblock freefile Whether you want an additional amount withheld. Hrblock freefile Whether you are claiming an exemption from withholding in 2014. Hrblock freefile See Exemption From Withholding , later. Hrblock freefile Note. Hrblock freefile You must specify a filing status and a number of withholding allowances on Form W-4. Hrblock freefile You cannot specify only a dollar amount of withholding. Hrblock freefile New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. Hrblock freefile Your employer should have copies of the form. Hrblock freefile If you need to change the information later, you must fill out a new form. Hrblock freefile If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. Hrblock freefile You may be able to avoid overwithholding if your employer agrees to use the part-year method. Hrblock freefile See Part-Year Method , later, for more information. Hrblock freefile Employee also receiving pension income. Hrblock freefile   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. Hrblock freefile However, you can choose to split your withholding allowances between your pension and job in any manner. Hrblock freefile Changing Your Withholding During the year changes may occur to your marital status, exemptions, adjustments, deductions, or credits you expect to claim on your tax return. Hrblock freefile When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. Hrblock freefile If the changes reduce the number of allowances you are allowed to claim or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days. Hrblock freefile See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. Hrblock freefile Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. Hrblock freefile See Table 1-1 for examples of personal and financial changes you should consider. Hrblock freefile Table 1-1. Hrblock freefile Personal and Financial Changes Factor Examples Lifestyle change Marriage Divorce Birth or adoption of child Loss of an exemption Purchase of a new home Retirement Filing chapter 11 bankruptcy Wage income You or your spouse start or stop working, or start or stop a second job Change in the amount of taxable income not subject to withholding Interest income Dividends Capital gains Self-employment income IRA (including certain Roth  IRA) distributions Change in the amount of adjustments to income IRA deduction Student loan interest deduction Alimony expense Change in the amount of itemized deductions or tax credits Medical expenses Taxes Interest expense Gifts to charity Job expenses Dependent care expenses Education credit Child tax credit Earned income credit If you change the number of your withholding allowances, you can request that your employer withhold using the Cumulative Wage Method , explained later. Hrblock freefile Checking Your Withholding After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too much or too little. Hrblock freefile If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. Hrblock freefile You can get a blank Form W-4 from your employer or print the form from IRS. Hrblock freefile gov. Hrblock freefile You should try to have your withholding match your actual tax liability. Hrblock freefile If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. Hrblock freefile If too much tax is withheld, you will lose the use of that money until you get your refund. Hrblock freefile Always check your withholding if there are personal or financial changes in your life or changes in the law that might change your tax liability. Hrblock freefile See Table 1-1 for examples. Hrblock freefile Note. Hrblock freefile You cannot give your employer a payment to cover federal income tax withholding on salaries and wages for past pay periods or a payment for estimated tax. Hrblock freefile When Should You Check Your Withholding? The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld. Hrblock freefile You should check your withholding when any of the following situations occur. Hrblock freefile You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. Hrblock freefile You prepare your 2013 tax return and get a: Big refund, or Balance due that is: More than you can comfortably pay, or Subject to a penalty. Hrblock freefile There are changes in your life or financial situation that affect your tax liability. Hrblock freefile See Table 1-1. Hrblock freefile There are changes in the tax law that affect your tax liability. Hrblock freefile How Do You Check Your Withholding? You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld. Hrblock freefile You can also use the IRS Withholding calculator at www. Hrblock freefile irs. Hrblock freefile gov/individuals. Hrblock freefile If you use the worksheets and tables in this publication, follow these steps. Hrblock freefile Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. Hrblock freefile Fill out Worksheet 1-7 to project your total federal withholding for 2014 and compare that with your projected tax liability from Worksheet 1-5. Hrblock freefile If you are not having enough tax withheld, line 6 of Worksheet 1-7 will show you how much more to have withheld each payday. Hrblock freefile For ways to increase the amount of tax withheld, see How Do You Increase Your Withholding? If line 5 of Worksheet 1-7 shows that you are having more tax withheld than necessary, see How Do You Decrease Your Withholding, for ways to decrease the amount of tax you have withheld each payday. Hrblock freefile How Do You Increase Your Withholding? There are two ways to increase your withholding. Hrblock freefile You can: Decrease the number of allowances you claim on Form W-4, or Enter an additional amount that you want withheld from each paycheck on Form W-4. Hrblock freefile Requesting an additional amount withheld. Hrblock freefile   You can request that an additional amount be withheld from each paycheck by following these steps. Hrblock freefile Complete Worksheets 1-5 and 1-7. Hrblock freefile Complete a new Form W-4 if the amount on Worksheet 1-7, line 5: Is more than you want to pay with your tax return or in estimated tax payments throughout the year, or Would cause you to pay a penalty when you file your tax return for 2014. Hrblock freefile Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. Hrblock freefile This is the number of allowances you entered on the last Form W-4 you gave your employer. Hrblock freefile Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. Hrblock freefile Give your newly completed Form W-4 to your employer. Hrblock freefile   If you have this additional amount withheld from your pay each payday, you should avoid owing a large amount at the end of the year. Hrblock freefile Example. Hrblock freefile Early in 2014, Steve Miller used Worksheets 1-5, 1-6, and 1-7 to project his 2014 tax liability ($4,316) and his withholding for the year ($3,516). Hrblock freefile Steve's tax will be underwithheld by $800 ($4,316 − $3,516). Hrblock freefile His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. Hrblock freefile Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. Hrblock freefile Steve completes the new Form W-4 as before, entering the same number of withholding allowances as before, but, in addition, entering $16 ($800 ÷ 50) on the form as the additional amount to be withheld from his pay each payday. Hrblock freefile He gives the completed form to his employer. Hrblock freefile What if I have more than one job or my spouse also has a job?   You are more likely to need to increase your withholding if you have more than one job or if you are married filing jointly and your spouse also works. Hrblock freefile If this is the case, you can increase your withholding for one or more of the jobs. Hrblock freefile   You can apply the amount on Worksheet 1-7, line 5, to only one job or divide it between the jobs any way you wish. Hrblock freefile For each job, determine the extra amount that you want to apply to that job and divide that amount by the number of paydays remaining in 2014 for that job. Hrblock freefile This will give you the additional amount to enter on the Form W-4 you will file for that job. Hrblock freefile You need to give your employer a new Form W-4 for each job for which you are changing your withholding. Hrblock freefile Example. Hrblock freefile Meg Green works in a store and earns $46,000 a year. Hrblock freefile Her husband, John, works full-time in manufacturing and earns $68,000 a year. Hrblock freefile In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. Hrblock freefile They expect to file a joint income tax return. Hrblock freefile Meg and John complete Worksheets 1-5, 1-6, and 1-7. Hrblock freefile Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. Hrblock freefile They can divide the $4,459 any way they want. Hrblock freefile They can enter an additional amount on either of their Forms W-4, or divide it between them. Hrblock freefile They decide to have the additional amount withheld from John's wages, so they enter $91 ($4,459 ÷ 49 remaining paydays) on his Form W-4. Hrblock freefile Both claim the same number of allowances as before. Hrblock freefile How Do You Decrease Your Withholding? If your completed Worksheets 1-5 and 1-7 show that you may have more tax withheld than your projected tax liability for 2014, you may be able to decrease your withholding. Hrblock freefile There are two ways to do this. Hrblock freefile You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. Hrblock freefile You can claim only the number of allowances to which you are entitled. Hrblock freefile To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. Hrblock freefile Increasing the number of allowances. Hrblock freefile   Figure and increase the number of withholding allowances you can claim as follows. Hrblock freefile On a new Form W-4, complete the Personal Allowances Worksheet. Hrblock freefile If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. Hrblock freefile If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. Hrblock freefile If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. Hrblock freefile If the number of allowances you can claim on Form W-4, is different from the number you already are claiming, give the newly completed Form W-4 to your employer. Hrblock freefile Converting Credits to Withholding Allowances Table 1-2 , later, shows many of the tax credits you may be able to use to decrease your withholding. Hrblock freefile The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. Hrblock freefile Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. Hrblock freefile Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. Hrblock freefile Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. Hrblock freefile If you take the child and dependent care credit into account on Worksheet 1-8, enter -0- on line F of the Personal Allowances Worksheet. Hrblock freefile If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. Hrblock freefile Example. Hrblock freefile Brett and Alyssa Davis are married and expect to file a joint return for 2014. Hrblock freefile Their expected taxable income from all sources is $68,000. Hrblock freefile They expect to have $15,900 of itemized deductions. Hrblock freefile Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. Hrblock freefile The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. Hrblock freefile Line 1, expected child and dependent care credit—$960. Hrblock freefile Line 9, expected adoption credit—$1,500. Hrblock freefile Line 10, total estimated tax credits—$2,460. Hrblock freefile Line 11. Hrblock freefile Their combined total income from all sources, $68,000, falls between $42,001 and $98,000 on the table for married filing jointly or qualifying widow(er). Hrblock freefile The number to the right of this range is 6. Hrblock freefile 7. Hrblock freefile Line 12, multiply line 10 by line 11—$16,482. Hrblock freefile Then the Davis' complete the Form W-4 worksheets. Hrblock freefile Because they choose to account for their child and dependent care credit on the Deductions and Adjustments Worksheet, they enter -0- on line F of the Personal Allowances Worksheet and figure a new total for line H. Hrblock freefile They take the result on line 12 of Worksheet 1-8, add it to their other adjustments on line 5 of the Form W-4 Deductions and Adjustments Worksheet, and complete the Form W-4 worksheets. Hrblock freefile When Will Your New Form W-4 Go Into Effect? If the change is for the current year, your employer must put your new Form W-4 into effect no later than the start of the first payroll period ending on or after the 30th day after the day on which you give your employer your revised Form W-4. Hrblock freefile If the change is for next year, your new Form W-4 will not take effect until next year. Hrblock freefile Retirees Returning to the Workforce When you first began receiving your pension, you told the payer how much tax to withhold, if any, by completing Form W-4P, Withholding Certificate for Pension or Annuity Payments (or similar form). Hrblock freefile However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. Hrblock freefile You completed either form based on your projected income at that time. Hrblock freefile Now that you are returning to the workforce, your new Form W-4 (given to your employer) and your Form W-4 or W-4P (on file with your pension plan) must work together to determine the correct amount of withholding for your new amount of income. Hrblock freefile The worksheets that come with Forms W-4 and W-4P are basically the same, so you can use either set of worksheets to figure out how many withholding allowances you are entitled to claim. Hrblock freefile Start off with the Personal Allowances Worksheet. Hrblock freefile Then, if you will be itemizing your deductions, claiming adjustments to income, or claiming tax credits when you file your tax return, complete the Deductions and Adjustments Worksheet. Hrblock freefile The third worksheet is the most important for this situation. Hrblock freefile Form W-4 calls it the Two-Earners/Multiple Jobs Worksheet, Form W-4P calls it the Multiple Pensions/More-Than-One-Income Worksheet—both are the same. Hrblock freefile If you have more than one source of income, in order to have enough withholding to cover the tax on your higher income, you may need to claim fewer withholding allowances or request your employer to withhold an additional amount from each paycheck. Hrblock freefile Once you have figured out how many allowances you are entitled to claim, look at the income from both your pension and your new job, and how often you receive payments. Hrblock freefile It is your decision how to divide up your withholding allowances between these sources of income. Hrblock freefile For example, you may want to “take home” most of your weekly paycheck to use as spending money and use your monthly pension to “pay the bills. Hrblock freefile ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. Hrblock freefile There are a couple of ways you can get a better idea of how much tax will be withheld when claiming a certain number of allowances. Hrblock freefile Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. Hrblock freefile Contact your pension provider and your employer's payroll department. Hrblock freefile And remember, this is not a final decision. Hrblock freefile If you do not get the correct amount of withholding with the first Forms W-4 and W-4P you submit, you should refigure your allowances (or divide them differently) using the information and worksheets in this publication, or the resources mentioned above. Hrblock freefile You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. Hrblock freefile You may need more tax withheld, or you may need less. Hrblock freefile Table 1-2. Hrblock freefile Tax Credits for 2014 For more information about the . Hrblock freefile . Hrblock freefile . Hrblock freefile See . Hrblock freefile . Hrblock freefile . Hrblock freefile Adoption credit Form 8839 instructions Child and dependent care expenses, credit for Publication 503, Child and Dependent Care Expenses Child tax credit (including the additional child tax credit) Instructions for Form 1040 or Form 1040A Earned income credit Publication 596, Earned Income Credit Education credits Publication 970, Tax Benefits for Education Elderly or the disabled, credit for the Publication 524, Credit for the Elderly or the Disabled Foreign tax credit (except any credit that applies to wages not subject to U. Hrblock freefile S. Hrblock freefile income tax withholding because they are subject to income tax withholding by a foreign country) Publication 514, Foreign Tax Credit for Individuals General business credit Form 3800, General Business Credit Mortgage interest credit Publication 530, Tax Information for First-Time Homeowners Qualified electric vehicle passive activity credit Form 8834 Prior year minimum tax, credit for (if you paid alternative minimum tax in an earlier year) Form 8801 instructions Retirement savings contributions credit (saver's credit) Publication 590, Individual Retirement Arrangements (IRAs) Tax credit bonds, credit to holders of Form 8912 instructions Completing Form W-4 and Worksheets When reading the following discussion, you may find it helpful to refer to Form W-4. Hrblock freefile Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. Hrblock freefile Everyone else must have tax withheld at the higher single rate. Hrblock freefile Single. Hrblock freefile   You must check the “Single” box if any of the following applies. Hrblock freefile You are single. Hrblock freefile If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. Hrblock freefile You are married, but neither you nor your spouse is a citizen or resident of the United States. Hrblock freefile You are married, either you or your spouse is a nonresident alien, and you have not chosen to have that person treated as a resident alien for tax purposes. Hrblock freefile For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Hrblock freefile Married. Hrblock freefile   You qualify to check the “Married” box if any of the following applies. Hrblock freefile You are married and neither you nor your spouse is a nonresident alien. Hrblock freefile You are considered married for the whole year even if your spouse died during the year. Hrblock freefile You are married and either you or your spouse is a nonresident alien who has chosen to be treated as a resident alien for tax purposes. Hrblock freefile For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Hrblock freefile You expect to be able to file your return as a qualifying widow or widower. Hrblock freefile You usually can use this filing status if your spouse died within the previous 2 years and you provide more than half the cost of keeping up a home for the entire year that was the main home for you and your child whom you can claim as a dependent. Hrblock freefile However, you must file a new Form W-4 showing your filing status as single by December 1 of the last year you are eligible to file as a qualifying widow or widower. Hrblock freefile For more information on this filing status, see Qualifying Widow(er) With Dependent Child under Filing Status in Publication 501, Exemptions, Standard Deduction, and Filing Information. Hrblock freefile Married, but withhold at higher single rate. Hrblock freefile   Some married people find that they do not have enough tax withheld at the married rate. Hrblock freefile This can happen, for example, when both spouses work. Hrblock freefile To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). Hrblock freefile Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. Hrblock freefile Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. Hrblock freefile You will have the most tax withheld if you claim “0” allowances. Hrblock freefile The number of allowances you can claim depends on the following factors. Hrblock freefile How many exemptions you can take on your tax return. Hrblock freefile Whether you have income from more than one job. Hrblock freefile What deductions, adjustments to income, and credits you expect to have for the year. Hrblock freefile Whether you will file as head of household. Hrblock freefile If you are married (filing jointly), it also depends on whether your spouse also works and claims any allowances on his or her own Form W-4. Hrblock freefile Or, if married filing separately, whether or not your spouse also works. Hrblock freefile Form W-4 worksheets. Hrblock freefile    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. Hrblock freefile The worksheets are for your own records. Hrblock freefile Do not give them to your employer. Hrblock freefile   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. Hrblock freefile If you are married and will file a joint return, complete only one set of worksheets for you and your spouse, even if you both earn wages and each must give Form W-4 to your employers. Hrblock freefile Complete separate sets of worksheets only if you and your spouse will file separate returns. Hrblock freefile   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. Hrblock freefile Also, use the worksheets on page 2 of the form to adjust the number of your withholding allowances for itemized deductions and adjustments to income, and for two-earner or multiple-job situations. Hrblock freefile If you want to adjust the number of your withholding allowances for certain tax credits, use the Deductions and Adjustments Worksheet on page 2 of Form W-4, even if you do not have any deductions or adjustments. Hrblock freefile   Complete all worksheets that apply to your situation. Hrblock freefile The worksheets will help you figure the maximum number of withholding allowances you are entitled to claim so that the amount of income tax withheld from your wages will match, as closely as possible, the amount of income tax you will owe at the end of the year. Hrblock freefile Multiple jobs. Hrblock freefile   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Hrblock freefile Then split your allowances between the Forms W-4 for each job. Hrblock freefile You cannot claim the same allowances with more than one employer at the same time. Hrblock freefile You can claim all your allowances with one employer and none with the other(s), or divide them any other way. Hrblock freefile Married individuals. Hrblock freefile   If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Hrblock freefile Use only one set of worksheets. Hrblock freefile You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. Hrblock freefile   If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on your own individual income, adjustments, deductions, exemptions, and credits. Hrblock freefile Alternative method of figuring withholding allowances. Hrblock freefile   You do not have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding allowances. Hrblock freefile   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. Hrblock freefile It must take into account only the items of income, adjustments to income, deductions, and tax credits that are taken into account on Form W-4. Hrblock freefile   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. Hrblock freefile You still must give your employer a Form W-4 claiming your withholding allowances. Hrblock freefile Employees who are not citizens or residents. Hrblock freefile   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. Hrblock freefile However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. Hrblock freefile S. Hrblock freefile national. Hrblock freefile It also does not apply if your spouse is a U. Hrblock freefile S. Hrblock freefile citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. Hrblock freefile Special rules apply to residents of South Korea and India. Hrblock freefile For more information, see Withholding From Compensation in chapter 8 of Publication 519. Hrblock freefile Personal Allowances Worksheet Use the Personal Allowances Worksheet on page 1 of Form W-4 to figure your withholding allowances based on all of the following that apply. Hrblock freefile Exemptions. Hrblock freefile Only one job. Hrblock freefile Head of household filing status. Hrblock freefile Child and dependent care credit. Hrblock freefile Child tax credit. Hrblock freefile Exemptions (worksheet lines A, C, and D). Hrblock freefile   You can claim one withholding allowance for each exemption you expect to claim on your tax return. Hrblock freefile Self. Hrblock freefile   You can claim an allowance for your exemption on line A unless another person can claim an exemption for you on his or her tax return. Hrblock freefile If another person is entitled to claim an exemption for you, you cannot claim an allowance for your exemption even if the other person will not claim your exemption. Hrblock freefile Spouse. Hrblock freefile   You can claim an allowance for your spouse's exemption on line C unless your spouse is claiming his or her own exemption or another person can claim an exemption for your spouse. Hrblock freefile Do not claim this allowance if you and your spouse expect to file separate returns. Hrblock freefile Dependents. Hrblock freefile   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. Hrblock freefile Only one job (worksheet line B). Hrblock freefile    You can claim an additional withholding allowance if any of the following apply for 2014. Hrblock freefile You are single and you have only one job at a time. Hrblock freefile You are married, you have only one job at a time, and your spouse does not work. Hrblock freefile Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. Hrblock freefile If you qualify for this allowance, enter “1” on line B of the worksheet. Hrblock freefile Head of household filing status (worksheet line E). Hrblock freefile   Generally, you can file as head of household if you are unmarried and pay more than half the cost of keeping up a home that: Was the main home for all of 2014 of your parent whom you can claim as a dependent, or You lived in for more than half the year with your qualifying child or any other person you can claim as a dependent. Hrblock freefile For more information, see Publication 501. Hrblock freefile   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. Hrblock freefile Reduction of personal allowances. Hrblock freefile   For 2014, your deduction for personal exemptions on your tax return is reduced if your adjusted gross income (AGI) is more than the AGI shown next for your filing status. Hrblock freefile Personal Allowance Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1-1 to figure your reduced number of personal allowances on lines A, C, and D of the Personal Allowances Worksheet. Hrblock freefile Worksheet 1-1. Hrblock freefile Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. Hrblock freefile Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. Hrblock freefile   2. Hrblock freefile Enter your expected AGI 2. Hrblock freefile       3. Hrblock freefile Enter $254,200 if single $305,050 if married filing jointly or qualifying widow(er) $152,525 if married filing separately $279,650 if head of household 3. Hrblock freefile       4. Hrblock freefile Subtract line 3 from line 2 4. Hrblock freefile       5. Hrblock freefile Divide line 4 by $125,000 ($62,500 if married filing separately). Hrblock freefile Enter the result as a decimal 5. Hrblock freefile   6. Hrblock freefile Multiply line 1 by line 5. Hrblock freefile If the result is not a whole number, increase it to the next higher whole number 6. Hrblock freefile   7. Hrblock freefile Subtract line 6 from line 1. Hrblock freefile The total of the numbers you enter on A, C, and D of the Personal Allowances Worksheet can not be more than this amount 7. Hrblock freefile     Child and dependent care credit (worksheet line F). Hrblock freefile   Enter “1” on line F if you expect to claim a credit for at least $2,000 of qualifying child or dependent care expenses on your 2014 return. Hrblock freefile Generally, qualifying expenses are those you pay for the care of your dependent who is your qualifying child under age 13 or for your spouse or dependent who is not able to care for himself or herself so that you can work or look for work. Hrblock freefile For more information, see Publication 503, Child and Dependent Care Expenses. Hrblock freefile   Instead of using line F, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Hrblock freefile Child tax credit (worksheet line G). Hrblock freefile   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. Hrblock freefile Subtract “1” from that amount if you have three to six eligible children. Hrblock freefile Subtract “2” from that amount if you have seven or more eligible children. Hrblock freefile   If your total income will be between $65,000 and $84,000 ($95,000 and $119,000 if married), enter “1” on line G for each eligible child. Hrblock freefile   An eligible child is any child: Who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Who will be under age 17 at the end of 2014, Who is younger than you (or your spouse if filing jointly) or permanently and totally disabled, Who will not provide over half of his or her own support for 2014, Who will not file a joint return, unless the return is filed only as a claim for refund, Who will live with you for more than half of 2014, Who is a U. Hrblock freefile S. Hrblock freefile citizen, U. Hrblock freefile S. Hrblock freefile national, or U. Hrblock freefile S. Hrblock freefile resident alien, and Who will be claimed as a dependent on your return. Hrblock freefile If you are a U. Hrblock freefile S. Hrblock freefile citizen or U. Hrblock freefile S. Hrblock freefile national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. Hrblock freefile   Also, if any other person can claim the child as an eligible child, see Qualifying child of more than one person in the 2013 instructions for Form 1040 or 1040A, line 6c. Hrblock freefile   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. Hrblock freefile   Instead of using line G, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Hrblock freefile Total personal allowances (worksheet line H). Hrblock freefile    Add lines A through G and enter the total on line H. Hrblock freefile If you do not use either of the worksheets on the back of Form W-4, enter the number from line H on line 5 of Form W-4. Hrblock freefile Deductions and Adjustments Worksheet Use the Deductions and Adjustments Worksheet on page 2 of Form W-4 if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2014 tax return and you want to reduce your withholding. Hrblock freefile Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. Hrblock freefile Use the amount of each item you reasonably can expect to show on your return. Hrblock freefile However, do not use more than: The amount shown for that item on your 2013 return (or your 2012 return if you have not yet filed your 2013 return), plus Any additional amount related to a transaction or occurrence (such as payments already made, the signing of an agreement, or the sale of property) that you can prove has happened or will happen during 2013 or 2014. Hrblock freefile Do not include any amount shown on your last tax return that has been disallowed by the IRS. Hrblock freefile Example. Hrblock freefile On June 30, 2013, you bought your first home. Hrblock freefile On your 2013 tax return, you claimed itemized deductions of $6,600, the total mortgage interest and real estate tax you paid during the 6 months you owned your home. Hrblock freefile Based on your mortgage payment schedule and your real estate tax assessment, you reasonably can expect to claim deductions of $13,200 for those items on your 2014 return. Hrblock freefile You can use $13,200 to figure the number of your withholding allowances for itemized deductions. Hrblock freefile Not itemizing deductions. Hrblock freefile   If you expect to claim the standard deduction on your tax return, skip lines 1 and 2, and enter “0” on line 3 of the worksheet. Hrblock freefile Itemized deductions (worksheet line 1). Hrblock freefile   Enter your estimated total itemized deductions on line 1 of the worksheet. Hrblock freefile   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. Hrblock freefile You normally claim these deductions on Schedule A of Form 1040. Hrblock freefile Medical and dental expenses that are more than 10% (7. Hrblock freefile 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). Hrblock freefile State and local income or property taxes. Hrblock freefile Deductible home mortgage interest. Hrblock freefile Investment interest up to net investment income. Hrblock freefile Charitable contributions. Hrblock freefile Casualty and theft losses that are more than $100 and 10% of your AGI. Hrblock freefile Fully deductible miscellaneous itemized deductions, including: Impairment-related work expenses of persons with disabilities, Federal estate tax on income in respect of a decedent, Repayment of more than $3,000 of income held under a claim of right that you included in income in an earlier year because at the time you thought you had an unrestricted right to it, Unrecovered investments in an annuity contract under which payments have ceased because of the annuitant's death, Gambling losses up to the amount of gambling winnings reported on your return, and Casualty and theft losses from  income-producing property. Hrblock freefile Other miscellaneous itemized deductions that are more than 2% of your AGI, including: Unreimbursed employee business expenses, such as education expenses, work clothes and uniforms, union dues and fees, and the cost of work-related small tools and supplies, Safe deposit box rental, Tax counsel and assistance, and Certain fees paid to an IRA trustee or custodian. Hrblock freefile AGI. Hrblock freefile   For the purpose of estimating your itemized deductions, your AGI is your estimated total income for 2014 minus any estimated adjustments to income (discussed later) that you include on line 4 of the Deductions and Adjustments Worksheet. Hrblock freefile Phaseout of itemized deductions. Hrblock freefile   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. Hrblock freefile    Itemized Deduction Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1–2 to figure your reduction in itemized deductions. Hrblock freefile Worksheet 1-2. Hrblock freefile Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. Hrblock freefile Enter the estimated total of your itemized deductions 1. Hrblock freefile   2. Hrblock freefile Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. Hrblock freefile   3. Hrblock freefile Is the amount on line 2 less than the amount on line 1? ❑ No. Hrblock freefile Stop here. Hrblock freefile Your deduction is not limited. Hrblock freefile Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Hrblock freefile  ❑ Yes. Hrblock freefile Subtract line 2 from line 1. Hrblock freefile 3. Hrblock freefile       4. Hrblock freefile Multiply line 3 by 80% (. Hrblock freefile 80) 4. Hrblock freefile       5. Hrblock freefile Enter your expected AGI 5. Hrblock freefile       6. Hrblock freefile Enter $305,050 If married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately 6. Hrblock freefile   7. Hrblock freefile Is the amount on line 6 less than the amount on line 5? ❑ No. Hrblock freefile Stop here. Hrblock freefile Your deduction is not limited. Hrblock freefile Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Hrblock freefile  ❑ Yes. Hrblock freefile Subtract line 6 from line 5. Hrblock freefile 7. Hrblock freefile       8. Hrblock freefile Multiply line 7 by 3% (. Hrblock freefile 03) 8. Hrblock freefile       9. Hrblock freefile Enter the smaller of line 4 or line 8 9. Hrblock freefile     10. Hrblock freefile Subtract line 9 from line 1. Hrblock freefile Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. Hrblock freefile     Adjustments to income (worksheet line 4). Hrblock freefile   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. Hrblock freefile   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. Hrblock freefile These adjustments appear on page 1 of your Form 1040 or 1040A. Hrblock freefile Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. Hrblock freefile Net operating loss carryovers. Hrblock freefile Certain business expenses of reservists, performing artists, and fee-based government officials. Hrblock freefile Health savings account or medical savings account deduction. Hrblock freefile Certain moving expenses. Hrblock freefile Deduction for self-employment tax. Hrblock freefile Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. Hrblock freefile Self-employed health insurance deduction. Hrblock freefile Penalty on early withdrawal of savings. Hrblock freefile Alimony paid. Hrblock freefile IRA deduction. Hrblock freefile Student loan interest deduction. Hrblock freefile Jury duty pay given to your employer. Hrblock freefile Reforestation amortization and expenses. Hrblock freefile Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. Hrblock freefile Repayment of certain supplemental unemployment benefits. Hrblock freefile Contributions to IRC 501(c)(18)(D) pension plans. Hrblock freefile Contributions by certain chaplains to IRC 403(b) plans. Hrblock freefile Attorney fees and court costs for certain unlawful discrimination claims. Hrblock freefile Attorney fees and court costs for certain whistleblower awards. Hrblock freefile Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). Hrblock freefile Tax credits (worksheet line 5). Hrblock freefile   Although you can take most tax credits into account when figuring withholding allowances, the Personal Allowances Worksheet uses only the child and dependent care credit (line F) and the child tax credit (line G). Hrblock freefile But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. Hrblock freefile   If you take the child and dependent care credit into account on line 5, do not use line F. Hrblock freefile If you take the child tax credit into account on line 5, do not use line G. Hrblock freefile   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. Hrblock freefile See the individual tax form instructions for more details. Hrblock freefile Foreign tax credit, except any credit that applies to wages not subject to U. Hrblock freefile S. Hrblock freefile income tax withholding because they are subject to income tax withholding by a foreign country. Hrblock freefile See Publication 514, Foreign Tax Credit for Individuals. Hrblock freefile Credit for the elderly or the disabled. Hrblock freefile See Publication 524, Credit for the Elderly or the Disabled. Hrblock freefile Education credits. Hrblock freefile See Publication 970, Tax Benefits for Education. Hrblock freefile Retirement savings contributions credit (saver's credit). Hrblock freefile See Publication 590. Hrblock freefile Mortgage interest credit. Hrblock freefile See Publication 530, Tax Information for Homeowners. Hrblock freefile Adoption credit. Hrblock freefile See the Instructions for Form 8839. Hrblock freefile Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. Hrblock freefile See the Instructions for Form 8801. Hrblock freefile General business credit. Hrblock freefile See the Instructions for Form 3800. Hrblock freefile Earned income credit. Hrblock freefile See Publication 596. Hrblock freefile Figuring line 5 entry. Hrblock freefile   To figure the amount to add on line 5 for tax credits, multiply your estimated total credits by the appropriate number from Table 1-3 . Hrblock freefile Example. Hrblock freefile You are married and expect to file a joint return for 2014. Hrblock freefile Your combined estimated wages are $68,000. Hrblock freefile Your estimated tax credits include a child and dependent care credit of $960 and a mortgage interest credit of $1,700 (total credits = $2,660). Hrblock freefile In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. Hrblock freefile 7. Hrblock freefile Multiply your total estimated tax credits of $2,660 by 6. Hrblock freefile 7. Hrblock freefile Add the result, $17,822, to the amount you otherwise would show on line 5 of the Deductions and Adjustments Worksheet and enter the total on line 5. Hrblock freefile Because you choose to account for your child and dependent care credit this way, do not make an entry on line F of the Personal Allowances Worksheet. Hrblock freefile Nonwage income (worksheet line 6). Hrblock freefile   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). Hrblock freefile Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. Hrblock freefile   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. Hrblock freefile See Getting the Right Amount of Tax Withheld , later. Hrblock freefile Net deductions and adjustments (worksheet line 8). Hrblock freefile    If line 7 is less than $3,950, enter “0” on line 8. Hrblock freefile If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. Hrblock freefile Example. Hrblock freefile If line 7 is $5,200, $5,200 ÷ $3,950 = 1. Hrblock freefile 32. Hrblock freefile Drop the fraction (. Hrblock freefile 32) and enter “1” on line 8. Hrblock freefile Two-Earners/Multiple Jobs Worksheet Complete the Two-Earners/Multiple Jobs Worksheet on page 2 of Form W-4 if you have more than one job or are married and you and your spouse both work and the combined earnings from all jobs are more than $50,000 ($20,000 if married). Hrblock freefile Reducing your allowances (worksheet lines 1-3). Hrblock freefile   On line 1 of the worksheet, enter the number from line H of the Personal Allowances Worksheet (or line 10 of the Deductions and Adjustments Worksheet, if used). Hrblock freefile Using Table 1 in the Two-Earners/Multiple Jobs Worksheet, find the number listed beside the amount of your estimated wages for the year from your lowest paying job (or if lower and you are filing jointly, your spouse's job). Hrblock freefile Enter that number on line 2. Hrblock freefile However, if you are married filing jointly and estimated wages from the highest paying job are $65,000 or less, do not enter more than “3. Hrblock freefile ”    Table 1-3. Hrblock freefile Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. Hrblock freefile  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. Hrblock freefile 0 $42,001 – 98,000 6. Hrblock freefile 7 $98,001 – 180,000 4. Hrblock freefile 0 $180,001 – 270,000 3. Hrblock freefile 6 $270,001 – 440,000 3. Hrblock freefile 0 $440,001 – 490,000. Hrblock freefile . Hrblock freefile . Hrblock freefile . Hrblock freefile 2. Hrblock freefile 9 $490,001 and over 2. Hrblock freefile 5 b. Hrblock freefile  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. Hrblock freefile 0 $19,001 – 47,000 6. Hrblock freefile 7 $47,001 – 104,000 4. Hrblock freefile 0 $104,001 – 205,000 3. Hrblock freefile 6 $205,001 – 430,000 3. Hrblock freefile 0 $430,001 and over 2. Hrblock freefile 5 c. Hrblock freefile  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. Hrblock freefile 0 $30,001 – 66,000 6. Hrblock freefile 7 $66,001 – 150,000 4. Hrblock freefile 0 $150,001 – 235,000 3. Hrblock freefile 6 $235,001 – 430,000 3. Hrblock freefile 0 $430,001 – 460,000 2. Hrblock freefile 9 $460,001 and over 2. Hrblock freefile 5 d. Hrblock freefile  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. Hrblock freefile 0 $21,001 – 49,000 6. Hrblock freefile 7 $49,001 – 90,000 4. Hrblock freefile 0 $90,001 – 135,000 3. Hrblock freefile 6 $135,001 – 220,000 3. Hrblock freefile 0 $220,001 – 245,000 2. Hrblock freefile 9 $245,001 and over 2. Hrblock freefile 5   Subtract line 2 from line 1 and enter the result (but not less than zero) on line 3 and on Form W-4, line 5. Hrblock freefile If line 1 is more than or equal to line 2, do not use the rest of the worksheet. Hrblock freefile   If line 1 is less than line 2, enter “0” on Form W-4, line 5. Hrblock freefile Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. Hrblock freefile Other amounts owed. Hrblock freefile   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. Hrblock freefile The total is the additional withholding needed for the year. Hrblock freefile Getting the Right Amount of Tax Withheld In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules. Hrblock freefile You accurately complete all the Form W-4 worksheets that apply to you. Hrblock freefile You give your employer a new Form W-4 when changes occur. Hrblock freefile But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. Hrblock freefile This is most likely to happen in the following situations. Hrblock freefile You are married and both you and your spouse work. Hrblock freefile You have more than one job at a time. Hrblock freefile You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. Hrblock freefile You will owe additional amounts with your return, such as self-employment tax. Hrblock freefile Your withholding is based on obsolete Form W-4 information for a substantial part of the year. Hrblock freefile Your earnings are more than $130,000 if you are single or $180,000 if you are married. Hrblock freefile You work only part of the year. Hrblock freefile You change the number of your withholding allowances during the year. Hrblock freefile You are subject to Additional Medicare Tax or Net Investment Income Tax. Hrblock freefile If you anticipate liability for Additional Medicare Tax or Net Investment Income Tax, you may request that your employer withhold an additional amount of income tax withholding on Form W-4. Hrblock freefile Part-Year Method If you work only part of the year and your employer agrees to use the part-year withholding method, less tax will be withheld from each wage payment than would be withheld if you worked all year. Hrblock freefile To be eligible for the part-year method, you must meet both of the following requirements. Hrblock freefile You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. Hrblock freefile You cannot use a fiscal year. Hrblock freefile You must not expect to be employed for more than 245 days during the year. Hrblock freefile To figure this limit, count all calendar days that you are employed (including weekends, vacations, and sick days) beginning with the first day you are on the job for pay and ending with your last day of work. Hrblock freefile If you are temporarily laid off for 30 days or less, count those days too. Hrblock freefile If you are laid off for more than 30 days, do not count those days. Hrblock freefile You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. Hrblock freefile How to apply for the part-year method. Hrblock freefile   You must ask your employer in writing to use this method. Hrblock freefile The request must state all three of the following. Hrblock freefile The date of your last day of work for any prior employer during the current calendar year. Hrblock freefile That you do not expect to be employed more than 245 days during the current calendar year. Hrblock freefile That you use the calendar year as your tax year. Hrblock freefile Cumulative Wage Method If you change the number of your withholding allowances during the year, too much or too little tax may have been withheld for the period before you made the change. Hrblock freefile You may be able to compensate for this if your employer agrees to use the cumulative wage withholding method for the rest of the year. Hrblock freefile You must ask your employer in writing to use this method. Hrblock freefile To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. Hrblock freefile ) since the beginning of the year. Hrblock freefile Aids for Figuring Your Withholding IRS Withholding Calculator. Hrblock freefile   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. Hrblock freefile Go to www. Hrblock freefile irs. Hrblock freefile gov/Individuals/IRS-Withholding-Calculator. Hrblock freefile It can help you determine the correct amount to be withheld any time during the year. Hrblock freefile Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. Hrblock freefile These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. Hrblock freefile New Form W-4. Hrblock freefile   When you start a new job, your employer should give you a Form W-4 to fill out. Hrblock freefile Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. Hrblock freefile   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. Hrblock freefile The deadline for putting it into effect is the start of the first payroll period ending 30 or more days after you turn it in. Hrblock freefile No Form W-4. Hrblock freefile   If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate, as if you were single and claimed no withholding allowances. Hrblock freefile Repaying withheld tax. Hrblock freefile   If you find you are having too much tax withheld because you did not claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. Hrblock freefile Your employer cannot repay any of the tax previously withheld. Hrblock freefile Instead, claim the full amount withheld when you file your tax return. Hrblock freefile   However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you do not have to fill out a new Form W-4 to have your withholding lowered to the correct amount. Hrblock freefile Your employer can repay the amount that was withheld incorrectly. Hrblock freefile If you are not repaid, your Form W-2 will reflect the full amount actually withheld, which you would claim when you file your tax return. Hrblock freefile IRS review of your withholding. Hrblock freefile   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. Hrblock freefile Your employer may be required to send a copy of the Form W-4 to the IRS. Hrblock freefile There is a penalty for supplying false information on Form W-4. Hrblock freefile See Penalties , later. Hrblock freefile   If the IRS determines that you cannot claim more than a specified number of withholding allowances or claim a complete exemption from withholding, the IRS will issue a notice of the maximum number of withholding allowances permitted (commonly referred to as a “lock-in letter”) to both you and your employer. Hrblock freefile   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. Hrblock freefile If you believe that you are entitled to claim complete exemption from withholding or claim more withholding allowances than the maximum number specified by the IRS in the lock-in letter, you must submit a new Form W-4 and a written statement to support your claims to the IRS. Hrblock freefile Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. Hrblock freefile At the end of this period, if you have not responded or if your response is not adequate, your employer will be required to withhold based on the original lock-in letter. Hrblock freefile   After the lock-in letter takes effect, your employer must withhold tax on the basis of the withholding rate (marital status) and maximum number of withholding allowances specified in that letter. Hrblock freefile   If you later believe that you are entitled to claim exemption from withholding or more allowances than the IRS determined, you can complete a new Form W-4 and a written statement to support the claims made on the Form W-4 and send them directly to the IRS address shown on the lock-in letter. Hrblock freefile Your employer must continue to figure your withholding on the basis of the number of allowances previously determined by the IRS until the IRS advises your employer otherwise. Hrblock freefile   At any time, either before or after the lock-in letter becomes effective, you may give your employer a new Form W-4 that does not claim complete exemption from withholding and results in more income tax withheld than specified in the lock-in letter. Hrblock freefile Your employer must then withhold tax based on this new Form W-4. Hrblock freefile   Additional information is available at IRS. Hrblock freefile gov. Hrblock freefile Enter “withholding compliance questions” in the search box. Hrblock freefile Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. Hrblock freefile The exemption applies only to income tax, not to social security or Medicare tax. Hrblock freefile You can claim exemption from withholding for 2014 only if both of the following situations apply. Hrblock freefile For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. Hrblock freefile For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. Hrblock freefile Use Figure 1-A to help you decide whether you can claim exemption from withholding. Hrblock freefile Do not use Figure 1-A if you: Are 65 or older, Are blind, Will itemize deductions on your 2014 return, Will claim an exemption for a dependent on your 2014 return, or Will claim any tax credits on your 2014 return. Hrblock freefile These situations are discussed later. Hrblock freefile Students. Hrblock freefile   If you are a student, you are not automatically exempt. Hrblock freefile If you work only part time or during the summer, you may qualify for exemption from withholding. Hrblock freefile Example 1. Hrblock freefile You are a high school student and expect to earn $2,500 from a summer job. Hrblock freefile You do not expect to have any other income during the year, and your parents will be able to claim an exemption for you on their tax return. Hrblock freefile You worked last summer and had $375 federal income tax withheld from your pay. Hrblock freefile The entire $375 was refunded when you filed your 2013 return. Hrblock freefile Using Figure 1-A, you find that you can claim exemption from withholding. Hrblock freefile Please click here for the text description of the image. Hrblock freefile Figure 1-A: Exemption From Withholding on Form W-4 Example 2. Hrblock freefile The facts are the same as in Example 1, except that you also have a savings account and expect to have $400 interest income during the year. Hrblock freefile Using Figure 1-A, you find that you cannot claim exemption from withholding because your unearned income will be more than $350 and your total income will be more than $1,000. Hrblock freefile    You may have to file a tax return, even if you are exempt from withholding. Hrblock freefile See Publication 501 to see whether you must file a return. Hrblock freefile    Age 65 or older or blind. Hrblock freefile If you are 65 or older or blind, use Worksheet 1-3 or Worksheet 1-4, to help you decide whether you can claim exemption from withholding. Hrblock freefile Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. Hrblock freefile Instead, see Itemizing deductions or claiming exemptions or credits, next. Hrblock freefile Itemizing deductions or claiming exemptions or credits. Hrblock freefile   If you had no tax liability for 2013, and you will: Itemize deductions, Claim an exemption for a dependent, or Claim a tax credit, use the 2014 Estimated Tax Worksheet (also see chapter 2), to figure your 2014 expected tax liability. Hrblock freefile You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. Hrblock freefile Claiming exemption from withholding. Hrblock freefile   To claim exemption, you must give your employer a Form W-4. Hrblock freefile Do not complete lines 5 and 6. Hrblock freefile Enter “Exempt” on line 7. Hrblock freefile   If you claim exemption, but later your situation changes so that you will have to pay income tax after all, you must file a new Form W-4 within 10 days after the change. Hrblock freefile If you claim exemption in 2014 but you expect to owe income tax for 2015, you must file a new Form W-4 by December 1, 2014. Hrblock freefile   Your claim of exempt status may be reviewed by the IRS. Hrblock freefile See IRS review of your withholding , earlier. Hrblock freefile An exemption is good for only 1 year. Hrblock freefile   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. Hrblock freefile Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. Hrblock freefile The payer can figure withholding on supplemental wages using the same method used for your regular wages. Hrblock freefile However, if these payments are identified separately from regular wages, your employer or other payer of supplemental wages can withhold income tax from these wages at a flat rate. Hrblock freefile Expense allowances. Hrblock freefile   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. Hrblock freefile A nonaccountable plan is a reimbursement arrangement that does not require you to account for, or prove, your business expenses to your employer or does not require you to return your employer's payments that are more than your proven expenses. Hrblock freefile   Reimbursements or other expense allowances paid under an accountable plan that are more than your proven expenses are treated as paid under a nonaccountable plan if you do not return the excess payments within a reasonable period of time. Hrblock freefile Accountable plan. Hrblock freefile   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. Hrblock freefile Your expenses must have a business connection. Hrblock freefile That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Hrblock freefile You must adequately account to your employer for these expenses within a reasonable period of time. Hrblock freefile You must return any excess reimbursement or allowance within a reasonable period of time. Hrblock freefile    An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. Hrblock freefile   The definition of reasonable period of time depends on the facts and circumstances of your situation. Hrblock freefile However, regardless of those facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Hrblock freefile You receive an advance within 30 days of the time you have an expense. Hrblock freefile You adequately account for your expenses within 60 days after they were paid or incurred. Hrblock freefile You return any excess reimbursement within 120 days after the expense was paid or incurred. Hrblock freefile You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. Hrblock freefile Nonaccountable plan. Hrblock freefile   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. Hrblock freefile For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. Hrblock freefile Penalties You may have to pay a penalty of $500 if both of the following apply. Hrblock freefile You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. Hrblock freefile You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. Hrblock freefile There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. Hrblock freefile The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. Hrblock freefile These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. Hrblock freefile A simple error or an honest mistake will not result in one of these penalties. Hrblock freefile For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a Form W-4 penalty. Hrblock freefile However, see chapter 4 for information on the penalty for underpaying your tax. Hrblock freefile Tips The tips you receive while working on your job are considered part of your pay. Hrblock freefile You must include your tips on your tax return on the same line as your regular pay. Hrblock freefile However, tax is not withheld directly from tip income, as it is from your regular pay. Hrblock freefile Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. Hrblock freefile Reporting tips to your employer. Hrblock freefile   If you receive tips of $20 or more in a month while working for any one employer, you must report to your employer the total amount of tips you receive on the job during the month. Hrblock freefile The report is due by the 10th day of the following month. Hrblock freefile   If you have more than one job, make a separate report to each employer. Hrblock freefile Report only the tips you received while working for that employer, and only if they total $20 or more for the month. Hrblock freefile How employer figures amount to withhold. Hrblock freefile   The tips you report to your employer are counted as part of your income for the month you report them. Hrblock freefile Your employer can figure your withholding in either of two ways. Hrblock freefile By withholding at the regular rate on the sum of your pay plus your reported tips. Hrblock freefile By withholding at the regular rate on your pay plus a percentage of your reported tips. Hrblock freefile Not enough pay to cover taxes. Hrblock freefile   If your regular pay is not enough for your employer to withhold all the tax (including income tax and social security and Medicare taxes (or the equivalent railroad retirement tax)) due on your pay plus your tips, you can give your employer money to cover the shortage. Hrblock freefile   If you do not give your employer money to cover the shortage, your employer first withholds as much Medicare tax and social security or railroad retirement tax as possible, up to the proper amount, and then withholds income tax up to the full amount of your pay. Hrblock freefile If not enough tax is withheld, you may have to pay estimated tax. Hrblock freefile When you file your return, you also may have to pay any Medicare and social security tax or railroad retirement tax your employer could not withhold. Hrblock freefile Tips not reported to your employer. Hrblock freefile   On your tax return, you must report all the tips you receive during the year, even tips you do not report to your employer (this includes the value of any noncash tips you received, such as tickets, passes, or other items of value). Hrblock freefile Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. Hrblock freefile Allocated tips. Hrblock freefile   If you work in a large food or beverage establishment, your employer may have to report an allocated amount of tips on your Form W-2. Hrblock freefile   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. Hrblock freefile Withholding is based only on your pay plus your reported tips. Hrblock freefile Your employer should refund to you any incorrectly withheld tax. Hrblock freefile More information. Hrblock freefile   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi