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Irs Forms 2010 Form 1040

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Irs Forms 2010 Form 1040

Irs forms 2010 form 1040 4. Irs forms 2010 form 1040   General Business Credits Table of Contents Introduction Useful Items - You may want to see: Business Credits How To Claim the Credit Introduction Your general business credit for the year consists of your carryforward of business credits from prior years plus the total of your current year business credits. Irs forms 2010 form 1040 In addition, your general business credit for the current year may be increased later by the carryback of business credits from later years. Irs forms 2010 form 1040 You subtract this credit directly from your tax. Irs forms 2010 form 1040 Useful Items - You may want to see: Form (and Instructions) 3800 General Business Credit 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Irs forms 2010 form 1040 Business Credits All of the following credits are part of the general business credit. Irs forms 2010 form 1040 The form you use to figure each credit is shown in parentheses. Irs forms 2010 form 1040 You will also have to complete Form 3800. Irs forms 2010 form 1040 Alternative fuel vehicle refueling property credit (Form 8911). Irs forms 2010 form 1040   This credit applies to the cost of any qualified fuel vehicle refueling property you placed in service. Irs forms 2010 form 1040 For more information, see Form 8911. Irs forms 2010 form 1040 Alternative motor vehicle credit (Form 8910). Irs forms 2010 form 1040   For more information, see Form 8910. Irs forms 2010 form 1040 Biodiesel and renewable diesel fuels credit (Form 8864). Irs forms 2010 form 1040   For more information, see Form 8864. Irs forms 2010 form 1040 Biofuel producer credit (Form 6478). Irs forms 2010 form 1040    For more information, see Form 6478. Irs forms 2010 form 1040 Carbon dioxide sequestration credit (Form 8933). Irs forms 2010 form 1040   This credit is for carbon dioxide which is captured at a qualified facility and disposed of in a secure geological storage or used in a qualified enhanced oil or natural gas recovery project. Irs forms 2010 form 1040 For more information, see Form 8933. Irs forms 2010 form 1040 Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846). Irs forms 2010 form 1040   This credit is generally equal to your (employer's) portion of social security and Medicare taxes paid on tips received by employees of your food and beverage establishment where tipping is customary. Irs forms 2010 form 1040 The credit applies regardless of whether the food is consumed on or off your business premises. Irs forms 2010 form 1040 For more information, see Form 8846. Irs forms 2010 form 1040 Credit for employer differential wage payments (Form 8932). Irs forms 2010 form 1040   This credit provides certain small businesses with an incentive to continue to pay wages to an employee performing services on active duty in the uniformed services of the United States for a period of more than 30 days. Irs forms 2010 form 1040 For more information, see Form 8932. Irs forms 2010 form 1040 Credit for employer-provided childcare facilities and services (Form 8882). Irs forms 2010 form 1040   This credit applies to the qualified expenses you paid for employee childcare and qualified expenses you paid for childcare resource and referral services. Irs forms 2010 form 1040 For more information, see Form 8882. Irs forms 2010 form 1040 Credit for increasing research activities (Form 6765). Irs forms 2010 form 1040   This credit is designed to encourage businesses to increase the amounts they spend on research and experimental activities, including energy research. Irs forms 2010 form 1040 For more information, see Form 6765. Irs forms 2010 form 1040 Credit for small employer health insurance premiums (Form 8941). Irs forms 2010 form 1040   This credit applies to the cost of certain health insurance coverage you provide to certain employees. Irs forms 2010 form 1040 For more information, see Form 8941. Irs forms 2010 form 1040 Credit for small employer pension plan startup costs (Form 8881). Irs forms 2010 form 1040   This credit applies to pension plan startup costs of a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. Irs forms 2010 form 1040 For more information, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Irs forms 2010 form 1040 Disabled access credit (Form 8826). Irs forms 2010 form 1040   This credit is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons who have disabilities. Irs forms 2010 form 1040 You must pay or incur the expenses to enable your business to comply with the Americans with Disabilities Act of 1990. Irs forms 2010 form 1040 For more information, see Form 8826. Irs forms 2010 form 1040 Distilled spirits credit (Form 8906). Irs forms 2010 form 1040   This credit is available to distillers and importers of distilled spirits and eligible wholesalers of distilled spirits. Irs forms 2010 form 1040 For more information, see Form 8906. Irs forms 2010 form 1040 Empowerment zone employment credit (Form 8844). Irs forms 2010 form 1040   You may qualify for this credit if you have employees and are engaged in a business in an empowerment zone for which the credit is available. Irs forms 2010 form 1040 For more information, see Form 8844. Irs forms 2010 form 1040 Energy efficient appliance credit (Form 8909). Irs forms 2010 form 1040   This credit is available for manufacturers of eligible appliances. Irs forms 2010 form 1040 For more information, see Form 8909. Irs forms 2010 form 1040 Energy efficient home credit (Form 8908). Irs forms 2010 form 1040   This credit is available for eligible contractors of certain homes sold for use as a residence. Irs forms 2010 form 1040 For more information, see Form 8908. Irs forms 2010 form 1040 Indian employment credit (Form 8845). Irs forms 2010 form 1040   This credit applies to qualified wages and health insurance costs you paid or incurred for qualified employees. Irs forms 2010 form 1040 For more information, see Form 8845. Irs forms 2010 form 1040 Investment credit (Form 3468). Irs forms 2010 form 1040   The investment credit is the total of the following credits. Irs forms 2010 form 1040 Rehabilitation credit. Irs forms 2010 form 1040 Energy credit. Irs forms 2010 form 1040 Qualifying advanced coal project credit. Irs forms 2010 form 1040 Qualifying gasification project credit. Irs forms 2010 form 1040 Qualifying advanced energy project credit. Irs forms 2010 form 1040   For more information, see Form 3468. Irs forms 2010 form 1040 Low sulfur diesel fuel production credit (Form 8896). Irs forms 2010 form 1040    For more information, see Form 8896. Irs forms 2010 form 1040 Low-income housing credit (Form 8586). Irs forms 2010 form 1040   This credit generally applies to each new qualified low-income building placed in service after 1986. Irs forms 2010 form 1040 For more information, see Form 8586. Irs forms 2010 form 1040 Mine rescue team training credit (Form 8923). Irs forms 2010 form 1040   This credit applies to training program costs you pay or incur for certain mine rescue team employees. Irs forms 2010 form 1040 For more information, see Form 8923. Irs forms 2010 form 1040 New markets credit (Form 8874). Irs forms 2010 form 1040   This credit is for qualified equity investments made in qualified community development entities. Irs forms 2010 form 1040 For more information, see Form 8874. Irs forms 2010 form 1040 Nonconventional source fuel credit (Form 8907). Irs forms 2010 form 1040   This credit is for qualified coke and coke gas you produced and sold to an unrelated person during the tax year. Irs forms 2010 form 1040 For more information, see Form 8907. Irs forms 2010 form 1040 Orphan drug credit (Form 8820). Irs forms 2010 form 1040   This credit applies to qualified expenses incurred in testing certain drugs for rare diseases and conditions. Irs forms 2010 form 1040 For more information, see Form 8820. Irs forms 2010 form 1040 Qualified plug-in electric drive motor vehicle credit (Form 8936). Irs forms 2010 form 1040   This credit is for certain new qualified plug-in electric vehicles placed in service during the tax year. Irs forms 2010 form 1040 For more information, see Form 8936. Irs forms 2010 form 1040 Qualified railroad track maintenance credit (Form 8900). Irs forms 2010 form 1040   This credit applies with respect to qualified railroad track maintenance expenditures paid or incurred during the tax year. Irs forms 2010 form 1040 For more information, see Form 8900. Irs forms 2010 form 1040 Renewable electricity, refined coal, and Indian coal production credit (Form 8835). Irs forms 2010 form 1040   This credit is for the sale of electricity, refined coal, or Indian coal produced in the United States or U. Irs forms 2010 form 1040 S. Irs forms 2010 form 1040 possessions from qualified energy resources at a qualified facility. Irs forms 2010 form 1040 For more information, see Form 8835. Irs forms 2010 form 1040 Work opportunity credit (Form 5884). Irs forms 2010 form 1040   This credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. Irs forms 2010 form 1040 For more information, see Form 5884. Irs forms 2010 form 1040 How To Claim the Credit To claim a general business credit, you will first have to get the forms you need to claim your current year business credits. Irs forms 2010 form 1040 In addition to the credit form, you also need to file Form 3800. Irs forms 2010 form 1040 Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Office of the Attorney General

Website: Office of the Attorney General

Address: Office of the Attorney General
Consumer Protection Division
PO Box 1789
Charleston, WV 25326-1789

Phone Number: 304-558-8986

Toll-free: 1-800-368-8808 (WV)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Division of Banking

Website: Division of Banking

Address: Division of Banking
900 Pennsylvania Ave.
Suite 306
Charleston, WV 25302

Phone Number: 304-558-2294

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Offices of the Insurance Commissioner

Website: Offices of the Insurance Commissioner

Address: Offices of the Insurance Commissioner
PO Box 50540
Charleston, WV 25305-0540

Phone Number: 304-558-3386

Toll-free: 1-888-879-9842 (WV)

TTY: 1-800-435-7381

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

State Auditors Office

Website: State Auditors Office

Address: State Auditors Office
Securities Commission
1900 Kanawha Blvd., E
Building 1, Room W-100
Charleston, WV 25305

Phone Number: 304-558-2251

Toll-free: 1-888-509-6567

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Consumer Advocate Division

Website: Consumer Advocate Division

Address: Consumer Advocate Division
723 Kanawha Blvd., E
Union Building, Suite 700
Charleston, WV 25301

Phone Number: 304-558-0526

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
Customer Assistance
PO Box 812
201 Brooks St.
Charleston, WV 25323

Toll-free: 1-800-642-8544

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The Irs Forms 2010 Form 1040

Irs forms 2010 form 1040 7. Irs forms 2010 form 1040   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. Irs forms 2010 form 1040 For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. Irs forms 2010 form 1040 There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. Irs forms 2010 form 1040 However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. Irs forms 2010 form 1040 See Contributions , later. Irs forms 2010 form 1040 This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. Irs forms 2010 form 1040 What is the tax benefit of the Coverdell ESA. Irs forms 2010 form 1040   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. Irs forms 2010 form 1040   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. Irs forms 2010 form 1040 See Tax-Free Distributions , later. Irs forms 2010 form 1040    Table 7-1 summarizes the main features of the Coverdell ESA. Irs forms 2010 form 1040 Table 7-1. Irs forms 2010 form 1040 Coverdell ESA at a Glance Do not rely on this table alone. Irs forms 2010 form 1040 It provides only general highlights. Irs forms 2010 form 1040 See the text for definitions of terms in bold type and for more complete explanations. Irs forms 2010 form 1040 Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. Irs forms 2010 form 1040 Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. Irs forms 2010 form 1040 Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. Irs forms 2010 form 1040 Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). Irs forms 2010 form 1040 Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. Irs forms 2010 form 1040 What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. Irs forms 2010 form 1040 When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. Irs forms 2010 form 1040 To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. Irs forms 2010 form 1040 The document creating and governing the account must be in writing and must satisfy the following requirements. Irs forms 2010 form 1040 The trustee or custodian must be a bank or an entity approved by the IRS. Irs forms 2010 form 1040 The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. Irs forms 2010 form 1040 The contribution is in cash. Irs forms 2010 form 1040 The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Irs forms 2010 form 1040 The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. Irs forms 2010 form 1040 Money in the account cannot be invested in life insurance contracts. Irs forms 2010 form 1040 Money in the account cannot be combined with other property except in a common trust fund or common investment fund. Irs forms 2010 form 1040 The balance in the account generally must be distributed within 30 days after the earlier of the following events. Irs forms 2010 form 1040 The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. Irs forms 2010 form 1040 The beneficiary's death. Irs forms 2010 form 1040 Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. Irs forms 2010 form 1040 For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. Irs forms 2010 form 1040 Designated beneficiary. Irs forms 2010 form 1040   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. Irs forms 2010 form 1040 Contributions to a qualified tuition program (QTP). Irs forms 2010 form 1040   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. Irs forms 2010 form 1040 In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. Irs forms 2010 form 1040 See chapter 8, Qualified Tuition Program . Irs forms 2010 form 1040 Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. Irs forms 2010 form 1040 Eligible postsecondary school. Irs forms 2010 form 1040   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Irs forms 2010 form 1040 S. Irs forms 2010 form 1040 Department of Education. Irs forms 2010 form 1040 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Irs forms 2010 form 1040 The educational institution should be able to tell you if it is an eligible educational institution. Irs forms 2010 form 1040   Certain educational institutions located outside the United States also participate in the U. Irs forms 2010 form 1040 S. Irs forms 2010 form 1040 Department of Education's Federal Student Aid (FSA) programs. Irs forms 2010 form 1040 Eligible elementary or secondary school. Irs forms 2010 form 1040   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Irs forms 2010 form 1040 Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. Irs forms 2010 form 1040 As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. Irs forms 2010 form 1040 The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. Irs forms 2010 form 1040 Tuition and fees. Irs forms 2010 form 1040 Books, supplies, and equipment. Irs forms 2010 form 1040 Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. Irs forms 2010 form 1040 Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). Irs forms 2010 form 1040 The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Irs forms 2010 form 1040 The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Irs forms 2010 form 1040 The actual amount charged if the student is residing in housing owned or operated by the school. Irs forms 2010 form 1040 Half-time student. Irs forms 2010 form 1040   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Irs forms 2010 form 1040 Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. Irs forms 2010 form 1040 As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. Irs forms 2010 form 1040 There are special rules for computer-related expenses. Irs forms 2010 form 1040 The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. Irs forms 2010 form 1040 Tuition and fees. Irs forms 2010 form 1040 Books, supplies, and equipment. Irs forms 2010 form 1040 Academic tutoring. Irs forms 2010 form 1040 Special needs services for a special needs beneficiary. Irs forms 2010 form 1040 The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. Irs forms 2010 form 1040 Room and board. Irs forms 2010 form 1040 Uniforms. Irs forms 2010 form 1040 Transportation. Irs forms 2010 form 1040 Supplementary items and services (including extended day programs). Irs forms 2010 form 1040 The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. Irs forms 2010 form 1040 (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. Irs forms 2010 form 1040 ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. Irs forms 2010 form 1040 For individuals filing joint returns, that amount is $220,000. Irs forms 2010 form 1040 Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. Irs forms 2010 form 1040 There is no requirement that an organization's income be below a certain level. Irs forms 2010 form 1040 Contributions must meet all of the following requirements. Irs forms 2010 form 1040 They must be in cash. Irs forms 2010 form 1040 They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Irs forms 2010 form 1040 They must be made by the due date of the contributor's tax return (not including extensions). Irs forms 2010 form 1040 Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. Irs forms 2010 form 1040 Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. Irs forms 2010 form 1040 Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. Irs forms 2010 form 1040 When contributions considered made. Irs forms 2010 form 1040   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. Irs forms 2010 form 1040 They must be made by the due date (not including extensions) for filing your return for the preceding year. Irs forms 2010 form 1040   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. Irs forms 2010 form 1040 Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. Irs forms 2010 form 1040 Limit for each designated beneficiary. Irs forms 2010 form 1040   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. Irs forms 2010 form 1040 This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. Irs forms 2010 form 1040 Rollovers are discussed under Rollovers and Other Transfers , later. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. Irs forms 2010 form 1040 In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. Irs forms 2010 form 1040 For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. Irs forms 2010 form 1040 Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. Irs forms 2010 form 1040 These contributions could be put into any of Maria's Coverdell ESA accounts. Irs forms 2010 form 1040 Limit for each contributor. Irs forms 2010 form 1040   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. Irs forms 2010 form 1040 This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. Irs forms 2010 form 1040 If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. Irs forms 2010 form 1040 Reduced limit. Irs forms 2010 form 1040   Your contribution limit may be reduced. Irs forms 2010 form 1040 If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). Irs forms 2010 form 1040 If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. Irs forms 2010 form 1040 Table 7-2. Irs forms 2010 form 1040 Coverdell ESA Contributions at a Glance Do not rely on this table alone. Irs forms 2010 form 1040 It provides only general highlights. Irs forms 2010 form 1040 See the text for more complete explanations. Irs forms 2010 form 1040 Question Answer Are contributions deductible? No. Irs forms 2010 form 1040 What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. Irs forms 2010 form 1040 What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. Irs forms 2010 form 1040 What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. Irs forms 2010 form 1040 Can contributions other than cash be made to a Coverdell ESA? No. Irs forms 2010 form 1040 When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. Irs forms 2010 form 1040 Modified adjusted gross income (MAGI). Irs forms 2010 form 1040   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Irs forms 2010 form 1040 MAGI when using Form 1040A. Irs forms 2010 form 1040   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Irs forms 2010 form 1040 MAGI when using Form 1040. Irs forms 2010 form 1040   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Irs forms 2010 form 1040 MAGI when using Form 1040NR. Irs forms 2010 form 1040   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. Irs forms 2010 form 1040 MAGI when using Form 1040NR-EZ. Irs forms 2010 form 1040   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. Irs forms 2010 form 1040   If you have any of these adjustments, you can use Worksheet 7-1. Irs forms 2010 form 1040 MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. Irs forms 2010 form 1040 Worksheet 7-1. Irs forms 2010 form 1040 MAGI for a Coverdell ESA 1. Irs forms 2010 form 1040 Enter your adjusted gross income  (Form 1040, line 38)   1. Irs forms 2010 form 1040   2. Irs forms 2010 form 1040 Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Irs forms 2010 form 1040       3. Irs forms 2010 form 1040 Enter your foreign housing deduction (Form 2555, line 50)   3. Irs forms 2010 form 1040         4. Irs forms 2010 form 1040 Enter the amount of income from Puerto Rico you are excluding   4. Irs forms 2010 form 1040       5. Irs forms 2010 form 1040 Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Irs forms 2010 form 1040       6. Irs forms 2010 form 1040 Add lines 2, 3, 4, and 5   6. Irs forms 2010 form 1040   7. Irs forms 2010 form 1040 Add lines 1 and 6. Irs forms 2010 form 1040 This is your  modified adjusted gross income   7. Irs forms 2010 form 1040   Figuring the limit. Irs forms 2010 form 1040    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. Irs forms 2010 form 1040 The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). Irs forms 2010 form 1040 The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). Irs forms 2010 form 1040 Subtract the result from $2,000. Irs forms 2010 form 1040 This is the amount you can contribute for each beneficiary. Irs forms 2010 form 1040 You can use Worksheet 7-2. Irs forms 2010 form 1040 Coverdell ESA Contribution Limit to figure the limit on contributions. Irs forms 2010 form 1040    Worksheet 7-2. Irs forms 2010 form 1040 Coverdell ESA Contribution Limit 1. Irs forms 2010 form 1040 Maximum contribution   1. Irs forms 2010 form 1040 $2,000 2. Irs forms 2010 form 1040 Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. Irs forms 2010 form 1040   3. Irs forms 2010 form 1040 Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Irs forms 2010 form 1040   4. Irs forms 2010 form 1040 Subtract line 3 from line 2. Irs forms 2010 form 1040 If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Irs forms 2010 form 1040   5. Irs forms 2010 form 1040 Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Irs forms 2010 form 1040     Note. Irs forms 2010 form 1040 If the amount on line 4 is greater than or equal to the amount on line 5, stop here. Irs forms 2010 form 1040 You are not allowed to contribute to a Coverdell ESA for 2013. Irs forms 2010 form 1040       6. Irs forms 2010 form 1040 Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Irs forms 2010 form 1040 . Irs forms 2010 form 1040 7. Irs forms 2010 form 1040 Multiply line 1 by line 6   7. Irs forms 2010 form 1040   8. Irs forms 2010 form 1040 Subtract line 7 from line 1   8. Irs forms 2010 form 1040   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 Paul, who is single, had a MAGI of $96,500 for 2013. Irs forms 2010 form 1040 Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. Irs forms 2010 form 1040 Worksheet 7-2. Irs forms 2010 form 1040 Coverdell ESA Contribution Limit—Illustrated 1. Irs forms 2010 form 1040 Maximum contribution   1. Irs forms 2010 form 1040 $2,000 2. Irs forms 2010 form 1040 Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. Irs forms 2010 form 1040 96,500 3. Irs forms 2010 form 1040 Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Irs forms 2010 form 1040 95,000 4. Irs forms 2010 form 1040 Subtract line 3 from line 2. Irs forms 2010 form 1040 If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Irs forms 2010 form 1040 1,500 5. Irs forms 2010 form 1040 Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Irs forms 2010 form 1040 15,000   Note. Irs forms 2010 form 1040 If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. Irs forms 2010 form 1040 You are not allowed to  contribute to a Coverdell ESA for 2013. Irs forms 2010 form 1040       6. Irs forms 2010 form 1040 Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Irs forms 2010 form 1040 . Irs forms 2010 form 1040 100 7. Irs forms 2010 form 1040 Multiply line 1 by line 6   7. Irs forms 2010 form 1040 200 8. Irs forms 2010 form 1040 Subtract line 7 from line 1   8. Irs forms 2010 form 1040 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Irs forms 2010 form 1040 Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. Irs forms 2010 form 1040 Excess contributions are the total of the following two amounts. Irs forms 2010 form 1040 Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). Irs forms 2010 form 1040 Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. Irs forms 2010 form 1040 Exceptions. Irs forms 2010 form 1040   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). Irs forms 2010 form 1040   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. Irs forms 2010 form 1040 You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. Irs forms 2010 form 1040 Box 2 of that form will show the amount of earnings on your excess contributions. Irs forms 2010 form 1040 Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. Irs forms 2010 form 1040 See Instructions for Recipient on the back of copy B of your Form 1099-Q. Irs forms 2010 form 1040 Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. Irs forms 2010 form 1040 For more information, see Taxable Distributions , later. Irs forms 2010 form 1040   The excise tax does not apply to any rollover contribution. Irs forms 2010 form 1040 Note. Irs forms 2010 form 1040 Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. Irs forms 2010 form 1040 Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. Irs forms 2010 form 1040 In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. Irs forms 2010 form 1040 Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. Irs forms 2010 form 1040 (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. Irs forms 2010 form 1040 Figuring and reporting the additional tax. Irs forms 2010 form 1040   You figure this excise tax in Part V of Form 5329. Irs forms 2010 form 1040 Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). Irs forms 2010 form 1040 Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. Irs forms 2010 form 1040 The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. Irs forms 2010 form 1040 Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. Irs forms 2010 form 1040 This age limitation does not apply if the new beneficiary is a special needs beneficiary. Irs forms 2010 form 1040 An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. Irs forms 2010 form 1040 Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Irs forms 2010 form 1040 These are not taxable distributions. Irs forms 2010 form 1040 Members of the beneficiary's family. Irs forms 2010 form 1040   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Irs forms 2010 form 1040 Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Irs forms 2010 form 1040 Brother, sister, stepbrother, or stepsister. Irs forms 2010 form 1040 Father or mother or ancestor of either. Irs forms 2010 form 1040 Stepfather or stepmother. Irs forms 2010 form 1040 Son or daughter of a brother or sister. Irs forms 2010 form 1040 Brother or sister of father or mother. Irs forms 2010 form 1040 Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Irs forms 2010 form 1040 The spouse of any individual listed above. Irs forms 2010 form 1040 First cousin. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. Irs forms 2010 form 1040 He wanted to give this money to his younger sister, who was still in high school. Irs forms 2010 form 1040 In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. Irs forms 2010 form 1040 Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. Irs forms 2010 form 1040 This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). Irs forms 2010 form 1040 Military death gratuity. Irs forms 2010 form 1040   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). Irs forms 2010 form 1040 Such payments are made to an eligible survivor upon the death of a member of the armed forces. Irs forms 2010 form 1040 The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. Irs forms 2010 form 1040   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . Irs forms 2010 form 1040 The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. Irs forms 2010 form 1040   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. Irs forms 2010 form 1040 See Distributions , later. Irs forms 2010 form 1040 The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. Irs forms 2010 form 1040 Changing the Designated Beneficiary The designated beneficiary can be changed. Irs forms 2010 form 1040 See Members of the beneficiary's family , earlier. Irs forms 2010 form 1040 There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 Assume the same situation for Aaron as in the last example (see Rollovers , earlier). Irs forms 2010 form 1040 Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. Irs forms 2010 form 1040 Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. Irs forms 2010 form 1040 After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 In their divorce settlement, Peg received her ex-husband's Coverdell ESA. Irs forms 2010 form 1040 In this process, the account was transferred into her name. Irs forms 2010 form 1040 Peg now treats the funds in this Coverdell ESA as if she were the original owner. Irs forms 2010 form 1040 Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. Irs forms 2010 form 1040 Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. Irs forms 2010 form 1040 See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. Irs forms 2010 form 1040 Table 7-3. Irs forms 2010 form 1040 Coverdell ESA Distributions at a Glance Do not rely on this table alone. Irs forms 2010 form 1040 It provides only general highlights. Irs forms 2010 form 1040 See the text for definitions of terms in bold type and for more complete explanations. Irs forms 2010 form 1040 Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. Irs forms 2010 form 1040 After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. Irs forms 2010 form 1040 Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. Irs forms 2010 form 1040 Also, certain transfers to members of the beneficiary's family are permitted. Irs forms 2010 form 1040 Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. Irs forms 2010 form 1040 Adjusted qualified education expenses. Irs forms 2010 form 1040   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. Irs forms 2010 form 1040 Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs forms 2010 form 1040 The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. Irs forms 2010 form 1040 Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. Irs forms 2010 form 1040 Do not report tax-free distributions (including qualifying rollovers) on your tax return. Irs forms 2010 form 1040 Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. Irs forms 2010 form 1040 Excess distribution. Irs forms 2010 form 1040   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. Irs forms 2010 form 1040 Earnings and basis. Irs forms 2010 form 1040   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. Irs forms 2010 form 1040 The amount of your gross distribution will be shown in box 1. Irs forms 2010 form 1040 For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. Irs forms 2010 form 1040 This will be shown in the blank box below boxes 5 and 6. Irs forms 2010 form 1040   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. Irs forms 2010 form 1040 Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. Irs forms 2010 form 1040 Figure the taxable portion for 2013 as shown in the following steps. Irs forms 2010 form 1040 Multiply the total amount distributed by a fraction. Irs forms 2010 form 1040 The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. Irs forms 2010 form 1040 Subtract the amount figured in (1) from the total amount distributed during 2013. Irs forms 2010 form 1040 The result is the amount of earnings included in the distribution(s). Irs forms 2010 form 1040 Multiply the amount of earnings figured in (2) by a fraction. Irs forms 2010 form 1040 The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. Irs forms 2010 form 1040 Subtract the amount figured in (3) from the amount figured in (2). Irs forms 2010 form 1040 The result is the amount the beneficiary must include in income. Irs forms 2010 form 1040 The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. Irs forms 2010 form 1040 There were no contributions in 2013. Irs forms 2010 form 1040 This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. Irs forms 2010 form 1040 The value (balance) of your account on December 31, 2013, was $950. Irs forms 2010 form 1040 You had $700 of adjusted qualified education expenses (AQEE) for the year. Irs forms 2010 form 1040 Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. Irs forms 2010 form 1040   1. Irs forms 2010 form 1040 $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. Irs forms 2010 form 1040 $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. Irs forms 2010 form 1040 $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. Irs forms 2010 form 1040 $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. Irs forms 2010 form 1040 Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. Irs forms 2010 form 1040 Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). Irs forms 2010 form 1040 Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. Irs forms 2010 form 1040 This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. Irs forms 2010 form 1040 Example. Irs forms 2010 form 1040 Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. Irs forms 2010 form 1040 He paid his college expenses from the following sources. Irs forms 2010 form 1040     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. Irs forms 2010 form 1040 Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. Irs forms 2010 form 1040 Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. Irs forms 2010 form 1040     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. Irs forms 2010 form 1040 The balance in Derek's account was $1,800 on December 31, 2013. Irs forms 2010 form 1040 Prior to 2013, $2,100 had been contributed to this account. Irs forms 2010 form 1040 Contributions for 2013 totaled $400. Irs forms 2010 form 1040 Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. Irs forms 2010 form 1040   1. Irs forms 2010 form 1040 $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. Irs forms 2010 form 1040 $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. Irs forms 2010 form 1040 $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. Irs forms 2010 form 1040 $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). Irs forms 2010 form 1040 This is the amount of distributed earnings not used for adjusted qualified higher education expenses. Irs forms 2010 form 1040 Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. Irs forms 2010 form 1040 The following two examples illustrate possible allocations. Irs forms 2010 form 1040 Example 1. Irs forms 2010 form 1040 In 2013, Beatrice graduated from high school and began her first semester of college. Irs forms 2010 form 1040 That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. Irs forms 2010 form 1040 To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. Irs forms 2010 form 1040 No one claimed Beatrice as a dependent, nor was she eligible for an education credit. Irs forms 2010 form 1040 She did not receive any tax-free educational assistance in 2013. Irs forms 2010 form 1040 Beatrice must allocate her total qualified education expenses between the two distributions. Irs forms 2010 form 1040 Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. Irs forms 2010 form 1040 The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. Irs forms 2010 form 1040 Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). Irs forms 2010 form 1040 She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. Irs forms 2010 form 1040 Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. Irs forms 2010 form 1040 (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. Irs forms 2010 form 1040 ) Example 2. Irs forms 2010 form 1040 Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. Irs forms 2010 form 1040 In this case, she allocates her qualified education expenses as follows. Irs forms 2010 form 1040 Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. Irs forms 2010 form 1040 Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). Irs forms 2010 form 1040   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). Irs forms 2010 form 1040 See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. Irs forms 2010 form 1040   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). Irs forms 2010 form 1040 The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. Irs forms 2010 form 1040 However, you do not have to allocate your expenses in the same way. Irs forms 2010 form 1040 You can use any reasonable method. Irs forms 2010 form 1040 Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. Irs forms 2010 form 1040 You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Irs forms 2010 form 1040 Your basis is the total amount of contributions to that Coverdell ESA. Irs forms 2010 form 1040 You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Irs forms 2010 form 1040 If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. Irs forms 2010 form 1040 ) from all such accounts in order to determine your taxable earnings for the year. Irs forms 2010 form 1040 By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. Irs forms 2010 form 1040 For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. Irs forms 2010 form 1040 Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Irs forms 2010 form 1040 Exceptions. Irs forms 2010 form 1040   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Irs forms 2010 form 1040 Made because the designated beneficiary is disabled. Irs forms 2010 form 1040 A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Irs forms 2010 form 1040 A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Irs forms 2010 form 1040 Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs forms 2010 form 1040 Made on account of the attendance of the designated beneficiary at a U. Irs forms 2010 form 1040 S. Irs forms 2010 form 1040 military academy (such as the USMA at West Point). Irs forms 2010 form 1040 This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Irs forms 2010 form 1040 S. Irs forms 2010 form 1040 Code) attributable to such attendance. Irs forms 2010 form 1040 Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier). Irs forms 2010 form 1040 Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). Irs forms 2010 form 1040 The distributed earnings must be included in gross income for the year in which the excess contribution was made. Irs forms 2010 form 1040 Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Irs forms 2010 form 1040 Figuring the additional tax. Irs forms 2010 form 1040    Use Part II of Form 5329, to figure any additional tax. Irs forms 2010 form 1040 Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Irs forms 2010 form 1040 When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. Irs forms 2010 form 1040 The designated beneficiary reaches age 30. Irs forms 2010 form 1040 In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. Irs forms 2010 form 1040 However, this rule does not apply if the beneficiary is a special needs beneficiary. Irs forms 2010 form 1040 The designated beneficiary dies before reaching age 30. Irs forms 2010 form 1040 In this case, the remaining assets must generally be distributed within 30 days after the date of death. Irs forms 2010 form 1040 Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. Irs forms 2010 form 1040 (“Family member” was defined earlier under Rollovers . Irs forms 2010 form 1040 ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. Irs forms 2010 form 1040 This age limitation does not apply if the new beneficiary is a special needs beneficiary. Irs forms 2010 form 1040 There are no tax consequences as a result of the transfer. Irs forms 2010 form 1040 How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. Irs forms 2010 form 1040 You determine these earnings as shown in the following two steps. Irs forms 2010 form 1040 Multiply the amount distributed by a fraction. Irs forms 2010 form 1040 The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. Irs forms 2010 form 1040 Subtract the amount figured in (1) from the total amount distributed during 2013. Irs forms 2010 form 1040 The result is the amount of earnings included in the distribution. Irs forms 2010 form 1040 For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. Irs forms 2010 form 1040 The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. Irs forms 2010 form 1040 Worksheet 7-3 Instructions. Irs forms 2010 form 1040 Coverdell ESA—Taxable Distributions and Basis Line G. Irs forms 2010 form 1040 Enter the total distributions received from all Coverdell ESAs during 2013. Irs forms 2010 form 1040 Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). Irs forms 2010 form 1040 Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. Irs forms 2010 form 1040 Line 2. Irs forms 2010 form 1040 Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. Irs forms 2010 form 1040   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. Irs forms 2010 form 1040 For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. Irs forms 2010 form 1040 For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. Irs forms 2010 form 1040 You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. Irs forms 2010 form 1040 Line 4. Irs forms 2010 form 1040 Enter the total distributions received from this Coverdell ESA in 2013. Irs forms 2010 form 1040 Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). Irs forms 2010 form 1040   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. Irs forms 2010 form 1040 Line 7. Irs forms 2010 form 1040 Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. Irs forms 2010 form 1040 A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. Irs forms 2010 form 1040   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. Irs forms 2010 form 1040 An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. Irs forms 2010 form 1040 Worksheet 7-3. Irs forms 2010 form 1040 Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. Irs forms 2010 form 1040 • • • Complete Part I, lines A through H, on only one worksheet. Irs forms 2010 form 1040  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. Irs forms 2010 form 1040  Complete Part III, the Summary (line 16), on only one worksheet. Irs forms 2010 form 1040 Part I. Irs forms 2010 form 1040 Qualified Education Expenses (Complete for total expenses)       A. Irs forms 2010 form 1040 Enter your total qualified education expenses for 2013   A. Irs forms 2010 form 1040   B. Irs forms 2010 form 1040 Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. Irs forms 2010 form 1040         C. Irs forms 2010 form 1040 Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). Irs forms 2010 form 1040 Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. Irs forms 2010 form 1040         D. Irs forms 2010 form 1040 Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. Irs forms 2010 form 1040         E. Irs forms 2010 form 1040 Add lines B, C, and D   D. Irs forms 2010 form 1040   F. Irs forms 2010 form 1040 Subtract line E from line A. Irs forms 2010 form 1040 This is your adjusted qualified education expense for 2013   E. Irs forms 2010 form 1040   G. Irs forms 2010 form 1040 Enter your total distributions from all Coverdell ESAs during 2013. Irs forms 2010 form 1040 Do not include rollovers  or the return of excess contributions (see instructions)   F. Irs forms 2010 form 1040   H. Irs forms 2010 form 1040 Divide line F by line G. Irs forms 2010 form 1040 Enter the result as a decimal (rounded to at least 3 places). Irs forms 2010 form 1040 If the  result is 1. Irs forms 2010 form 1040 000 or more, enter 1. Irs forms 2010 form 1040 000   G. Irs forms 2010 form 1040 . Irs forms 2010 form 1040 Part II. Irs forms 2010 form 1040 Taxable Distributions and Basis (Complete separately for each account) 1. Irs forms 2010 form 1040 Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. Irs forms 2010 form 1040 Do not include rollovers or the return of excess contributions   1. Irs forms 2010 form 1040   2. Irs forms 2010 form 1040 Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. Irs forms 2010 form 1040   3. Irs forms 2010 form 1040 Add lines 1 and 2   3. Irs forms 2010 form 1040   4. Irs forms 2010 form 1040 Enter the total distributions from this Coverdell ESA during 2013. Irs forms 2010 form 1040 Do not include rollovers  or the return of excess contributions (see instructions)   4. Irs forms 2010 form 1040   5. Irs forms 2010 form 1040 Multiply line 4 by line H. Irs forms 2010 form 1040 This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. Irs forms 2010 form 1040         6. Irs forms 2010 form 1040 Subtract line 5 from line 4   6. Irs forms 2010 form 1040         7. Irs forms 2010 form 1040 Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. Irs forms 2010 form 1040         8. Irs forms 2010 form 1040 Add lines 4 and 7   8. Irs forms 2010 form 1040         9. Irs forms 2010 form 1040 Divide line 3 by line 8. Irs forms 2010 form 1040 Enter the result as a decimal (rounded to  at least 3 places). Irs forms 2010 form 1040 If the result is 1. Irs forms 2010 form 1040 000 or more, enter 1. Irs forms 2010 form 1040 000   9. Irs forms 2010 form 1040 . Irs forms 2010 form 1040       10. Irs forms 2010 form 1040 Multiply line 4 by line 9. Irs forms 2010 form 1040 This is the amount of basis allocated to your  distributions, and is tax free   10. Irs forms 2010 form 1040     Note. Irs forms 2010 form 1040 If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. Irs forms 2010 form 1040       11. Irs forms 2010 form 1040 Subtract line 10 from line 4   11. Irs forms 2010 form 1040   12. Irs forms 2010 form 1040 Divide line 5 by line 4. Irs forms 2010 form 1040 Enter the result as a decimal (rounded to  at least 3 places). Irs forms 2010 form 1040 If the result is 1. Irs forms 2010 form 1040 000 or more, enter 1. Irs forms 2010 form 1040 000   12. Irs forms 2010 form 1040 . Irs forms 2010 form 1040       13. Irs forms 2010 form 1040 Multiply line 11 by line 12. Irs forms 2010 form 1040 This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. Irs forms 2010 form 1040   14. Irs forms 2010 form 1040 Subtract line 13 from line 11. Irs forms 2010 form 1040 This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. Irs forms 2010 form 1040   15. Irs forms 2010 form 1040 Subtract line 10 from line 3. Irs forms 2010 form 1040 This is your basis in this Coverdell ESA as of December 31, 2013   15. Irs forms 2010 form 1040   Part III. Irs forms 2010 form 1040 Summary (Complete only once)       16. Irs forms 2010 form 1040 Taxable amount. Irs forms 2010 form 1040 Add together all amounts on line 14 for all your Coverdell ESAs. Irs forms 2010 form 1040 Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. 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