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Tax Filing 2010

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Tax Filing 2010

Tax filing 2010 Index A Addition to property, Additions and Improvements Adjusted basis, Adjusted Basis Alternative Depreciation System (ADS) Recovery periods, Recovery Periods Under ADS Required use, Required use of ADS. Tax filing 2010 Amended return, Filing an Amended Return Apartment Cooperative, Cooperative apartments. Tax filing 2010 Rental, Which Property Class Applies Under GDS? Automobile (see Passenger automobile) B Basis Adjustments, Basis adjustment for depreciation allowed or allowable. Tax filing 2010 , Adjustment of partner's basis in partnership. Tax filing 2010 , Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. Tax filing 2010 , Basis adjustment due to casualty loss. Tax filing 2010 Basis for depreciation, What Is the Basis for Depreciation? Casualty loss, Basis adjustment due to casualty loss. Tax filing 2010 Change in use, Property changed from personal use. Tax filing 2010 Cost, Cost as Basis Depreciable basis, Depreciable basis. Tax filing 2010 Other than cost, Other Basis Recapture of clean-fuel vehicle deduction or credit, Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. Tax filing 2010 Term interest, Basis adjustments. Tax filing 2010 Unadjusted, Figuring the Unadjusted Basis of Your Property Business use of property, partial, Partial business or investment use. Tax filing 2010 Business-use limit, recapture of Section 179 deduction, When Must You Recapture the Deduction? Business-use requirement, listed property, What Is the Business-Use Requirement? C Car (see Passenger automobile) Carryover of section 179 deduction, Carryover of disallowed deduction. Tax filing 2010 Casualty loss, effect of, Basis adjustment due to casualty loss. Tax filing 2010 Changing accounting method, Changing Your Accounting Method Communication equipment (see Listed property) Commuting, Commuting use. Tax filing 2010 Computer (see Listed property) Computer software, Computer software. Tax filing 2010 , Off-the-shelf computer software. Tax filing 2010 Containers, Containers. Tax filing 2010 Conventions, Which Convention Applies? Cooperative apartment, Cooperative apartments. Tax filing 2010 Copyright, Patents and copyrights. Tax filing 2010 (see also Section 197 intangibles) Correcting depreciation deductions, How Do You Correct Depreciation Deductions? Cost basis, Cost as Basis D Declining balance Method, Declining Balance Method Rates, Declining balance rate. Tax filing 2010 Deduction limit Automobile, Do the Passenger Automobile Limits Apply? Section 179, How Much Can You Deduct? Depreciation Deduction Employee, Can Employees Claim a Deduction? Listed property, Can Employees Claim a Deduction? Determinable useful life, Property Having a Determinable Useful Life Excepted property, Excepted Property Incorrect amount deducted, How Do You Correct Depreciation Deductions? Methods, Which Depreciation Method Applies? Property lasting more than one year, Property Lasting More Than One Year Property owned, Property You Own Property used in business, Property Used in Your Business or Income-Producing Activity Recapture, Revoking an election. Tax filing 2010 , Recapture of Excess Depreciation Depreciation allowable, Basis adjustment for depreciation allowed or allowable. Tax filing 2010 Depreciation allowed, Basis adjustment for depreciation allowed or allowable. Tax filing 2010 Depreciation deduction Listed property, What Is the Business-Use Requirement? Determinable useful life, Property Having a Determinable Useful Life Disposition Before recovery period ends, Sale or Other Disposition Before the Recovery Period Ends General asset account property, Disposing of GAA Property Section 179 deduction, When Must You Recapture the Deduction? E Election ADS, Electing ADS. Tax filing 2010 , Election of ADS. Tax filing 2010 Declining balance (150% DB) method, 150% election. Tax filing 2010 Exclusion from MACRS, Election To Exclude Property From MACRS General asset account, Electing To Use a GAA Not to claim special depreciation allowance, How Can You Elect Not To Claim an Allowance? Section 179 deduction, How Do You Elect the Deduction? Straight line method, Straight line election. Tax filing 2010 Electric vehicle, Electric Vehicles Employee Depreciation deduction, Can Employees Claim a Deduction? How to claim depreciation, Employee. Tax filing 2010 Employee deduction, listed property, Can Employees Claim a Deduction? Energy property, Energy property. Tax filing 2010 Exchange of MACRS property, Property Acquired in a Like-kind Exchange or Involuntary Conversion F Farm Property, Depreciation Methods for Farm Property Figuring MACRS Using percentage tables, How Is the Depreciation Deduction Figured? Without using percentage tables, Figuring the Deduction Without Using the Tables Films, Films, video tapes, and recordings. Tax filing 2010 Free tax services, Free help with your tax return. Tax filing 2010 G General asset account Abusive transaction, Abusive transactions. Tax filing 2010 Disposing of property, Disposing of GAA Property Grouping property in, Grouping Property Nonrecognition transaction, Nonrecognition transactions. Tax filing 2010 General Depreciation System (GDS), recovery periods, Recovery Periods Under GDS Gift (see Basis, other than cost) H Help (see Tax help) I Idle property, Idle Property Improvements, How Do You Treat Repairs and Improvements?, Additions and Improvements Income forecast method, Income Forecast Method Incorrect depreciation deductions, How Do You Correct Depreciation Deductions? Indian reservation Defined, Indian reservation. Tax filing 2010 Qualified infrastructure property, Qualified infrastructure property. Tax filing 2010 Qualified property, Qualified property. Tax filing 2010 Recovery periods for qualified property, Indian Reservation Property Related person, Related person. Tax filing 2010 Inheritance (see Basis, other than cost) Intangible property Depreciation method, Intangible Property, Income Forecast Method Income forecast method, Income Forecast Method Straight line method, Intangible Property Inventory, Inventory. Tax filing 2010 Investment use of property, partial, Partial business or investment use. Tax filing 2010 Involuntary conversion of MACRS property, Property Acquired in a Like-kind Exchange or Involuntary Conversion L Land Not depreciable, Land Preparation costs, Land Leased property, Leased property. Tax filing 2010 Leasehold improvement property, defined, Qualified leasehold improvement property. Tax filing 2010 , Qualified leasehold improvement property. Tax filing 2010 Life tenant, Life tenant. Tax filing 2010 (see also Term interests) Limit on deduction Automobile, Do the Passenger Automobile Limits Apply? Section 179, How Much Can You Deduct? Listed property 5% owner, 5% owner. Tax filing 2010 Computer, Computers and Related Peripheral Equipment Condition of employment, Condition of employment. Tax filing 2010 Defined, What Is Listed Property? Employee deduction, Can Employees Claim a Deduction? Employer convenience, Employer's convenience. Tax filing 2010 Improvements to, Improvements to listed property. Tax filing 2010 Leased, Lessee's Inclusion Amount Passenger automobile, Passenger Automobiles Qualified business use, Qualified Business Use Recordkeeping, Adequate Records Related person, Related persons. Tax filing 2010 Reporting on Form 4562, How Is Listed Property Information Reported? Lodging, Property used for lodging. Tax filing 2010 M Maximum deduction Electric vehicles, Electric Vehicles Passenger automobiles, Maximum Depreciation Deduction Trucks, Trucks and Vans Vans, Trucks and Vans Mobile home (see Residential rental property) Modified ACRS (MACRS) Addition or improvement, Additions and Improvements Alternative Depreciation System (ADS), Which Depreciation System (GDS or ADS) Applies? Conventions, Which Convention Applies? Declining balance method, Declining Balance Method Depreciation methods, Which Depreciation Method Applies? Farm property, Depreciation Methods for Farm Property Figuring, short tax year, Property Placed in Service in a Short Tax Year General Depreciation System (GDS), Which Depreciation System (GDS or ADS) Applies? Percentage tables, Using the MACRS Percentage Tables Property classes, Which Property Class Applies Under GDS? Recovery periods, Which Recovery Period Applies? Short tax year, Figuring the Deduction for a Short Tax Year Straight line method, Straight Line Method N Nonresidential real property, Which Property Class Applies Under GDS? Nontaxable transfer of MACRS property, Property Acquired in a Nontaxable Transfer O Office in the home, Office in the home. Tax filing 2010 , Office in the home. Tax filing 2010 Ownership, incidents of, Incidents of ownership. Tax filing 2010 P Partial business use, Partial business use. Tax filing 2010 Passenger automobile Defined, Passenger Automobiles Electric vehicles, Electric Vehicles Limit on, Do the Passenger Automobile Limits Apply? Maximum depreciation deduction, Maximum Depreciation Deduction Trucks, Trucks and Vans Vans, Trucks and Vans Patent, Patents and copyrights. Tax filing 2010 (see also Section 197 intangibles) Personal property, Personal property. Tax filing 2010 Phonographic equipment (see Listed property) Photographic equipment (see Listed property) Placed in service Before 1987, Property You Placed in Service Before 1987 Date, What Is the Placed in Service Date? Rule, Placed in Service Property Classes, Which Property Class Applies Under GDS? Depreciable, What Property Can Be Depreciated? Idle, Idle Property Improvements, How Do You Treat Repairs and Improvements? Leased, Leased property. Tax filing 2010 , Leased property. Tax filing 2010 Listed, What Is Listed Property? Personal, Personal property. Tax filing 2010 Real, Real property. Tax filing 2010 Retired from service, Retired From Service Tangible personal, Tangible personal property. Tax filing 2010 Term interest, Certain term interests in property. Tax filing 2010 Q Qualified leasehold improvement property, defined, Qualified leasehold improvement property. Tax filing 2010 , Qualified leasehold improvement property. Tax filing 2010 Qualified property, special depreciation allowance, What Is Qualified Property? R Real property, Real property. Tax filing 2010 Recapture Clean-fuel vehicle deduction or credit, Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. Tax filing 2010 General asset account, abusive transaction, Abusive transactions. Tax filing 2010 Listed property, Recapture of Excess Depreciation MACRS depreciation, Revoking an election. Tax filing 2010 Section 179 deduction, When Must You Recapture the Deduction? Special depreciation allowance, When Must You Recapture an Allowance? Recordkeeping Listed property, Adequate Records Section 179, How Do You Elect the Deduction? Recovery periods ADS, Recovery Periods Under ADS GDS, Recovery Periods Under GDS Related persons, Related persons. Tax filing 2010 , Related persons. Tax filing 2010 , Related persons. Tax filing 2010 , Related persons. Tax filing 2010 , Related person. Tax filing 2010 , Related persons. Tax filing 2010 Rent-to-own property, defined, Qualified rent-to-own property. Tax filing 2010 Rental home (see Residential rental property) Rented property, improvements, Improvements to rented property. Tax filing 2010 Repairs, How Do You Treat Repairs and Improvements? Residential rental property, Which Property Class Applies Under GDS? Retail motor fuels outlet, Retail motor fuels outlet. Tax filing 2010 Revoking ADS election, Electing ADS. Tax filing 2010 General asset account election, Revoking an election. Tax filing 2010 Section 179 election, Revoking an election. Tax filing 2010 S Sale of property, Sale or Other Disposition Before the Recovery Period Ends Section 179 deduction Business use required, Partial business use. Tax filing 2010 Carryover, Carryover of disallowed deduction. Tax filing 2010 Dispositions, When Must You Recapture the Deduction? Electing, How Do You Elect the Deduction? Limits Business (taxable) income, Business Income Limit Business-use, recapture, When Must You Recapture the Deduction? Dollar, Dollar Limits Enterprise zone business, Enterprise Zone Businesses Partial business use, Partial business use. Tax filing 2010 Married filing separate returns, Married Individuals Partnership rules, Partnerships and Partners Property Eligible, Eligible Property Excepted, Excepted Property Purchase required, Property Acquired by Purchase Recapture, When Must You Recapture the Deduction? Recordkeeping, How Do You Elect the Deduction? S corporation rules, S Corporations Settlement fees, Settlement costs. Tax filing 2010 Short tax year Figuring depreciation, Property Placed in Service in a Short Tax Year Figuring placed-in-service date, Using the Applicable Convention in a Short Tax Year Software, computer, Computer software. Tax filing 2010 , Off-the-shelf computer software. Tax filing 2010 Sound recording, Films, video tapes, and recordings. Tax filing 2010 Special depreciation allowance Election not to claim, How Can You Elect Not To Claim an Allowance? Qualified property, What Is Qualified Property? Recapture, When Must You Recapture an Allowance? Stock, constructive ownership of, Constructive ownership of stock or partnership interest. Tax filing 2010 Straight line method, Intangible Property, Straight Line Method Created intangibles, Certain created intangibles. Tax filing 2010 T Tangible personal property, Tangible personal property. Tax filing 2010 Term interest, Certain term interests in property. Tax filing 2010 Trade-in of property, Trade-in of other property. Tax filing 2010 Trucks, Trucks and Vans U Unadjusted basis, Figuring the Unadjusted Basis of Your Property Useful life, Property Having a Determinable Useful Life V Vans, Trucks and Vans Video tape, Films, video tapes, and recordings. Tax filing 2010 Video-recording equipment (see Listed property) W When to use ADS, Which Depreciation System (GDS or ADS) Applies? Worksheet Leased listed property, Inclusion amount worksheet. Tax filing 2010 MACRS, MACRS Worksheet Prev  Up     Home   More Online Publications
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The Tax Filing 2010

Tax filing 2010 3. Tax filing 2010   Lifetime Learning Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. Tax filing 2010 They are the American opportunity credit and the lifetime learning credit. Tax filing 2010 This chapter discusses the lifetime learning credit. Tax filing 2010 The American opportunity credit is discussed in chapter 2, The American Opportunity Credit . Tax filing 2010 This chapter explains: Who can claim the lifetime learning credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. Tax filing 2010 What is the tax benefit of the lifetime learning credit. Tax filing 2010   For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. Tax filing 2010 There is no limit on the number of years the lifetime learning credit can be claimed for each student. Tax filing 2010   A tax credit reduces the amount of income tax you may have to pay. Tax filing 2010 Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Tax filing 2010 The lifetime learning credit is a nonrefundable credit. Tax filing 2010 This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you. Tax filing 2010   Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. Tax filing 2010 Can you claim more than one education credit this year. Tax filing 2010   For each student, you can elect for any year only one of the credits. Tax filing 2010 For example, if you elect to take the lifetime learning credit for a child on your 2013 tax return, you cannot, for that same child, also claim the American opportunity credit for 2013. Tax filing 2010   If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. Tax filing 2010   If you pay qualified education expenses for more than one student in the same year, you can choose to take certain credits on a per-student, per-year basis. Tax filing 2010 This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. Tax filing 2010 Differences between the American opportunity and lifetime learning credits. Tax filing 2010   There are several differences between these two credits. Tax filing 2010 For example, you can claim the American opportunity credit for the same student for no more than 4 tax years, but any year in which the Hope Scholarship Credit was claimed counts toward the 4 years. Tax filing 2010 However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. Tax filing 2010 The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. Tax filing 2010 Overview of the lifetime learning credit. Tax filing 2010   See Table 3-1, Overview of the Lifetime Learning Credit for the basics of the lifetime learning credit. Tax filing 2010 The details are discussed in this chapter. Tax filing 2010 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return. Tax filing 2010 Who Can Claim the Credit Generally, you can claim the lifetime learning credit if all three of the following requirements are met. Tax filing 2010 You pay qualified education expenses of higher education. Tax filing 2010 You pay the education expenses for an eligible student. Tax filing 2010 The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Tax filing 2010 Table 3-1. Tax filing 2010 Overview of the Lifetime Learning Credit Maximum credit Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $127,000 if married filling jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable Nonrefundable—credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available for an unlimited number of years Type of program required Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Available for one or more courses Felony drug conviction Felony drug convictions do not make the student ineligible Qualified expenses Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Note. Tax filing 2010 Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. Tax filing 2010 “Qualified education expenses” are defined later under Qualified Education Expenses . Tax filing 2010 “Eligible students” are defined later under Who Is an Eligible Student . Tax filing 2010 A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Tax filing 2010 You may find Figure 3-1, Can You Claim the Lifetime Learning Credit for 2013 , later, helpful in determining if you can claim a lifetime learning credit on your tax return. Tax filing 2010 Who Cannot Claim the Credit You cannot claim the lifetime learning credit for 2013 if any of the following apply. Tax filing 2010 Your filing status is married filing separately. Tax filing 2010 You are listed as a dependent on another person's tax return (such as your parents'). Tax filing 2010 See Who Can Claim a Dependent's Expenses , later. Tax filing 2010 Your modified adjusted gross income (MAGI) is $63,000 or more ($127,000 or more in the case of a joint return). Tax filing 2010 MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Tax filing 2010 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. Tax filing 2010 More information on nonresident aliens can be found in Publication 519. Tax filing 2010 You claim the American Opportunity Credit (see chapter 2) or a Tuition and Fees Deduction (see chapter 6) for the same student in 2013. Tax filing 2010 What Expenses Qualify The lifetime learning credit 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. Tax filing 2010 Generally, the credit is allowed for qualified education expenses paid in 2013 for an academic period beginning in 2013 or in the first 3 months of 2014. Tax filing 2010 For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 credit. Tax filing 2010 Academic period. Tax filing 2010   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. Tax filing 2010 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. Tax filing 2010 Paid with borrowed funds. Tax filing 2010   You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. Tax filing 2010 You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid. Tax filing 2010 Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. Tax filing 2010 Student withdraws from class(es). Tax filing 2010   You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. Tax filing 2010 Qualified Education Expenses For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. Tax filing 2010 The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. Tax filing 2010 Eligible educational institution. Tax filing 2010   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. Tax filing 2010 S. Tax filing 2010 Department of Education. Tax filing 2010 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Tax filing 2010 The educational institution should be able to tell you if it is an eligible educational institution. Tax filing 2010   Certain educational institutions located outside the United States also participate in the U. Tax filing 2010 S. Tax filing 2010 Department of Education's Federal Student Aid (FSA) programs. Tax filing 2010 Related expenses. Tax filing 2010   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance. Tax filing 2010 Prepaid expenses. Tax filing 2010   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. Tax filing 2010 See Academic period , earlier. Tax filing 2010 For example, 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 an education credit for 2013 only (if you meet all the other requirements). Tax filing 2010 You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Tax filing 2010 In the following examples, assume that each student is an eligible student at an eligible educational institution. Tax filing 2010 Example 1. Tax filing 2010   Jackson is a sophomore in University V's degree program in dentistry. Tax filing 2010 This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Tax filing 2010 Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense. Tax filing 2010 Example 2. Tax filing 2010   Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. Tax filing 2010 The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Tax filing 2010 Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Tax filing 2010 Donna bought hers at College W's bookstore. Tax filing 2010 Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. Tax filing 2010 Example 3. Tax filing 2010   When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Tax filing 2010 This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and student government. Tax filing 2010 No portion of the fee covers personal expenses. Tax filing 2010 Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Tax filing 2010 Therefore, it is a qualified expense. Tax filing 2010 No Double Benefit Allowed You cannot do any of the following: Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses. Tax filing 2010 Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student. Tax filing 2010 Claim a lifetime learning credit and an American opportunity credit based on the same qualified education expenses. Tax filing 2010 Claim a lifetime learning credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). Tax filing 2010 See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. Tax filing 2010 Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. Tax filing 2010 See Adjustments to Qualified Education Expenses, next. Tax filing 2010 This image is too large to be displayed in the current screen. Tax filing 2010 Please click the link to view the image. Tax filing 2010 Figure 3-1 Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Tax filing 2010 The result is the amount of adjusted qualified education expenses for each student. Tax filing 2010 Tax-free educational assistance. Tax filing 2010   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Tax filing 2010 See Academic period , earlier. Tax filing 2010   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Tax filing 2010 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). Tax filing 2010   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. Tax filing 2010 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. Tax filing 2010   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), 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 ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Tax filing 2010 Generally, any scholarship or fellowship is treated as tax free. Tax filing 2010 However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. Tax filing 2010 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Tax filing 2010 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Tax filing 2010 You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. Tax filing 2010 For examples, see Coordination with Pell grants and other scholarships, later. Tax filing 2010 Refunds. Tax filing 2010   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Tax filing 2010 Some tax-free educational assistance received after 2013 may be treated as a refund. Tax filing 2010 See Tax-free educational assistance , earlier. Tax filing 2010 Refunds received in 2013. Tax filing 2010   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Tax filing 2010 Refunds received after 2013 but before your income tax return is filed. Tax filing 2010   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. Tax filing 2010 Refunds received after 2013 and after your income tax return is filed. Tax filing 2010   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. Tax filing 2010 See Credit recapture, next. Tax filing 2010 Credit recapture. Tax filing 2010    If any tax-free educational assistance for the qualified education expenses paid in 2013 or any refund of your qualified education expenses paid in 2013 is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Tax filing 2010 You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. Tax filing 2010 You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Tax filing 2010 Include that amount as an additional tax for the year the refund or tax-free assistance was received. Tax filing 2010 Example. Tax filing 2010   You pay $9,300 in tuition and fees in December 2013, and your child began college in January 2014. Tax filing 2010 You filed your 2013 tax return on February 14, 2014, and claimed a lifetime learning credit of $1,860. Tax filing 2010 You claimed no other tax credits. Tax filing 2010 After you filed your return, your child withdrew from two courses and you received a refund of $2,900. Tax filing 2010 You must refigure your 2013 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. Tax filing 2010 The refigured credit is $1,280 and your tax liability increased by $580. Tax filing 2010 See instructions for your 2014 income tax return to determine where to include this tax. Tax filing 2010 If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. Tax filing 2010 Amounts that do not reduce qualified education expenses. Tax filing 2010   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. Tax filing 2010   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. Tax filing 2010 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, as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Tax filing 2010 The use of the money is not restricted. Tax filing 2010 For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit. Tax filing 2010 Coordination with Pell grants and other scholarships. Tax filing 2010   In some cases, you may be able to reduce your tax liability by including scholarships in income. Tax filing 2010 If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. Tax filing 2010 The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Tax filing 2010 Example 1—No scholarship. Tax filing 2010 Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. Tax filing 2010 Her AGI and her MAGI, for purposes of the credit, are $27,000. Tax filing 2010 Judy takes the standard deduction of $5,950 and personal exemption of $3,800, reducing her AGI to taxable income of $17,250 and her tax before credits is $2,156. Tax filing 2010 She claims no credits other than the lifetime learning credit. Tax filing 2010 In July 2013 she paid $700 for the summer 2013 semester; in August 2013 she paid $1,900 for the fall 2013 semester; and in December 2013 she paid another $1,900 for the spring semester beginning in January 2014. Tax filing 2010 Judy and the college meet all requirements for the lifetime learning tax credit. Tax filing 2010 She can use all of the $4,500 tuition she paid in 2013 when figuring her 2013 lifetime learning credit. Tax filing 2010 She claims a $900 lifetime learning credit and her tax after credits is $1,256. Tax filing 2010 Example 2—Scholarship excluded from income. Tax filing 2010 The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. Tax filing 2010 Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. Tax filing 2010 If Judy excludes the scholarship from income, she will be deemed (for purposes of computing her education credit) as having used the scholarship to pay for tuition, required fees, and course materials. Tax filing 2010 Only $3,000 of the $4,500 tuition she paid in 2013 could be used when figuring her 2013 lifetime learning credit. Tax filing 2010 Her lifetime learning credit would be reduced to $600 and her tax after credits would be $1,556. Tax filing 2010 Example 3—Scholarship included in income. Tax filing 2010 The facts are the same as in Example 2—Scholarship excluded from income. Tax filing 2010 If, unlike Example 2, Judy includes the $1,500 scholarship in income, she will be deemed to have used the entire scholarship to pay for room and board. Tax filing 2010 Judy's AGI will increase to $28,500, her taxable income would be $18,750, and her tax before credits would be $2,381. Tax filing 2010 She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. Tax filing 2010 Judy could claim a $900 lifetime learning credit and her tax after credits would be $1,481. Tax filing 2010 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. Tax filing 2010 This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Tax filing 2010 Sports, games, hobbies, and noncredit courses. Tax filing 2010   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. Tax filing 2010 However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify. Tax filing 2010 Comprehensive or bundled fees. Tax filing 2010   Some eligible educational institutions combine all of their fees for an academic period into one amount. Tax filing 2010 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. Tax filing 2010 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. Tax filing 2010 See Figuring the Credit , later, for more information about Form 1098-T. Tax filing 2010 Who Is an Eligible Student For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses , earlier). Tax filing 2010 Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim a lifetime learning credit for your dependent's expenses for that year. Tax filing 2010 For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. Tax filing 2010 You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Tax filing 2010 IF you. Tax filing 2010 . Tax filing 2010 . Tax filing 2010 THEN only. Tax filing 2010 . Tax filing 2010 . Tax filing 2010 claim an exemption on your tax return for a dependent who is an eligible student you can claim the lifetime learning credit based on that dependent's expenses. Tax filing 2010 The dependent cannot claim the credit. Tax filing 2010 do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the lifetime learning credit. Tax filing 2010 You cannot claim the credit based on this dependent's expenses. Tax filing 2010 Expenses paid by dependent. Tax filing 2010   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Tax filing 2010 Include these expenses when figuring the amount of your lifetime learning credit. Tax filing 2010    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. Tax filing 2010 Expenses paid by you. Tax filing 2010   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the lifetime learning credit. Tax filing 2010 If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the lifetime learning credit. Tax filing 2010 Expenses paid by others. Tax filing 2010   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. Tax filing 2010 In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Tax filing 2010 If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Tax filing 2010 Example. Tax filing 2010 In 2013, Ms. Tax filing 2010 Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Tax filing 2010 For purposes of claiming a lifetime learning credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. Tax filing 2010 Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim a lifetime learning credit. Tax filing 2010 If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim a lifetime learning credit. Tax filing 2010 If anyone else claims an exemption for Todd, Todd cannot claim a lifetime learning credit. Tax filing 2010 Tuition reduction. Tax filing 2010   When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. Tax filing 2010 If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. Tax filing 2010 For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Tax filing 2010 Figuring the Credit The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. Tax filing 2010 The maximum amount of lifetime learning credit you can claim for 2013 is $2,000 (20% × $10,000). Tax filing 2010 However, that amount may be reduced based on your MAGI. Tax filing 2010 See Effect of the Amount of Your Income on the Amount of Your Credit , later. Tax filing 2010 Example. Tax filing 2010 Bruce and Toni Harper are married and file a joint tax return. Tax filing 2010 For 2013, their MAGI is $75,000. Tax filing 2010 Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. Tax filing 2010 She already has a bachelor's degree in history and wants to become a nurse. Tax filing 2010 In August 2013, Toni paid $5,000 of qualified education expenses for her fall 2013 semester. Tax filing 2010 Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2013 joint tax return. Tax filing 2010 Form 1098-T. Tax filing 2010   To help you figure your lifetime learning credit, the student should receive Form 1098-T. Tax filing 2010 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. Tax filing 2010 An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Tax filing 2010 However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you paid. Tax filing 2010 When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Tax filing 2010   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. Tax filing 2010    The eligible educational institution may ask for a completed Form W-9S, or similar statement to obtain the student's name, address, and taxpayer identification number. Tax filing 2010 Effect of the Amount of Your Income on the Amount of Your Credit The amount of your lifetime learning credit is phased out (gradually reduced) if your MAGI is between $53,000 and $63,000 ($107,000 and $127,000 if you file a joint return). Tax filing 2010 You cannot claim a lifetime learning credit if your MAGI is $63,000 or more ($127,000 or more if you file a joint return). Tax filing 2010 Modified adjusted gross income (MAGI). Tax filing 2010   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Tax filing 2010 MAGI when using Form 1040A. Tax filing 2010   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Tax filing 2010 MAGI when using Form 1040. Tax filing 2010   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. Tax filing 2010 You can use Worksheet 3-1 to figure your MAGI. Tax filing 2010 Worksheet 3-1. Tax filing 2010 MAGI for the Lifetime Learning Credit 1. Tax filing 2010 Enter your adjusted gross income  (Form 1040, line 38)   1. Tax filing 2010   2. Tax filing 2010 Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Tax filing 2010       3. Tax filing 2010 Enter your foreign housing deduction (Form 2555, line 50)   3. Tax filing 2010       4. Tax filing 2010 Enter the amount of income from Puerto Rico you are excluding   4. Tax filing 2010       5. Tax filing 2010 Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Tax filing 2010       6. Tax filing 2010 Add the amounts on lines 2, 3, 4, and 5   6. Tax filing 2010   7. Tax filing 2010 Add the amounts on lines 1 and 6. Tax filing 2010  This is your modified adjusted  gross income. Tax filing 2010 Enter this amount  on Form 8863, line 14   7. Tax filing 2010   Phaseout. Tax filing 2010   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 10-18 of Form 8863. Tax filing 2010 The same method is shown in the following example. Tax filing 2010 Example. Tax filing 2010 You are filing a joint return with a MAGI of $112,000. Tax filing 2010 In 2013, you paid $6,600 of qualified education expenses. Tax filing 2010 You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). Tax filing 2010 The result is a $1,320 (20% x $6,600) tentative credit. Tax filing 2010 Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. Tax filing 2010 The numerator of the fraction is $127,000 (the upper limit for those filing a joint return) minus your MAGI. Tax filing 2010 The denominator is $20,000, the range of incomes for the phaseout ($107,000 to $127,000). Tax filing 2010 The result is the amount of your phased out (reduced) lifetime learning credit ($990). Tax filing 2010   $1,320 × $127,000 − $112,000  $20,000 = $990   Claiming the Credit You claim the lifetime learning credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Tax filing 2010 Enter the credit on Form 1040, line 49, or Form 1040A, line 31. Tax filing 2010 Note. Tax filing 2010 In Appendix A, Illustrated Example of Education Credits at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. Tax filing 2010 Prev  Up  Next   Home   More Online Publications