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


What you need to do

  • Read the notice and the enclosed forms carefully. They explain the information you must send to us.
  • Provide copies of supporting documentation to verify the items we're auditing.
  • Complete the response form by indicating which items your supporting documentation addresses on the copies you're submitting and return the form with the documents you are submitting.

You may want to


Answers to Common Questions

Why was my return selected for audit?
While most returns are accepted as filed, some are selected for examination. The IRS examines (or audits) some federal tax returns to determine if income, expenses, and credits are reported accurately. The IRS selects returns for examination using various methods which include random sampling, computerized screening, and comparison of information received by the IRS such as Forms W-2 and 1099. Having your return selected for examination doesn't suggest you made an error or were dishonest.

Why are my wages being audited?
The amounts you reported on the wages and withholding lines of your tax return appear incorrect.

Can I claim the earned income credit for my fiancé’s child?
No. You must be married to the child’s parent during the tax year in question to receive EIC.

What do I need to send?
Refer to the applicable Form 886-H and Form 886-L you received with your notice. There is a separate form for each item being audited that explains what supporting documentation to send.

What if I can’t provide the requested documentation?
We’ll disallow the items being audited and send you an examination report that shows the proposed changes to your tax return.

What if I did not file a tax return claiming the items you are questioning and someone else is using my name and social security number?
Contact us at the number listed on the top right corner of your notice. You can also refer to the IRS Identity Theft resource page for more information.

Can I file my tax return while I am being audited?
Yes, you should continue to file all required tax returns before the due date to avoid additional penalties and interest.


Tips for next year

Avoid errors that can delay your refund or result in IRS denying your EITC claim. Find out the most common errors in claiming EITC here.

Page Last Reviewed or Updated: 07-Mar-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

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