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Turbotax 2011 Tax Preparation

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Turbotax 2011 Tax Preparation

Turbotax 2011 tax preparation Publication 970 - Additional Material Table of Contents AppendicesAppendix A. Turbotax 2011 tax preparation Illustrated Example of Education Credits Glossary Appendices The following appendices are provided to help you claim the education benefits that will give you the lowest tax. Turbotax 2011 tax preparation Appendix A—An illustrated example of education credits, including a filled-in Form 8863 showing how to claim both the American opportunity credit and lifetime learning credit for 2013. Turbotax 2011 tax preparation Appendix B—A chart summarizing some of the major differences between the education tax benefits discussed in this publication. Turbotax 2011 tax preparation It is intended only as a guide. Turbotax 2011 tax preparation Look in this publication for more complete information. Turbotax 2011 tax preparation   Appendix A. Turbotax 2011 tax preparation Illustrated Example of Education Credits Dave and Valerie Jones are married and on their 2013 joint tax return they claim exemptions for their two dependent children, Sean (age 21, social security number: 000-00-0001) and Carey (age 18, social security number: 000–00–0002). Turbotax 2011 tax preparation Their modified adjusted gross income (MAGI) on Form 1040, line 38 is $110,000. Turbotax 2011 tax preparation Because Dave and Valerie have unusually high itemized deductions, their taxable income is $10,000 and their tax before credits is $1,000. Turbotax 2011 tax preparation Sean enrolled as a full-time graduate student in August 2013 at California State College. Turbotax 2011 tax preparation He graduated with his bachelor's degree in 2012 and did not attend school from January 2013 through July 2013. Turbotax 2011 tax preparation His parents claimed the Hope Scholarship Credit for Sean for 2008 and the American opportunity credit for Sean for 2010, 2011, and 2012. Turbotax 2011 tax preparation Carey enrolled full time as a freshman at the same college in January 2013 to begin working on her bachelor's degree. Turbotax 2011 tax preparation In 2013, Dave and Valerie paid $7,000 in tuition for Sean and $8,500 in tuition for Carey. Turbotax 2011 tax preparation California State College issued two Forms 1098-T, one for Sean and one for Carey, and sent them to the Joneses' residence. Turbotax 2011 tax preparation California State College reports amounts billed in 2013 instead of amounts paid during 2013. Turbotax 2011 tax preparation In completing Form 8863, the Joneses use the amounts they paid. Turbotax 2011 tax preparation Neither Sean nor Carey has been convicted of a felony for possession or distribution of a controlled substance before the end of 2013. Turbotax 2011 tax preparation Dave and Valerie figure their education credits by completing Form 8863. Turbotax 2011 tax preparation They begin Form 8863 on page 2 before completing Part I on page 1. Turbotax 2011 tax preparation Because the Joneses have two eligible students, they will complete page 2 twice, once for their son, Sean, and once for their daughter, Carey. Turbotax 2011 tax preparation The Joneses decide to complete Part III for Carey first, as shown later. Turbotax 2011 tax preparation They carry over the amount of $2,500 entered on Part III, line 30, to Part I, line 1. Turbotax 2011 tax preparation The Joneses complete a separate Part III for their son Sean. Turbotax 2011 tax preparation They check the “Yes” box on line 23, determine that Sean is not eligible for the American opportunity credit, and go to line 31 as instructed. Turbotax 2011 tax preparation They figure their line 31 adjusted qualified education expenses for Sean to be $7,000. Turbotax 2011 tax preparation Once they have completed Part III for each student, they figure their credits. Turbotax 2011 tax preparation The Joneses figure their refundable American opportunity credit of $1,000 by completing Form 8863, Part I, lines 1 through 8. Turbotax 2011 tax preparation They enter the amount from line 8, $1,000, on line 66 of their Form 1040. Turbotax 2011 tax preparation The Joneses enter $7,000 on Part II, line 10, of Form 8863 and figure their tentative lifetime learning credit for 2013 to be $1,400 (line 12). Turbotax 2011 tax preparation They cannot claim the full amount because their MAGI of $110,000 is greater than $107,000. Turbotax 2011 tax preparation They enter the reduced amount of $1,190 (figured on Part II, line 18) on the Credit Limit Worksheet, line 1. Turbotax 2011 tax preparation The $1,190 is added to their nonrefundable American opportunity credit ($1,500 on line 2 of the Credit Limit Worksheet) for a total nonrefundable credit of $2,690. Turbotax 2011 tax preparation The Joneses enter $1,000 on line 7 of the Credit Limit Worksheet, which is the smaller of their tax from line 46 of their Form 1040 (which is $1,000) or the $2,690 on line 3 of the Credit Limit Worksheet. Turbotax 2011 tax preparation They enter $1,000 on line 19, Part II of Form 8863 and on line 49 of Form 1040. Turbotax 2011 tax preparation This image is too large to be displayed in the current screen. Turbotax 2011 tax preparation Please click the link to view the image. Turbotax 2011 tax preparation Form 1098-T Adjusted Qualified Education Expenses Worksheet (Form 8863 instructions) 1. Turbotax 2011 tax preparation Total qualified education expenses paid for or on behalf of the student in 2013 for the academic period 8,500 2. Turbotax 2011 tax preparation Less adjustments:     a. Turbotax 2011 tax preparation Tax-free educational assistance received in 2013 allocable to the academic period   0     b. Turbotax 2011 tax preparation Tax-free educational assistance received in 2014 (and before you file your 2013 tax return) allocable to the academic period   0     c. Turbotax 2011 tax preparation Refunds of qualified education expenses paid in 2013 if the refund is received in 2013 or in 2014 before you file your 2013 tax return   0   3. Turbotax 2011 tax preparation Total adjustments (add lines 2a, 2b, and 2c) 0 4. Turbotax 2011 tax preparation Adjusted qualified education expenses. Turbotax 2011 tax preparation Subtract line 3 from line 1. Turbotax 2011 tax preparation If zero or less, enter -0- 8,500 This image is too large to be displayed in the current screen. Turbotax 2011 tax preparation Please click the link to view the image. Turbotax 2011 tax preparation Form 1098-T Adjusted Qualified Education Expenses Worksheet (Form 8863 instructions) 1. Turbotax 2011 tax preparation Total qualified education expenses paid for or on behalf of the student in 2013 for the academic period 7,000 2. Turbotax 2011 tax preparation Less adjustments:     a. Turbotax 2011 tax preparation Tax-free educational assistance received in 2013 allocable to the academic period   0     b. Turbotax 2011 tax preparation Tax-free educational assistance received in 2014 (and before you file your 2013 tax return) allocable to the academic period   0     c. Turbotax 2011 tax preparation Refunds of qualified education expenses paid in 2013 if the refund is received in 2013 or in 2014 before you file your 2013 tax return   0   3. Turbotax 2011 tax preparation Total adjustments (add lines 2a, 2b, and 2c) 0 4. Turbotax 2011 tax preparation Adjusted qualified education expenses. Turbotax 2011 tax preparation Subtract line 3 from line 1. Turbotax 2011 tax preparation If zero or less, enter -0- 7,000 Credit Limit Worksheet (Form 8863 instructions) Nonrefundable Credit Worksheet 1. Turbotax 2011 tax preparation Enter the amount from Form 8863, line 18 1. Turbotax 2011 tax preparation 1,190 2. Turbotax 2011 tax preparation Enter the amount from Form 8863, line 9 2. Turbotax 2011 tax preparation 1,500 3. Turbotax 2011 tax preparation Add lines 1 and 2 3. Turbotax 2011 tax preparation 2,690 4. Turbotax 2011 tax preparation Enter the amount from: Form 1040, line 46; or Form 1040A, line 28 4. Turbotax 2011 tax preparation 1,000 5. Turbotax 2011 tax preparation Enter the amount from either: Form 1040, lines 47 and 48, and the amount from Schedule R included on Form 1040, line 53; or Form 1040A, lines 29 and 30 5. Turbotax 2011 tax preparation 0 6. Turbotax 2011 tax preparation Subtract line 5 from line 4 6. Turbotax 2011 tax preparation 1,000 7. Turbotax 2011 tax preparation   Enter the smaller of line 3 or line 6 here and on Form 8863, line 19 7. Turbotax 2011 tax preparation 1,000 This image is too large to be displayed in the current screen. Turbotax 2011 tax preparation Please click the link to view the image. Turbotax 2011 tax preparation Form 8863 for Dave and Valerie Jones This image is too large to be displayed in the current screen. Turbotax 2011 tax preparation Please click the link to view the image. Turbotax 2011 tax preparation Carey Jones page 2 This image is too large to be displayed in the current screen. Turbotax 2011 tax preparation Please click the link to view the image. Turbotax 2011 tax preparation Filled-in Form 8863 Jones page 2 Appendix B. Turbotax 2011 tax preparation Highlights of Education Tax Benefits for Tax Year 2013 This chart highlights some differences among the benefits discussed in this publication. Turbotax 2011 tax preparation See the text for definitions and details. Turbotax 2011 tax preparation Do not rely on this chart alone. Turbotax 2011 tax preparation    Caution:You generally cannot claim more than one benefit for the same education expense. Turbotax 2011 tax preparation   Scholarships,  Fellowships, Grants, and  Tuition  Reductions American Opportunity Credit Lifetime Learning Credit Student Loan Interest Deduction Tuition and Fees Deduction Coverdell ESA† Qualified Tuition Program (QTP)† Education Exception to Additional Tax on Early IRA Distributions† Education Savings Bond Program† Employer- Provided Educational Assistance† Business Deduction for Work-Related Education What is your  benefit? Amounts received may not be taxable   Credits can reduce the amount of tax you have to pay. Turbotax 2011 tax preparation    40% of the credit may be refundable (limited to $1,000 per student). Turbotax 2011 tax preparation Credits can reduce amount of tax you must pay Can deduct interest paid Can deduct expenses Earnings not  taxed Earnings not taxed No 10%  additional tax on early distribution Interest not taxed Employer benefits not taxed Can deduct expenses What is the annual limit? None $2,500 credit per student $2,000 credit per tax return     $2,500 deduction $4,000 deduction $2,000 contribution per beneficiary None Amount of qualified  education expenses Amount of qualified  education expenses $5,250 exclusion Amount of qualifying work-related education expenses What expenses  qualify besides  tuition and required enrollment fees? Course-related expenses such as fees, books, supplies, and equipment Course-related books, supplies, and equipment Amounts paid for required books, etc. Turbotax 2011 tax preparation , that must be paid to the educational institution, etc. Turbotax 2011 tax preparation , are required fees Books Supplies Equipment  Room & board  Transportation  Other necessary expenses  None Books Supplies Equipment  Expenses for special needs services  Payments to QTP  Higher education: Room & board if  at least half-time  student  Elem/sec (K–12) education: Tutoring Room & board Uniforms Transportation Computer  access Supplementary expenses Books Supplies Equipment  Room & board if  at least half-time student  Expenses for special needs services Books Supplies Equipment  Room & board if  at least half-time student  Expenses for special needs services Payments to Coverdell ESA  Payments to QTP Books Supplies Equipment Transportation  Travel  Other necessary expenses   Scholarships,  Fellowships, Grants, and  Tuition  Reductions American Opportunity Credit Lifetime Learning Credit Student Loan Interest Deduction Tuition and Fees Deduction Coverdell ESA† Qualified Tuition Program (QTP)† Education Exception to Additional Tax on Early IRA Distributions† Education Savings Bond Program† Employer- Provided Educational Assistance† Business Deduction for Work-Related Education What education qualifies? Undergraduate & graduate  K–12 Undergraduate & graduate Undergraduate & graduate  Courses to acquire or improve job skills    Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate  K–12 Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate Required by employer or law to keep present job, salary, status  Maintain or improve job skills What are some of the other  conditions that  apply? Must be in degree or vocational program  Payment of tuition and required fees must be allowed under the grant Can be claimed for only 4 tax years (which includes years Hope Scholarship Credit claimed)  Must be enrolled at least half-time in degree program  No felony drug conviction(s)  Must not have completed first 4 years of postsecondary education before end of preceding tax year. Turbotax 2011 tax preparation   No other conditions Must have been at least half-time  student in degree program Cannot claim both deduction & education credit for same student in same year Assets must be distributed at age 30 unless special  needs beneficiary No other conditions No other conditions Applies only to qualified series  EE bonds issued after 1989 or series I bonds No other conditions Cannot be to  meet minimum educational requirements of present trade/business  Cannot qualify  you for new trade/business   In what income  range do benefits  phase out? No phaseout $80,000 – $90,000  $160,000 – $180,000 for joint returns $53,000 – $63,000  $107,000 – $127,000 for joint returns $60,000 – $75,000  $125,000 –  $155,000 for  joint returns  $60,000 – $80,000  $130,000 –  $160,000 for  joint returns  $95,000 – $110,000  $190,000 – $220,000 for  joint returns No phaseout No phaseout   No phaseout No phaseout † Any nontaxable distribution is limited to the amount that does not exceed qualified education expenses. Turbotax 2011 tax preparation Glossary The education benefits included in this publication were enacted over many years, leading to a number of common terms being defined differently from one benefit to the next. Turbotax 2011 tax preparation For example, an eligible educational institution means one thing when determining if earnings from a Coverdell education savings account are not taxable and something else when determining if a scholarship or fellowship is not taxable. Turbotax 2011 tax preparation For each term listed below that has more than one definition, the definition for each education benefit is listed. Turbotax 2011 tax preparation Academic period:   A semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Turbotax 2011 tax preparation If an educational institution uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Turbotax 2011 tax preparation Adjusted qualified education expenses (AQEE):    Qualified education expenses (defined later) reduced by any tax-free educational assistance, such as a tax-free scholarship or employer-provided educational assistance. Turbotax 2011 tax preparation They must also be reduced by any qualified education expenses deducted elsewhere on your return, used to determine an education credit or other benefit, or used to determine a tax-free distribution. Turbotax 2011 tax preparation For information on a specific benefit, see the appropriate chapter in this publication. Turbotax 2011 tax preparation Candidate for a degree:   A student who meets either of the following requirements. Turbotax 2011 tax preparation Attends a primary or secondary school or pursues a degree at a college or university, or Attends an accredited educational institution that is authorized to provide: A program that is acceptable for full credit toward a bachelor's or higher degree, or A program of training to prepare students for gainful employment in a recognized occupation. Turbotax 2011 tax preparation Designated beneficiary:   The individual named in the document creating the account/plan who is to receive the benefit of the funds in the account/plan. Turbotax 2011 tax preparation Eligible educational institution:    American opportunity credit. Turbotax 2011 tax preparation Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Turbotax 2011 tax preparation It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Turbotax 2011 tax preparation Coverdell education savings account (ESA). Turbotax 2011 tax preparation Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Turbotax 2011 tax preparation It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Turbotax 2011 tax preparation Also included is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Turbotax 2011 tax preparation Education savings bond program. Turbotax 2011 tax preparation Same as American opportunity credit in this category. Turbotax 2011 tax preparation IRA, early distributions from. Turbotax 2011 tax preparation Same as American opportunity credit in this category. Turbotax 2011 tax preparation Lifetime learning credit. Turbotax 2011 tax preparation Same as American opportunity credit in this category. Turbotax 2011 tax preparation Qualified tuition program (QTP). Turbotax 2011 tax preparation Same as American opportunity credit in this category. Turbotax 2011 tax preparation Scholarships and fellowships. Turbotax 2011 tax preparation An institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. Turbotax 2011 tax preparation Student loan, cancellation of. Turbotax 2011 tax preparation Same as Scholarships and fellowships in this category. Turbotax 2011 tax preparation Student loan interest deduction. Turbotax 2011 tax preparation Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Turbotax 2011 tax preparation It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Turbotax 2011 tax preparation Also included is an institution that conducts 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. Turbotax 2011 tax preparation Tuition and fees deduction. Turbotax 2011 tax preparation Same as American opportunity credit in this category. Turbotax 2011 tax preparation Eligible student:    American opportunity credit. Turbotax 2011 tax preparation A student who meets all of the following requirements for the tax year for which the credit is being determined. Turbotax 2011 tax preparation Did not have expenses that were used to figure an American opportunity or Hope Scholarship Credit in any 4 earlier tax years. Turbotax 2011 tax preparation Had not completed the first 4 years of postsecondary education (generally the freshman through senior years). Turbotax 2011 tax preparation For at least one academic period beginning in the tax year, was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. Turbotax 2011 tax preparation Was free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year. Turbotax 2011 tax preparation Lifetime learning credit. Turbotax 2011 tax preparation A student who is enrolled in one or more courses at an eligible educational institution. Turbotax 2011 tax preparation Student loan interest deduction. Turbotax 2011 tax preparation A student who was enrolled at least half-time in a program leading to a postsecondary degree, certificate, or other recognized educational credential at an eligible educational institution. Turbotax 2011 tax preparation Tuition and fees deduction. Turbotax 2011 tax preparation A student who is enrolled in one or more courses at an eligible educational institution. Turbotax 2011 tax preparation Half-time student:   A student who 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. Turbotax 2011 tax preparation Modified adjusted gross income (MAGI):    American opportunity credit. Turbotax 2011 tax preparation Adjusted gross income (AGI) as figured on the federal income tax return, 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. Turbotax 2011 tax preparation Coverdell education savings account (ESA). Turbotax 2011 tax preparation Same as American opportunity credit in this category. Turbotax 2011 tax preparation Education savings bond program. Turbotax 2011 tax preparation Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any savings bond interest exclusion 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, Exclusion of income by bona fide residents of Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for student loan interest, Deduction for tuition and fees, and Deduction for domestic production activities. Turbotax 2011 tax preparation Lifetime learning credit. Turbotax 2011 tax preparation Same as American opportunity credit in this category. Turbotax 2011 tax preparation Student loan interest deduction. Turbotax 2011 tax preparation Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any student loan interest deduction, tuition and fees deduction, or 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. Turbotax 2011 tax preparation Tuition and fees deduction. Turbotax 2011 tax preparation Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any tuition and fees deduction, or 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. Turbotax 2011 tax preparation Phaseout:   The amount of credit or deduction allowed is reduced when modified adjusted gross income (MAGI) is greater than a specified amount of income. Turbotax 2011 tax preparation Qualified education expenses:   See pertinent chapter for specific items. Turbotax 2011 tax preparation    American opportunity credit. Turbotax 2011 tax preparation Tuition and certain related expenses (including student activity fees) required for enrollment or attendance at an eligible educational institution. Turbotax 2011 tax preparation Books, supplies, and equipment needed for a course of study are included even if not purchased from the educational institution. Turbotax 2011 tax preparation Does not include expenses for room and board. Turbotax 2011 tax preparation Does not include expenses for courses involving sports, games, or hobbies (including noncredit courses) that are not part of the student's postsecondary degree program. Turbotax 2011 tax preparation Coverdell education savings account (ESA). Turbotax 2011 tax preparation Expenses related to or required for enrollment or attendance of the designated beneficiary at an eligible elementary, secondary, or postsecondary school. Turbotax 2011 tax preparation Many specialized expenses included for K–12. Turbotax 2011 tax preparation Also includes expenses for special needs services and contribution to qualified tuition program (QTP). Turbotax 2011 tax preparation Education savings bond program. Turbotax 2011 tax preparation Tuition and fees required to enroll at or attend an eligible educational institution. Turbotax 2011 tax preparation Also includes contributions to a qualified tuition program (QTP) or Coverdell education savings account (ESA). Turbotax 2011 tax preparation Does not include expenses for room and board. Turbotax 2011 tax preparation Does not include expenses for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Turbotax 2011 tax preparation IRA, early distributions from. Turbotax 2011 tax preparation Tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution, plus certain limited costs of room and board for students who are enrolled at least half-time. Turbotax 2011 tax preparation Also includes expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Turbotax 2011 tax preparation Lifetime learning credit. Turbotax 2011 tax preparation Tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Turbotax 2011 tax preparation Student-activity fees and expenses for course-related books, supplies, and equipment are included only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Turbotax 2011 tax preparation Does not include expenses for room and board. Turbotax 2011 tax preparation Does not include expenses for courses involving sports, games, or hobbies (including noncredit courses) that are not part of the student's postsecondary degree program, unless taken by the student to acquire or improve job skills. Turbotax 2011 tax preparation Qualified tuition program (QTP). Turbotax 2011 tax preparation Tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution, plus certain limited costs of room and board for students who are enrolled at least half-time. Turbotax 2011 tax preparation Includes expenses for special needs services and computer access. Turbotax 2011 tax preparation Scholarships and fellowships. Turbotax 2011 tax preparation Expenses for tuition and fees required to enroll at or attend an eligible educational institution, and course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Turbotax 2011 tax preparation Course-related items must be required of all students in the course of instruction. Turbotax 2011 tax preparation Student loan interest deduction. Turbotax 2011 tax preparation Total costs of attending an eligible educational institution, including graduate school (however, limitations may apply to the cost of room and board allowed). Turbotax 2011 tax preparation Tuition and fees deduction. Turbotax 2011 tax preparation Tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Turbotax 2011 tax preparation Student-activity fees and expenses for course-related books, supplies, and equipment are included only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Turbotax 2011 tax preparation Recapture:   To include as income on your current year's return an amount allowed as a deduction in a prior year. Turbotax 2011 tax preparation To include as tax on your current year's return an amount allowed as a credit in a prior year. Turbotax 2011 tax preparation Rollover:   A tax-free distribution to you of cash or other assets from a tax-favored plan that you contribute to another tax-favored plan. Turbotax 2011 tax preparation Transfer:   A movement of funds in a tax-favored plan from one trustee directly to another, either at your request or at the trustee's request. Turbotax 2011 tax preparation Prev  Up  Next   Home   More Online Publications
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The Turbotax 2011 Tax Preparation

Turbotax 2011 tax preparation Internal Revenue Bulletin:  2012-14  April 2, 2012  Rev. Turbotax 2011 tax preparation Proc. Turbotax 2011 tax preparation 2012-23 Table of Contents SECTION 1. Turbotax 2011 tax preparation PURPOSE SECTION 2. Turbotax 2011 tax preparation BACKGROUND SECTION 3. Turbotax 2011 tax preparation SCOPE SECTION 4. Turbotax 2011 tax preparation APPLICATION. Turbotax 2011 tax preparation 01 Limitations on Depreciation Deductions for Certain Automobiles. Turbotax 2011 tax preparation . Turbotax 2011 tax preparation 02 Inclusions in Income of Lessees of Passenger Automobiles. Turbotax 2011 tax preparation SECTION 5. Turbotax 2011 tax preparation EFFECTIVE DATE SECTION 6. Turbotax 2011 tax preparation DRAFTING INFORMATION SECTION 1. Turbotax 2011 tax preparation PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2012, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2012, including a separate table of inclusion amounts for lessees of trucks and vans. Turbotax 2011 tax preparation The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Turbotax 2011 tax preparation SECTION 2. Turbotax 2011 tax preparation BACKGROUND . Turbotax 2011 tax preparation 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Turbotax 2011 tax preparation For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. Turbotax 2011 tax preparation The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Turbotax 2011 tax preparation This change reflects the higher rate of price inflation for trucks and vans since 1988. Turbotax 2011 tax preparation . Turbotax 2011 tax preparation 02 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. Turbotax 2011 tax preparation L. Turbotax 2011 tax preparation No. Turbotax 2011 tax preparation 111-312, 124 Stat. Turbotax 2011 tax preparation 3296 (Dec. Turbotax 2011 tax preparation 17, 2010) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. Turbotax 2011 tax preparation Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. Turbotax 2011 tax preparation . Turbotax 2011 tax preparation 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Turbotax 2011 tax preparation Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Turbotax 2011 tax preparation Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)). Turbotax 2011 tax preparation Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Turbotax 2011 tax preparation This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. Turbotax 2011 tax preparation . Turbotax 2011 tax preparation 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Turbotax 2011 tax preparation The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Turbotax 2011 tax preparation Under § 1. Turbotax 2011 tax preparation 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Turbotax 2011 tax preparation One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Turbotax 2011 tax preparation Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Turbotax 2011 tax preparation SECTION 3. Turbotax 2011 tax preparation SCOPE . Turbotax 2011 tax preparation 01 The limitations on depreciation deductions in section 4. Turbotax 2011 tax preparation 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2012, and continue to apply for each taxable year that the passenger automobile remains in service. Turbotax 2011 tax preparation . Turbotax 2011 tax preparation 02 The tables in section 4. Turbotax 2011 tax preparation 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2012. Turbotax 2011 tax preparation Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Turbotax 2011 tax preparation See Rev. Turbotax 2011 tax preparation Proc. Turbotax 2011 tax preparation 2007-30, 2007-1 C. Turbotax 2011 tax preparation B. Turbotax 2011 tax preparation 1104, for passenger automobiles first leased during calendar year 2007; Rev. Turbotax 2011 tax preparation Proc. Turbotax 2011 tax preparation 2008-22, 2008-1 C. Turbotax 2011 tax preparation B. Turbotax 2011 tax preparation 658, for passenger automobiles first leased during calendar year 2008; Rev. Turbotax 2011 tax preparation Proc. Turbotax 2011 tax preparation 2009-24, 2009-17 I. Turbotax 2011 tax preparation R. Turbotax 2011 tax preparation B. Turbotax 2011 tax preparation 885, for passenger automobiles first leased during calendar year 2009; Rev. Turbotax 2011 tax preparation Proc. Turbotax 2011 tax preparation 2010-18, 2010-9 I. Turbotax 2011 tax preparation R. Turbotax 2011 tax preparation B. Turbotax 2011 tax preparation 427, as amplified and modified by section 4. Turbotax 2011 tax preparation 03 of Rev. Turbotax 2011 tax preparation Proc. Turbotax 2011 tax preparation 2011-21, 2011-12 I. Turbotax 2011 tax preparation R. Turbotax 2011 tax preparation B. Turbotax 2011 tax preparation 560, for passenger automobiles first leased during calendar year 2010; and Rev. Turbotax 2011 tax preparation Proc. Turbotax 2011 tax preparation 2011-21, for passenger automobiles first leased during calendar year 2011. Turbotax 2011 tax preparation SECTION 4. Turbotax 2011 tax preparation APPLICATION . Turbotax 2011 tax preparation 01 Limitations on Depreciation Deductions for Certain Automobiles. Turbotax 2011 tax preparation (1) Amount of the inflation adjustment. Turbotax 2011 tax preparation (a) Passenger automobiles (other than trucks or vans). Turbotax 2011 tax preparation Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Turbotax 2011 tax preparation Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Turbotax 2011 tax preparation The new car component of the CPI was 115. Turbotax 2011 tax preparation 2 for October 1987 and 143. Turbotax 2011 tax preparation 419 for October 2011. Turbotax 2011 tax preparation The October 2011 index exceeded the October 1987 index by 28. Turbotax 2011 tax preparation 219. Turbotax 2011 tax preparation Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24. Turbotax 2011 tax preparation 5 percent (28. Turbotax 2011 tax preparation 219/115. Turbotax 2011 tax preparation 2 x 100%). Turbotax 2011 tax preparation The dollar limitations in § 280F(a) are multiplied by a factor of 0. Turbotax 2011 tax preparation 245, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2012. Turbotax 2011 tax preparation This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012. Turbotax 2011 tax preparation (b) Trucks and vans. Turbotax 2011 tax preparation To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, the Service uses the new truck component of the CPI instead of the new car component. Turbotax 2011 tax preparation The new truck component of the CPI was 112. Turbotax 2011 tax preparation 4 for October 1987 and 146. Turbotax 2011 tax preparation 607 for October 2011. Turbotax 2011 tax preparation The October 2011 index exceeded the October 1987 index by 34. Turbotax 2011 tax preparation 207. Turbotax 2011 tax preparation Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30. Turbotax 2011 tax preparation 43 percent (34. Turbotax 2011 tax preparation 207/112. Turbotax 2011 tax preparation 4 x 100%). Turbotax 2011 tax preparation The dollar limitations in § 280F(a) are multiplied by a factor of 0. Turbotax 2011 tax preparation 3043, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Turbotax 2011 tax preparation This adjustment applies to all trucks and vans that are first placed in service in calendar year 2012. Turbotax 2011 tax preparation (2) Amount of the limitation. Turbotax 2011 tax preparation Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. Turbotax 2011 tax preparation Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction applies. Turbotax 2011 tax preparation Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction does not apply. Turbotax 2011 tax preparation REV. Turbotax 2011 tax preparation PROC. Turbotax 2011 tax preparation 2012-23 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Turbotax 2011 tax preparation PROC. Turbotax 2011 tax preparation 2012-23 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. Turbotax 2011 tax preparation PROC. Turbotax 2011 tax preparation 2012-23 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Turbotax 2011 tax preparation PROC. Turbotax 2011 tax preparation 2012-23 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 . Turbotax 2011 tax preparation 02 Inclusions in Income of Lessees of Passenger Automobiles. Turbotax 2011 tax preparation A taxpayer must follow the procedures in § 1. Turbotax 2011 tax preparation 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2012. Turbotax 2011 tax preparation In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. Turbotax 2011 tax preparation REV. Turbotax 2011 tax preparation PROC. Turbotax 2011 tax preparation 2012-23 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 2 4 5 6 8 19,000 19,500 2 4 7 7 9 19,500 20,000 2 5 8 8 10 20,000 20,500 3 5 9 10 11 20,500 21,000 3 6 9 12 12 21,000 21,500 3 7 10 12 14 21,500 22,000 3 8 11 13 16 22,000 23,000 4 8 13 15 17 23,000 24,000 4 10 15 17 20 24,000 25,000 5 11 17 19 23 25,000 26,000 6 12 19 21 26 26,000 27,000 6 14 20 24 28 27,000 28,000 7 15 22 26 31 28,000 29,000 7 16 25 28 33 29,000 30,000 8 18 25 32 35 30,000 31,000 9 19 27 34 38 31,000 32,000 9 20 30 36 41 32,000 33,000 10 21 32 38 43 33,000 34,000 10 23 33 41 46 34,000 35,000 11 24 35 43 49 35,000 36,000 12 25 37 45 52 36,000 37,000 12 27 39 47 54 37,000 38,000 13 28 41 49 57 38,000 39,000 13 29 43 52 59 39,000 40,000 14 30 45 54 62 40,000 41,000 14 32 47 56 65 41,000 42,000 15 33 49 58 68 42,000 43,000 16 34 51 61 70 43,000 44,000 16 36 52 63 73 44,000 45,000 17 37 54 66 75 45,000 46,000 17 38 57 67 78 46,000 47,000 18 39 59 70 80 47,000 48,000 19 40 61 72 83 48,000 49,000 19 42 62 75 86 49,000 50,000 20 43 64 77 89 50,000 51,000 20 45 66 79 91 51,000 52,000 21 46 68 81 94 52,000 53,000 21 47 70 84 96 53,000 54,000 22 48 72 86 99 54,000 55,000 23 49 74 88 102 55,000 56,000 23 51 76 90 104 56,000 57,000 24 52 78 92 107 57,000 58,000 24 54 79 95 110 58,000 59,000 25 55 81 97 113 59,000 60,000 26 56 83 100 115 60,000 62,000 26 58 86 103 119 62,000 64,000 28 60 90 108 124 64,000 66,000 29 63 94 112 129 66,000 68,000 30 66 97 117 135 68,000 70,000 31 68 102 121 140 70,000 72,000 32 71 105 126 145 72,000 74,000 33 74 109 130 151 74,000 76,000 35 76 113 135 156 76,000 78,000 36 78 117 140 161 78,000 80,000 37 81 120 145 166 80,000 85,000 39 86 127 152 176 85,000 90,000 42 92 137 163 189 90,000 95,000 45 98 147 175 202 95,000 100,000 48 105 155 187 215 100,000 110,000 52 115 170 203 235 110,000 120,000 58 127 189 227 262 120,000 130,000 64 140 208 250 288 130,000 140,000 70 153 227 272 315 140,000 150,000 75 166 246 296 340 150,000 160,000 81 179 265 318 368 160,000 170,000 87 192 284 341 394 170,000 180,000 93 204 304 364 420 180,000 190,000 99 217 323 387 446 190,000 200,000 105 230 342 409 473 200,000 210,000 111 243 361 432 499 210,000 220,000 116 256 380 455 526 220,000 230,000 122 269 399 478 552 230,000 240,000 128 282 418 501 578 240,000 and up 134 294 437 524 605 REV. Turbotax 2011 tax preparation PROC. Turbotax 2011 tax preparation 2012-23 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $19,000 $19,500 1 4 5 6 7 19,500 20,000 2 4 6 7 9 20,000 20,500 2 5 7 8 10 20,500 21,000 2 5 8 10 11 21,000 21,500 3 6 9 10 13 21,500 22,000 3 6 10 12 14 22,000 23,000 3 8 11 14 15 23,000 24,000 4 9 13 16 18 24,000 25,000 4 10 15 19 21 25,000 26,000 5 11 17 21 24 26,000 27,000 6 12 19 23 26 27,000 28,000 6 14 21 25 29 28,000 29,000 7 15 23 27 32 29,000 30,000 7 17 24 30 34 30,000 31,000 8 18 26 32 37 31,000 32,000 9 19 28 34 40 32,000 33,000 9 20 31 36 42 33,000 34,000 10 21 33 39 44 34,000 35,000 10 23 34 41 48 35,000 36,000 11 24 36 44 50 36,000 37,000 12 25 38 46 53 37,000 38,000 12 27 40 48 55 38,000 39,000 13 28 42 50 58 39,000 40,000 13 29 44 53 60 40,000 41,000 14 31 45 55 63 41,000 42,000 14 32 48 57 66 42,000 43,000 15 33 50 59 69 43,000 44,000 16 34 52 61 72 44,000 45,000 16 36 53 64 74 45,000 46,000 17 37 55 66 77 46,000 47,000 17 38 58 68 79 47,000 48,000 18 40 59 70 82 48,000 49,000 19 41 61 73 84 49,000 50,000 19 42 63 75 87 50,000 51,000 20 43 65 78 89 51,000 52,000 20 45 66 80 93 52,000 53,000 21 46 68 83 95 53,000 54,000 21 48 70 84 98 54,000 55,000 22 49 72 87 100 55,000 56,000 23 50 74 89 103 56,000 57,000 23 51 76 92 105 57,000 58,000 24 52 78 94 108 58,000 59,000 24 54 80 96 111 59,000 60,000 25 55 82 98 114 60,000 62,000 26 57 85 101 118 62,000 64,000 27 60 88 106 123 64,000 66,000 28 62 93 110 128 66,000 68,000 29 65 96 115 134 68,000 70,000 30 67 100 120 139 70,000 72,000 32 70 103 125 144 72,000 74,000 33 72 108 129 149 74,000 76,000 34 75 111 134 155 76,000 78,000 35 78 115 138 160 78,000 80,000 36 80 119 143 165 80,000 85,000 38 85 125 151 175 85,000 90,000 41 91 135 163 187 90,000 95,000 44 98 144 174 201 95,000 100,000 47 104 154 185 214 100,000 110,000 52 113 169 202 234 110,000 120,000 57 127 187 225 261 120,000 130,000 63 139 207 248 287 130,000 140,000 69 152 226 271 313 140,000 150,000 75 165 245 294 339 150,000 160,000 81 178 264 316 366 160,000 170,000 87 190 283 340 392 170,000 180,000 92 204 302 362 419 180,000 190,000 98 216 322 385 445 190,000 200,000 104 229 340 409 471 200,000 210,000 110 242 359 431 498 210,000 220,000 116 255 378 454 524 220,000 230,000 122 267 398 477 551 230,000 240,000 127 281 416 500 577 240,000 and up 133 294 435 523 603 SECTION 5. Turbotax 2011 tax preparation EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012. Turbotax 2011 tax preparation SECTION 6. Turbotax 2011 tax preparation DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Turbotax 2011 tax preparation Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Turbotax 2011 tax preparation For further information regarding this revenue procedure, contact Mr. Turbotax 2011 tax preparation Harvey at (202) 622-4930 (not a toll-free call). Turbotax 2011 tax preparation Prev  Up  Next   Home   More Internal Revenue Bulletins