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Army H&r Block

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Army H&r Block

Army h&r block 3. Army h&r block   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. Army h&r block They are the American opportunity credit and the lifetime learning credit. Army h&r block This chapter discusses the lifetime learning credit. Army h&r block The American opportunity credit is discussed in chapter 2, The American Opportunity Credit . Army h&r block 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. Army h&r block What is the tax benefit of the lifetime learning credit. Army h&r block   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. Army h&r block There is no limit on the number of years the lifetime learning credit can be claimed for each student. Army h&r block   A tax credit reduces the amount of income tax you may have to pay. Army h&r block Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Army h&r block The lifetime learning credit is a nonrefundable credit. Army h&r block 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. Army h&r block   Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. Army h&r block Can you claim more than one education credit this year. Army h&r block   For each student, you can elect for any year only one of the credits. Army h&r block 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. Army h&r block   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. Army h&r block   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. Army h&r block 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. Army h&r block Differences between the American opportunity and lifetime learning credits. Army h&r block   There are several differences between these two credits. Army h&r block 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. Army h&r block 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. Army h&r block 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. Army h&r block Overview of the lifetime learning credit. Army h&r block   See Table 3-1, Overview of the Lifetime Learning Credit for the basics of the lifetime learning credit. Army h&r block The details are discussed in this chapter. Army h&r block 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. Army h&r block Who Can Claim the Credit Generally, you can claim the lifetime learning credit if all three of the following requirements are met. Army h&r block You pay qualified education expenses of higher education. Army h&r block You pay the education expenses for an eligible student. Army h&r block The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Army h&r block Table 3-1. Army h&r block 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. Army h&r block 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. Army h&r block “Qualified education expenses” are defined later under Qualified Education Expenses . Army h&r block “Eligible students” are defined later under Who Is an Eligible Student . Army h&r block A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Army h&r block 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. Army h&r block Who Cannot Claim the Credit You cannot claim the lifetime learning credit for 2013 if any of the following apply. Army h&r block Your filing status is married filing separately. Army h&r block You are listed as a dependent on another person's tax return (such as your parents'). Army h&r block See Who Can Claim a Dependent's Expenses , later. Army h&r block Your modified adjusted gross income (MAGI) is $63,000 or more ($127,000 or more in the case of a joint return). Army h&r block MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Army h&r block 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. Army h&r block More information on nonresident aliens can be found in Publication 519. Army h&r block You claim the American Opportunity Credit (see chapter 2) or a Tuition and Fees Deduction (see chapter 6) for the same student in 2013. Army h&r block 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. Army h&r block 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. Army h&r block 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. Army h&r block Academic period. Army h&r block   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. Army h&r block 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. Army h&r block Paid with borrowed funds. Army h&r block   You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. Army h&r block 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. Army h&r block Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. Army h&r block Student withdraws from class(es). Army h&r block   You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. Army h&r block 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. Army h&r block The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. Army h&r block Eligible educational institution. Army h&r block   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. Army h&r block S. Army h&r block Department of Education. Army h&r block It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Army h&r block The educational institution should be able to tell you if it is an eligible educational institution. Army h&r block   Certain educational institutions located outside the United States also participate in the U. Army h&r block S. Army h&r block Department of Education's Federal Student Aid (FSA) programs. Army h&r block Related expenses. Army h&r block   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. Army h&r block Prepaid expenses. Army h&r block   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. Army h&r block See Academic period , earlier. Army h&r block 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). Army h&r block 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). Army h&r block In the following examples, assume that each student is an eligible student at an eligible educational institution. Army h&r block Example 1. Army h&r block   Jackson is a sophomore in University V's degree program in dentistry. Army h&r block 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. Army h&r block Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense. Army h&r block Example 2. Army h&r block   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. Army h&r block 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. Army h&r block Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Army h&r block Donna bought hers at College W's bookstore. Army h&r block 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. Army h&r block Example 3. Army h&r block   When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Army h&r block 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. Army h&r block No portion of the fee covers personal expenses. Army h&r block Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Army h&r block Therefore, it is a qualified expense. Army h&r block 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. Army h&r block Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student. Army h&r block Claim a lifetime learning credit and an American opportunity credit based on the same qualified education expenses. Army h&r block 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). Army h&r block 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. Army h&r block 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. Army h&r block See Adjustments to Qualified Education Expenses, next. Army h&r block This image is too large to be displayed in the current screen. Army h&r block Please click the link to view the image. Army h&r block 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. Army h&r block The result is the amount of adjusted qualified education expenses for each student. Army h&r block Tax-free educational assistance. Army h&r block   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. Army h&r block See Academic period , earlier. Army h&r block   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Army h&r block 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). Army h&r block   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. Army h&r block 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. Army h&r block   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. Army h&r block Generally, any scholarship or fellowship is treated as tax free. Army h&r block 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. Army h&r block 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. Army h&r block 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. Army h&r block 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. Army h&r block For examples, see Coordination with Pell grants and other scholarships, later. Army h&r block Refunds. Army h&r block   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. Army h&r block Some tax-free educational assistance received after 2013 may be treated as a refund. Army h&r block See Tax-free educational assistance , earlier. Army h&r block Refunds received in 2013. Army h&r block   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. Army h&r block Refunds received after 2013 but before your income tax return is filed. Army h&r block   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. Army h&r block Refunds received after 2013 and after your income tax return is filed. Army h&r block   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. Army h&r block See Credit recapture, next. Army h&r block Credit recapture. Army h&r block    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. Army h&r block 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. Army h&r block 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). Army h&r block Include that amount as an additional tax for the year the refund or tax-free assistance was received. Army h&r block Example. Army h&r block   You pay $9,300 in tuition and fees in December 2013, and your child began college in January 2014. Army h&r block You filed your 2013 tax return on February 14, 2014, and claimed a lifetime learning credit of $1,860. Army h&r block You claimed no other tax credits. Army h&r block After you filed your return, your child withdrew from two courses and you received a refund of $2,900. Army h&r block You must refigure your 2013 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. Army h&r block The refigured credit is $1,280 and your tax liability increased by $580. Army h&r block See instructions for your 2014 income tax return to determine where to include this tax. Army h&r block 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. Army h&r block Amounts that do not reduce qualified education expenses. Army h&r block   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. Army h&r block   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. Army h&r block 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. Army h&r block The use of the money is not restricted. Army h&r block For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit. Army h&r block Coordination with Pell grants and other scholarships. Army h&r block   In some cases, you may be able to reduce your tax liability by including scholarships in income. Army h&r block 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. Army h&r block The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Army h&r block Example 1—No scholarship. Army h&r block Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. Army h&r block Her AGI and her MAGI, for purposes of the credit, are $27,000. Army h&r block 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. Army h&r block She claims no credits other than the lifetime learning credit. Army h&r block 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. Army h&r block Judy and the college meet all requirements for the lifetime learning tax credit. Army h&r block She can use all of the $4,500 tuition she paid in 2013 when figuring her 2013 lifetime learning credit. Army h&r block She claims a $900 lifetime learning credit and her tax after credits is $1,256. Army h&r block Example 2—Scholarship excluded from income. Army h&r block The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. Army h&r block Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. Army h&r block 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. Army h&r block Only $3,000 of the $4,500 tuition she paid in 2013 could be used when figuring her 2013 lifetime learning credit. Army h&r block Her lifetime learning credit would be reduced to $600 and her tax after credits would be $1,556. Army h&r block Example 3—Scholarship included in income. Army h&r block The facts are the same as in Example 2—Scholarship excluded from income. Army h&r block 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. Army h&r block Judy's AGI will increase to $28,500, her taxable income would be $18,750, and her tax before credits would be $2,381. Army h&r block She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. Army h&r block Judy could claim a $900 lifetime learning credit and her tax after credits would be $1,481. Army h&r block 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. Army h&r block This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Army h&r block Sports, games, hobbies, and noncredit courses. Army h&r block   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. Army h&r block 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. Army h&r block Comprehensive or bundled fees. Army h&r block   Some eligible educational institutions combine all of their fees for an academic period into one amount. Army h&r block 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. Army h&r block 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. Army h&r block See Figuring the Credit , later, for more information about Form 1098-T. Army h&r block 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). Army h&r block 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. Army h&r block For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. Army h&r block You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Army h&r block IF you. Army h&r block . Army h&r block . Army h&r block THEN only. Army h&r block . Army h&r block . Army h&r block 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. Army h&r block The dependent cannot claim the credit. Army h&r block 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. Army h&r block You cannot claim the credit based on this dependent's expenses. Army h&r block Expenses paid by dependent. Army h&r block   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. Army h&r block Include these expenses when figuring the amount of your lifetime learning credit. Army h&r block    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. Army h&r block Expenses paid by you. Army h&r block   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. Army h&r block 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. Army h&r block Expenses paid by others. Army h&r block   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. Army h&r block In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Army h&r block If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Army h&r block Example. Army h&r block In 2013, Ms. Army h&r block Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Army h&r block 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. Army h&r block 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. Army h&r block 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. Army h&r block If anyone else claims an exemption for Todd, Todd cannot claim a lifetime learning credit. Army h&r block Tuition reduction. Army h&r block   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. Army h&r block 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. Army h&r block For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Army h&r block 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. Army h&r block The maximum amount of lifetime learning credit you can claim for 2013 is $2,000 (20% × $10,000). Army h&r block However, that amount may be reduced based on your MAGI. Army h&r block See Effect of the Amount of Your Income on the Amount of Your Credit , later. Army h&r block Example. Army h&r block Bruce and Toni Harper are married and file a joint tax return. Army h&r block For 2013, their MAGI is $75,000. Army h&r block Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. Army h&r block She already has a bachelor's degree in history and wants to become a nurse. Army h&r block In August 2013, Toni paid $5,000 of qualified education expenses for her fall 2013 semester. Army h&r block Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2013 joint tax return. Army h&r block Form 1098-T. Army h&r block   To help you figure your lifetime learning credit, the student should receive Form 1098-T. Army h&r block 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. Army h&r block An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Army h&r block However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you paid. Army h&r block When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Army h&r block   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. Army h&r block    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. Army h&r block 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). Army h&r block 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). Army h&r block Modified adjusted gross income (MAGI). Army h&r block   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Army h&r block MAGI when using Form 1040A. Army h&r block   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Army h&r block MAGI when using Form 1040. Army h&r block   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. Army h&r block You can use Worksheet 3-1 to figure your MAGI. Army h&r block Worksheet 3-1. Army h&r block MAGI for the Lifetime Learning Credit 1. Army h&r block Enter your adjusted gross income  (Form 1040, line 38)   1. Army h&r block   2. Army h&r block Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Army h&r block       3. Army h&r block Enter your foreign housing deduction (Form 2555, line 50)   3. Army h&r block       4. Army h&r block Enter the amount of income from Puerto Rico you are excluding   4. Army h&r block       5. Army h&r block Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Army h&r block       6. Army h&r block Add the amounts on lines 2, 3, 4, and 5   6. Army h&r block   7. Army h&r block Add the amounts on lines 1 and 6. Army h&r block  This is your modified adjusted  gross income. Army h&r block Enter this amount  on Form 8863, line 14   7. Army h&r block   Phaseout. Army h&r block   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. Army h&r block The same method is shown in the following example. Army h&r block Example. Army h&r block You are filing a joint return with a MAGI of $112,000. Army h&r block In 2013, you paid $6,600 of qualified education expenses. Army h&r block You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). Army h&r block The result is a $1,320 (20% x $6,600) tentative credit. Army h&r block 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. Army h&r block The numerator of the fraction is $127,000 (the upper limit for those filing a joint return) minus your MAGI. Army h&r block The denominator is $20,000, the range of incomes for the phaseout ($107,000 to $127,000). Army h&r block The result is the amount of your phased out (reduced) lifetime learning credit ($990). Army h&r block   $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. Army h&r block Enter the credit on Form 1040, line 49, or Form 1040A, line 31. Army h&r block Note. Army h&r block 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. Army h&r block Prev  Up  Next   Home   More Online Publications
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General Car Tips

Whether you are buying or leasing a vehicle, these tips will help you get the best deal and avoid problems.

  • Decide what kind of vehicle best suits your needs and budget. Read our tips for choosing a safe vehicle. To compare models and get car buying tips, visit Edmunds.com or InternetAutoGuide.com.
  • Consider fuel economy. A vehicle that gets more miles per gallon is good for your wallet as well as for the environment.
  • Check out the seller. For car dealers, check with your local consumer protection office and Better Business Bureau. If you're buying from an individual, check the title to make sure you're dealing with the vehicle owner.
  • Take a test drive. Drive at different speeds and check for smooth right and left turns. On a straight stretch, make sure the vehicle doesn't pull to one side.
  • Handle trade-ins and financing separately from your purchase to get the best deal on each. Get a written price quote before you talk about a trade-in or dealer financing.
  • Shop in advance for the best finance deal at your credit union, bank or finance company. Look at the total finance charges and the Annual Percentage Rate (APR), not just the monthly payment.
  • Read and understand every document you are asked to sign.
  • Don't take possession of the car until all paperwork is final.
  • Choose an auto insurance policy that is right for you.

Vehicle Financing

Most car buyers today need some form of financing to purchase a new vehicle. Many use direct lending, that is, a loan from a finance company, bank, or credit union. In direct lending, a buyer agrees to pay the amount financed, plus an agreed-upon finance charge, over a specified period. Once a buyer and a vehicle dealership enter into a contract to purchase a vehicle, the buyer uses the loan proceeds from the direct lender to pay the dealership for the vehicle.

Another common form is dealership financing, which offers convenience, financing options, and sometimes special, manufacturer-sponsored, low-rate deals. Before you make a financing decision, it’s important to do your research:

  • Decide in advance how much you can afford to spend and stick to your limit.
  • Get a copy of your credit report and correct any errors before applying for a loan.
  • Check buying guides to identify price ranges and best available deals.

The Federal Trade Commission has more information about vehicle financing, deciding what you can afford, and consumer protections. If you need to file a complaint about your auto loan, contact the Consumer Financial Protection Bureau.

The Army H&r Block

Army h&r block Index A Activities not for profit, Hobby Expenses Adjustments to gross income Armed forces reservists' travel expenses, Armed Forces reservists traveling more than 100 miles from home. Army h&r block Performing artists, Performing Artists State or local government officials paid on fee basis, Officials Paid on a Fee Basis Unlawful discrimination claims, Unlawful discrimination claims. Army h&r block Administrative fees IRA trustees, Trustee's Administrative Fees for IRA Adoption expenses, Adoption Expenses Amortizable bond premium, Amortizable Premium on Taxable Bonds, More information. Army h&r block Appraisal fees, Appraisal Fees Armed forces Military uniforms, Military uniforms. Army h&r block Reservists, travel expenses, Armed Forces reservists traveling more than 100 miles from home. Army h&r block Assistance (see Tax help) B Bad debts, Business Bad Debt Bank accounts Check-writing fees, Check-Writing Fees on Personal Account Losses on deposits, Loss on Deposits Bonds Amortizable premium, Amortizable Premium on Taxable Bonds Breach of contract Damages, Damages for Breach of Employment Contract Bribes, List of Nondeductible Expenses Burial expenses, List of Nondeductible Expenses Business expenses (see Employee business expenses) Business gifts, Gift expenses. Army h&r block C Campaign contributions, Lobbying and political activities. Army h&r block , Political Contributions Campaign expenses, Campaign Expenses Capital expenditures, Capital Expenses Casualty losses, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Cell phones, Depreciation on Computers Chambers of Commerce dues, Lobbying and political activities. Army h&r block Check-writing fees, Check-Writing Fees on Personal Account Claim of right repayments, Repayments Under Claim of Right Clerical help, deductibility of, Clerical Help and Office Rent Clothes Protective, Protective clothing. Army h&r block Work, Work Clothes and Uniforms Club dues, Club Dues Commissions, Commissions Commuting expenses, Commuting Expenses Computers Depreciation, Depreciation on Computers, Depreciation on Home Computer, Excess Deductions of an Estate Convenience fees, Credit or Debit Card Convenience Fees Criminal prosecutions Travel expenses for federal staff, Federal crime investigation and prosecution. Army h&r block D Damages Breach of employment contract, Damages for Breach of Employment Contract Deposits Losses on, Loss on Deposits Depreciation Computers, Depreciation on Computers, Depreciation on Home Computer, Excess Deductions of an Estate Disabilities, persons with Work-related expenses, Impairment-Related Work Expenses Dividends Fees to collect, Fees To Collect Interest and Dividends Service charges on reinvestment plans, Service Charges on Dividend Reinvestment Plans Dues, Dues to Chambers of Commerce and Professional Societies (see also Expenses) (see also Fees) Chambers of Commerce, Dues to Chambers of Commerce and Professional Societies Club, Club Dues Lobbying, Dues used for lobbying. Army h&r block Professional societies, Dues to Chambers of Commerce and Professional Societies Union, Union Dues and Expenses E Education, Educator Expenses, Education Expenses During Unemployment Education expenses, Work-Related Education, More information. Army h&r block Employee business expenses Form 2106 and Form 2106-EZ, Form 2106 and Form 2106-EZ. Army h&r block Performing artists, Performing Artists Unreimbursed, Unreimbursed Employee Expenses Employment Agency fees, Employment and outplacement agency fees. Army h&r block Breach of contract, Damages for Breach of Employment Contract Entertainers and musicians (see Performing artists) Entertainment expenses, Meals and entertainment. Army h&r block Estates Federal estate tax, Federal Estate Tax on Income in Respect of a Decedent Expenses, Dues to Chambers of Commerce and Professional Societies, Education Expenses During Unemployment (see also Dues) (see also Fees) Adoption, Adoption Expenses Campaign, Campaign Expenses Capital, Capital Expenses Commuting, Commuting Expenses Education Work-related, Work-Related Education Educator, Educator Expenses Qualified, Qualified expenses. Army h&r block Educator Expenses, Eligible educator. Army h&r block Employee business (see Employee business expenses) Entertainment, Meals and entertainment. Army h&r block Funeral and burial, List of Nondeductible Expenses Gifts, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging, Gift expenses. Army h&r block Health spa, Health Spa Expenses Hobby, Hobby Expenses Home office, Home Office Impairment-related, Impairment-Related Work Expenses Investment, Investment Fees and Expenses, Investment-Related Seminars Job search, Job Search Expenses Legal (see Legal expenses) Local lodging, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Meals, Meals and entertainment. Army h&r block , Lunches With Co-workers Meals and entertainment, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Nondeductible, Nondeductible Expenses Over limit, educator, Educator expenses over limit. Army h&r block Personal, Nondeductible Expenses Production of income, Other Expenses Professional promotion, Professional Reputation Tax-exempt income, Tax-Exempt Income Expenses Travel and transportation, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Travel as education, Travel as education. Army h&r block F Federal estate tax, Federal Estate Tax on Income in Respect of a Decedent Fees, Dues to Chambers of Commerce and Professional Societies (see also Dues) (see also Expenses) Appraisal, Appraisal Fees Check-writing, Check-Writing Fees on Personal Account Employment and outplacement agency, Employment and outplacement agency fees. Army h&r block Investment, Fees To Collect Interest and Dividends, Investment Fees and Expenses IRA trustee, Trustee's Administrative Fees for IRA Legal (see Legal expenses) License, Licenses and Regulatory Fees Professional accreditation, Professional Accreditation Fees Fines, Fines or Penalties Form 2106 Employee business expenses, Form 2106 and Form 2106-EZ. Army h&r block Form 2106-EZ Employee business expenses, Form 2106 and Form 2106-EZ. Army h&r block Form 4562 Depreciation and amortization, Reporting your depreciation deduction. Army h&r block , Depreciation. Army h&r block , Computer used in a home office. Army h&r block Free tax services, Free help with your tax return. Army h&r block Funeral expenses, List of Nondeductible Expenses G Gambling winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Government employees Federal criminal investigation and prosecution travel expenses, Federal crime investigation and prosecution. Army h&r block State or local government officials paid on fee basis, Officials Paid on a Fee Basis H Health spa, Health Spa Expenses Help (see Tax help) Hobbies, Hobby Expenses Home Security system, Home Security System Telephone service, Residential Telephone Service Home office Computers, Computer used in a home office. Army h&r block Expenses, Home Office Principal place of business, Principal place of business. Army h&r block Travel and transportation expenses, Home office. Army h&r block I Impairment-related work expenses, Impairment-Related Work Expenses Income aid payment, Repayment of Income Aid Payment Income in respect of decedent Estate tax, Federal Estate Tax on Income in Respect of a Decedent Individual retirement arrangements (IRAs) Trustees' fees, Trustee's Administrative Fees for IRA Insurance Business liability, Business Liability Insurance Life insurance, Life Insurance Premiums Malpractice, Unreimbursed Employee Expenses Personal disability, List of Nondeductible Expenses Interest income Fees to collect, Fees To Collect Interest and Dividends Investments Annuity, unrecovered investment in, Unrecovered Investment in Annuity Deposits, losses on, Loss on Deposits Fees and expenses, Investment Fees and Expenses Seminars, Investment-Related Seminars Itemized deductions Deductions not subject to 2% limit, Deductions Not Subject to the 2% Limit Deductions subject to 2% limit, Introduction, Deductions Subject to the 2% Limit How to report, How To Report J Job search, Job Search Expenses, Travel and transportation expenses. Army h&r block K Kickbacks, List of Nondeductible Expenses L Legal expenses Job-related, Legal Fees Personal, Personal Legal Expenses Political campaigns, Legal fees. Army h&r block Production of income, Legal Expenses Unlawful discrimination claims, Legal Expenses Licenses Fees, Licenses and Regulatory Fees Life insurance, Life Insurance Premiums Lobbying, Lobbying and political activities. Army h&r block , Lobbying Expenses, Exceptions. Army h&r block Local transportation, Local transportation expenses. Army h&r block Losses Casualties and thefts, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Deposits, Loss on Deposits Gambling, Gambling Losses Up to the Amount of Gambling Winnings IRA, Loss on IRA Mislaid cash or property, Lost or Mislaid Cash or Property Partnership, Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 Roth IRA, Loss on IRA M Mail carriers, rural, Rural Mail Carriers' Vehicle Expenses Malpractice insurance, Unreimbursed Employee Expenses Meal and lodging expenses, Meals and entertainment. Army h&r block Lunches with coworkers, Lunches With Co-workers Working late, Meals While Working Late Medical examinations, Unreimbursed Employee Expenses Mileage rate, What's New Missing children, photographs of, Reminders Mutual funds Indirect deductions, Indirect Deductions of Pass-Through Entities N Nondeductible expenses, Nondeductible Expenses, Wristwatches Not-for-profit activities, Hobby Expenses O Occupational taxes, Occupational Taxes Office Home (see Home office) Rent, Clerical Help and Office Rent Outplacement agency fees, Employment and outplacement agency fees. Army h&r block P Partnerships Indirect deductions, Indirect Deductions of Pass-Through Entities Pass-through entities, Indirect Deductions of Pass-Through Entities Passport expense, Unreimbursed Employee Expenses Penalties, Fines or Penalties Performing artists, Performing Artists Work clothes, Work Clothes and Uniforms Personal expenses, Nondeductible Expenses, Wristwatches Political contributions, Lobbying and political activities. Army h&r block , Political Contributions Campaign expenses, Campaign Expenses Ponzi-type investment schemes, Losses From Ponzi-type Investment Schemes Postal workers, Rural Mail Carriers' Vehicle Expenses Production of income expenses, Other Expenses, Loss on IRA Professional accreditation fees, Professional Accreditation Fees Professional journals, Unreimbursed Employee Expenses Professional reputation and marketing, Professional Reputation Professional societies dues, Lobbying and political activities. Army h&r block Prosecution travel expenses, Federal crime investigation and prosecution. Army h&r block Protective clothing, Protective clothing. Army h&r block Publications (see Tax help) R Recordkeeping requirements Computer used for home and business, Depreciation on Computers Deductions, to verify, Introduction Gambling winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Home office, Home Office Relief fund contributions, Relief Fund Contributions Rent Office, Clerical Help and Office Rent Safe deposit box, Safe Deposit Box Rent Repayments Claim of right, Repayments Under Claim of Right Income, Repayments of Income Income aid payments, Unreimbursed Employee Expenses Social Security benefits, Repayments of Social Security Benefits Reporting requirements Armed Forces reservists, Armed Forces reservists. Army h&r block Computer used in a home office, Computer used in a home office. Army h&r block Depreciation, Depreciation. Army h&r block Form 2106 and Form 2106-EZ, Form 2106 and Form 2106-EZ. Army h&r block Impairment-related work expenses, Impairment-related work expenses. Army h&r block Itemized deductions, How To Report Tax preparation fees, Tax preparation fees. Army h&r block Research expenses, Research Expenses of a College Professor Résumé, Résumé. Army h&r block Rural mail carriers, Rural Mail Carriers' Vehicle Expenses S S corporations Indirect deductions, Indirect Deductions of Pass-Through Entities Safe deposit box, Safe Deposit Box Rent Security systems, home, Home Security System Seminars, investment-related, Investment-Related Seminars Service charges on dividend reinvestment plans, Service Charges on Dividend Reinvestment Plans Social Security repayments, Repayments of Social Security Benefits State or local governments Officials paid on fee basis, Officials Paid on a Fee Basis Stockholders' meeting expenses, Stockholders' Meetings T Tax help, How To Get Tax Help Tax-exempt income expenses, Tax-Exempt Income Expenses Taxes Estate tax, Federal Estate Tax on Income in Respect of a Decedent Occupational, Occupational Taxes Telephones Cell phone, Depreciation on Computers Residential service, Residential Telephone Service Theft losses, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Tools, Tools Used in Your Work Travel and transportation expenses, Local lodging. Army h&r block , Additional information. Army h&r block Another individual, paid by taxpayer, Travel Expenses for Another Individual Armed forces reservists, Armed Forces reservists traveling more than 100 miles from home. Army h&r block Commuting, Commuting Expenses Criminal investigations and prosecutions, Federal crime investigation and prosecution. Army h&r block Education, Travel as education. Army h&r block Indefinite work assignments, Indefinite work assignment. Army h&r block Job search, Travel and transportation expenses. Army h&r block Local transportation, Local transportation expenses. Army h&r block Research, Research Expenses of a College Professor Temporary work assignments, Temporary work assignment. Army h&r block Trustees IRA administrative fees, Trustee's Administrative Fees for IRA TTY/TDD information, How To Get Tax Help U Unemployment and education expenses, Education Expenses During Unemployment Unemployment benefit fund contributions, Voluntary Unemployment Benefit Fund Contributions Uniforms, military, Military uniforms. Army h&r block Union dues, Union Dues and Expenses Unreimbursed employee expenses, Unreimbursed Employee Expenses, Military uniforms. Army h&r block W Wagering winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Work Clothes and uniforms, Work Clothes and Uniforms Impairment-related expenses, Impairment-Related Work Expenses Supplies, Unreimbursed Employee Expenses Tools, Unreimbursed Employee Expenses, Tools Used in Your Work Travel and transportation expenses, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Wristwatches, List of Nondeductible Expenses, Wristwatches Prev  Up     Home   More Online Publications