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File 2011 taxes online free 3. File 2011 taxes online free   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. File 2011 taxes online free They are the American opportunity credit and the lifetime learning credit. File 2011 taxes online free This chapter discusses the lifetime learning credit. File 2011 taxes online free The American opportunity credit is discussed in chapter 2, The American Opportunity Credit . File 2011 taxes online free 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. File 2011 taxes online free What is the tax benefit of the lifetime learning credit. File 2011 taxes online free   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. File 2011 taxes online free There is no limit on the number of years the lifetime learning credit can be claimed for each student. File 2011 taxes online free   A tax credit reduces the amount of income tax you may have to pay. File 2011 taxes online free Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. File 2011 taxes online free The lifetime learning credit is a nonrefundable credit. File 2011 taxes online free 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. File 2011 taxes online free   Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. File 2011 taxes online free Can you claim more than one education credit this year. File 2011 taxes online free   For each student, you can elect for any year only one of the credits. File 2011 taxes online free 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. File 2011 taxes online free   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. File 2011 taxes online free   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. File 2011 taxes online free 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. File 2011 taxes online free Differences between the American opportunity and lifetime learning credits. File 2011 taxes online free   There are several differences between these two credits. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free Overview of the lifetime learning credit. File 2011 taxes online free   See Table 3-1, Overview of the Lifetime Learning Credit for the basics of the lifetime learning credit. File 2011 taxes online free The details are discussed in this chapter. File 2011 taxes online free 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. File 2011 taxes online free Who Can Claim the Credit Generally, you can claim the lifetime learning credit if all three of the following requirements are met. File 2011 taxes online free You pay qualified education expenses of higher education. File 2011 taxes online free You pay the education expenses for an eligible student. File 2011 taxes online free The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. File 2011 taxes online free Table 3-1. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free “Qualified education expenses” are defined later under Qualified Education Expenses . File 2011 taxes online free “Eligible students” are defined later under Who Is an Eligible Student . File 2011 taxes online free A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . File 2011 taxes online free 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. File 2011 taxes online free Who Cannot Claim the Credit You cannot claim the lifetime learning credit for 2013 if any of the following apply. File 2011 taxes online free Your filing status is married filing separately. File 2011 taxes online free You are listed as a dependent on another person's tax return (such as your parents'). File 2011 taxes online free See Who Can Claim a Dependent's Expenses , later. File 2011 taxes online free Your modified adjusted gross income (MAGI) is $63,000 or more ($127,000 or more in the case of a joint return). File 2011 taxes online free MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . File 2011 taxes online free 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. File 2011 taxes online free More information on nonresident aliens can be found in Publication 519. File 2011 taxes online free You claim the American Opportunity Credit (see chapter 2) or a Tuition and Fees Deduction (see chapter 6) for the same student in 2013. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free Academic period. File 2011 taxes online free   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. File 2011 taxes online free 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. File 2011 taxes online free Paid with borrowed funds. File 2011 taxes online free   You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. File 2011 taxes online free 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. File 2011 taxes online free Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. File 2011 taxes online free Student withdraws from class(es). File 2011 taxes online free   You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. File 2011 taxes online free 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. File 2011 taxes online free The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. File 2011 taxes online free Eligible educational institution. File 2011 taxes online free   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. File 2011 taxes online free S. File 2011 taxes online free Department of Education. File 2011 taxes online free It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. File 2011 taxes online free The educational institution should be able to tell you if it is an eligible educational institution. File 2011 taxes online free   Certain educational institutions located outside the United States also participate in the U. File 2011 taxes online free S. File 2011 taxes online free Department of Education's Federal Student Aid (FSA) programs. File 2011 taxes online free Related expenses. File 2011 taxes online free   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. File 2011 taxes online free Prepaid expenses. File 2011 taxes online free   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. File 2011 taxes online free See Academic period , earlier. File 2011 taxes online free 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). File 2011 taxes online free 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). File 2011 taxes online free In the following examples, assume that each student is an eligible student at an eligible educational institution. File 2011 taxes online free Example 1. File 2011 taxes online free   Jackson is a sophomore in University V's degree program in dentistry. File 2011 taxes online free 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. File 2011 taxes online free Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense. File 2011 taxes online free Example 2. File 2011 taxes online free   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. File 2011 taxes online free 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. File 2011 taxes online free Charles bought his books from a friend, so what he paid for them is not a qualified education expense. File 2011 taxes online free Donna bought hers at College W's bookstore. File 2011 taxes online free 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. File 2011 taxes online free Example 3. File 2011 taxes online free   When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. File 2011 taxes online free 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. File 2011 taxes online free No portion of the fee covers personal expenses. File 2011 taxes online free Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. File 2011 taxes online free Therefore, it is a qualified expense. File 2011 taxes online free 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. File 2011 taxes online free Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student. File 2011 taxes online free Claim a lifetime learning credit and an American opportunity credit based on the same qualified education expenses. File 2011 taxes online free 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). File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free See Adjustments to Qualified Education Expenses, next. File 2011 taxes online free This image is too large to be displayed in the current screen. File 2011 taxes online free Please click the link to view the image. File 2011 taxes online free 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. File 2011 taxes online free The result is the amount of adjusted qualified education expenses for each student. File 2011 taxes online free Tax-free educational assistance. File 2011 taxes online free   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. File 2011 taxes online free See Academic period , earlier. File 2011 taxes online free   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. File 2011 taxes online free 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). File 2011 taxes online free   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. File 2011 taxes online free 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. File 2011 taxes online free   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. File 2011 taxes online free Generally, any scholarship or fellowship is treated as tax free. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free For examples, see Coordination with Pell grants and other scholarships, later. File 2011 taxes online free Refunds. File 2011 taxes online free   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. File 2011 taxes online free Some tax-free educational assistance received after 2013 may be treated as a refund. File 2011 taxes online free See Tax-free educational assistance , earlier. File 2011 taxes online free Refunds received in 2013. File 2011 taxes online free   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. File 2011 taxes online free Refunds received after 2013 but before your income tax return is filed. File 2011 taxes online free   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. File 2011 taxes online free Refunds received after 2013 and after your income tax return is filed. File 2011 taxes online free   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. File 2011 taxes online free See Credit recapture, next. File 2011 taxes online free Credit recapture. File 2011 taxes online free    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. File 2011 taxes online free 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. File 2011 taxes online free 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). File 2011 taxes online free Include that amount as an additional tax for the year the refund or tax-free assistance was received. File 2011 taxes online free Example. File 2011 taxes online free   You pay $9,300 in tuition and fees in December 2013, and your child began college in January 2014. File 2011 taxes online free You filed your 2013 tax return on February 14, 2014, and claimed a lifetime learning credit of $1,860. File 2011 taxes online free You claimed no other tax credits. File 2011 taxes online free After you filed your return, your child withdrew from two courses and you received a refund of $2,900. File 2011 taxes online free You must refigure your 2013 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. File 2011 taxes online free The refigured credit is $1,280 and your tax liability increased by $580. File 2011 taxes online free See instructions for your 2014 income tax return to determine where to include this tax. File 2011 taxes online free 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. File 2011 taxes online free Amounts that do not reduce qualified education expenses. File 2011 taxes online free   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. File 2011 taxes online free   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. File 2011 taxes online free 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. File 2011 taxes online free The use of the money is not restricted. File 2011 taxes online free For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit. File 2011 taxes online free Coordination with Pell grants and other scholarships. File 2011 taxes online free   In some cases, you may be able to reduce your tax liability by including scholarships in income. File 2011 taxes online free 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. File 2011 taxes online free The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. File 2011 taxes online free Example 1—No scholarship. File 2011 taxes online free Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. File 2011 taxes online free Her AGI and her MAGI, for purposes of the credit, are $27,000. File 2011 taxes online free 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. File 2011 taxes online free She claims no credits other than the lifetime learning credit. File 2011 taxes online free 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. File 2011 taxes online free Judy and the college meet all requirements for the lifetime learning tax credit. File 2011 taxes online free She can use all of the $4,500 tuition she paid in 2013 when figuring her 2013 lifetime learning credit. File 2011 taxes online free She claims a $900 lifetime learning credit and her tax after credits is $1,256. File 2011 taxes online free Example 2—Scholarship excluded from income. File 2011 taxes online free The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. File 2011 taxes online free Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. File 2011 taxes online free 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. File 2011 taxes online free Only $3,000 of the $4,500 tuition she paid in 2013 could be used when figuring her 2013 lifetime learning credit. File 2011 taxes online free Her lifetime learning credit would be reduced to $600 and her tax after credits would be $1,556. File 2011 taxes online free Example 3—Scholarship included in income. File 2011 taxes online free The facts are the same as in Example 2—Scholarship excluded from income. File 2011 taxes online free 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. File 2011 taxes online free Judy's AGI will increase to $28,500, her taxable income would be $18,750, and her tax before credits would be $2,381. File 2011 taxes online free She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. File 2011 taxes online free Judy could claim a $900 lifetime learning credit and her tax after credits would be $1,481. File 2011 taxes online free 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. File 2011 taxes online free This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. File 2011 taxes online free Sports, games, hobbies, and noncredit courses. File 2011 taxes online free   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. File 2011 taxes online free 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. File 2011 taxes online free Comprehensive or bundled fees. File 2011 taxes online free   Some eligible educational institutions combine all of their fees for an academic period into one amount. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free See Figuring the Credit , later, for more information about Form 1098-T. File 2011 taxes online free 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). File 2011 taxes online free 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. File 2011 taxes online free For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. File 2011 taxes online free You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. File 2011 taxes online free IF you. File 2011 taxes online free . File 2011 taxes online free . File 2011 taxes online free THEN only. File 2011 taxes online free . File 2011 taxes online free . File 2011 taxes online free 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. File 2011 taxes online free The dependent cannot claim the credit. File 2011 taxes online free 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. File 2011 taxes online free You cannot claim the credit based on this dependent's expenses. File 2011 taxes online free Expenses paid by dependent. File 2011 taxes online free   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. File 2011 taxes online free Include these expenses when figuring the amount of your lifetime learning credit. File 2011 taxes online free    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. File 2011 taxes online free Expenses paid by you. File 2011 taxes online free   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. File 2011 taxes online free 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. File 2011 taxes online free Expenses paid by others. File 2011 taxes online free   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. File 2011 taxes online free In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. File 2011 taxes online free If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. File 2011 taxes online free Example. File 2011 taxes online free In 2013, Ms. File 2011 taxes online free Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free 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. File 2011 taxes online free If anyone else claims an exemption for Todd, Todd cannot claim a lifetime learning credit. File 2011 taxes online free Tuition reduction. File 2011 taxes online free   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. File 2011 taxes online free 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. File 2011 taxes online free For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. File 2011 taxes online free 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. File 2011 taxes online free The maximum amount of lifetime learning credit you can claim for 2013 is $2,000 (20% × $10,000). File 2011 taxes online free However, that amount may be reduced based on your MAGI. File 2011 taxes online free See Effect of the Amount of Your Income on the Amount of Your Credit , later. File 2011 taxes online free Example. File 2011 taxes online free Bruce and Toni Harper are married and file a joint tax return. File 2011 taxes online free For 2013, their MAGI is $75,000. File 2011 taxes online free Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. File 2011 taxes online free She already has a bachelor's degree in history and wants to become a nurse. File 2011 taxes online free In August 2013, Toni paid $5,000 of qualified education expenses for her fall 2013 semester. File 2011 taxes online free Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2013 joint tax return. File 2011 taxes online free Form 1098-T. File 2011 taxes online free   To help you figure your lifetime learning credit, the student should receive Form 1098-T. File 2011 taxes online free 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. File 2011 taxes online free An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. File 2011 taxes online free However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you paid. File 2011 taxes online free When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. File 2011 taxes online free   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. File 2011 taxes online free    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. File 2011 taxes online free 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). File 2011 taxes online free 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). File 2011 taxes online free Modified adjusted gross income (MAGI). File 2011 taxes online free   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. File 2011 taxes online free MAGI when using Form 1040A. File 2011 taxes online free   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. File 2011 taxes online free MAGI when using Form 1040. File 2011 taxes online free   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. File 2011 taxes online free You can use Worksheet 3-1 to figure your MAGI. File 2011 taxes online free Worksheet 3-1. File 2011 taxes online free MAGI for the Lifetime Learning Credit 1. File 2011 taxes online free Enter your adjusted gross income  (Form 1040, line 38)   1. File 2011 taxes online free   2. File 2011 taxes online free Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. File 2011 taxes online free       3. File 2011 taxes online free Enter your foreign housing deduction (Form 2555, line 50)   3. File 2011 taxes online free       4. File 2011 taxes online free Enter the amount of income from Puerto Rico you are excluding   4. File 2011 taxes online free       5. File 2011 taxes online free Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. File 2011 taxes online free       6. File 2011 taxes online free Add the amounts on lines 2, 3, 4, and 5   6. File 2011 taxes online free   7. File 2011 taxes online free Add the amounts on lines 1 and 6. File 2011 taxes online free  This is your modified adjusted  gross income. File 2011 taxes online free Enter this amount  on Form 8863, line 14   7. File 2011 taxes online free   Phaseout. File 2011 taxes online free   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. File 2011 taxes online free The same method is shown in the following example. File 2011 taxes online free Example. File 2011 taxes online free You are filing a joint return with a MAGI of $112,000. File 2011 taxes online free In 2013, you paid $6,600 of qualified education expenses. File 2011 taxes online free You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). File 2011 taxes online free The result is a $1,320 (20% x $6,600) tentative credit. File 2011 taxes online free 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. File 2011 taxes online free The numerator of the fraction is $127,000 (the upper limit for those filing a joint return) minus your MAGI. File 2011 taxes online free The denominator is $20,000, the range of incomes for the phaseout ($107,000 to $127,000). File 2011 taxes online free The result is the amount of your phased out (reduced) lifetime learning credit ($990). File 2011 taxes online free   $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. File 2011 taxes online free Enter the credit on Form 1040, line 49, or Form 1040A, line 31. File 2011 taxes online free Note. File 2011 taxes online free 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. File 2011 taxes online free Prev  Up  Next   Home   More Online Publications
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IRS Virtual Currency Guidance : Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply

IR-2014-36, March. 25, 2014

WASHINGTON — The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that:

  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
  • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. 

Further details, including a set of 16 questions and answers, are in Notice 2014-21, posted today on IRS.gov.

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The File 2011 Taxes Online Free

File 2011 taxes online free 21. File 2011 taxes online free   Medical and Dental Expenses Table of Contents What's New Introduction Useful Items - You may want to see: What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. File 2011 taxes online free How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Yourself Spouse Dependent Decedent What Medical Expenses Are Includible?Insurance Premiums Meals and Lodging Transportation Disabled Dependent Care Expenses How Do You Treat Reimbursements?Insurance Reimbursement Damages for Personal Injuries How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons What's New Medical and dental expenses. File 2011 taxes online free  Beginning January 1, 2013, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted gross income (AGI) (7. File 2011 taxes online free 5% if either you or your spouse is age 65 or older). File 2011 taxes online free Standard mileage rate. File 2011 taxes online free  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. File 2011 taxes online free See Transportation under What Medical Expenses Are Includible. File 2011 taxes online free Introduction This chapter will help you determine the following. File 2011 taxes online free What medical expenses are. File 2011 taxes online free What expenses you can include this year. File 2011 taxes online free How much of the expenses you can deduct. File 2011 taxes online free Whose medical expenses you can include. File 2011 taxes online free What medical expenses are includible. File 2011 taxes online free How to treat reimbursements. File 2011 taxes online free How to report the deduction on your tax return. File 2011 taxes online free How to report impairment-related work expenses. File 2011 taxes online free How to report health insurance costs if you are self-employed. File 2011 taxes online free Useful Items - You may want to see: Publications 502 Medical and Dental Expenses 969 Health Savings Accounts and Other Tax-Favored Health Plans Form (and Instructions) Schedule A (Form 1040) Itemized Deductions What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. File 2011 taxes online free These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. File 2011 taxes online free They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. File 2011 taxes online free Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. File 2011 taxes online free They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. File 2011 taxes online free Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. File 2011 taxes online free Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. File 2011 taxes online free What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. File 2011 taxes online free If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. File 2011 taxes online free If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. File 2011 taxes online free If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. File 2011 taxes online free Separate returns. File 2011 taxes online free   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. File 2011 taxes online free Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. File 2011 taxes online free Community property states. File 2011 taxes online free   If you and your spouse live in a community property state and file separate returns, or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. File 2011 taxes online free Each of you should include half the expenses. File 2011 taxes online free If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. File 2011 taxes online free If you live in a community property state, and are not filing a joint return, see Publication 555, Community Property. File 2011 taxes online free How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI (7. File 2011 taxes online free 5% of your AGI if either you or your spouse is age 65 or older)(Form 1040, line 38). File 2011 taxes online free Example. File 2011 taxes online free You are unmarried and under age 65 and your AGI is $40,000, 10% of which is $4,000. File 2011 taxes online free You paid medical expenses of $2,500. File 2011 taxes online free You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. File 2011 taxes online free Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. File 2011 taxes online free There are different rules for decedents and for individuals who are the subject of multiple support agreements. File 2011 taxes online free See Support claimed under a multiple support agreement , later. File 2011 taxes online free Yourself You can include medical expenses you paid for yourself. File 2011 taxes online free Spouse You can include medical expenses you paid for your spouse. File 2011 taxes online free To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. File 2011 taxes online free Example 1. File 2011 taxes online free Mary received medical treatment before she married Bill. File 2011 taxes online free Bill paid for the treatment after they married. File 2011 taxes online free Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. File 2011 taxes online free If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. File 2011 taxes online free Mary would include the amounts she paid during the year in her separate return. File 2011 taxes online free If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. File 2011 taxes online free Example 2. File 2011 taxes online free This year, John paid medical expenses for his wife Louise, who died last year. File 2011 taxes online free John married Belle this year and they file a joint return. File 2011 taxes online free Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. File 2011 taxes online free Dependent You can include medical expenses you paid for your dependent. File 2011 taxes online free For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. File 2011 taxes online free A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. File 2011 taxes online free The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. File 2011 taxes online free S. File 2011 taxes online free citizen or national, or a resident of the United States, Canada, or Mexico. File 2011 taxes online free If your qualifying child was adopted, see Exception for adopted child , next. File 2011 taxes online free You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. File 2011 taxes online free Exception for adopted child. File 2011 taxes online free   If you are a U. File 2011 taxes online free S. File 2011 taxes online free citizen or U. File 2011 taxes online free S. File 2011 taxes online free national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. File 2011 taxes online free S. File 2011 taxes online free citizen or national or a resident of the United States, Canada, or Mexico. File 2011 taxes online free Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, or, if he or she did, it was only to claim a refund. File 2011 taxes online free Adopted child. File 2011 taxes online free   A legally adopted child is treated as your own child. File 2011 taxes online free This includes a child lawfully placed with you for legal adoption. File 2011 taxes online free   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. File 2011 taxes online free   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. File 2011 taxes online free   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. File 2011 taxes online free    You may be able to take an adoption credit for other expenses related to an adoption. File 2011 taxes online free See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. File 2011 taxes online free Child of divorced or separated parents. File 2011 taxes online free   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. File 2011 taxes online free Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. File 2011 taxes online free This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). File 2011 taxes online free Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of either of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child earlier) of any other person for 2013, and For whom you provided over half of the support in 2013. File 2011 taxes online free But see Child of divorced or separated parents , earlier, and Support claimed under a multiple support agreement, next. File 2011 taxes online free Support claimed under a multiple support agreement. File 2011 taxes online free   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. File 2011 taxes online free A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. File 2011 taxes online free   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. File 2011 taxes online free However, you can include the entire unreimbursed amount you paid for medical expenses. File 2011 taxes online free Example. File 2011 taxes online free You and your three brothers each provide one-fourth of your mother's total support. File 2011 taxes online free Under a multiple support agreement, you treat your mother as your dependent. File 2011 taxes online free You paid all of her medical expenses. File 2011 taxes online free Your brothers reimbursed you for three-fourths of these expenses. File 2011 taxes online free In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. File 2011 taxes online free Your brothers cannot include any part of the expenses. File 2011 taxes online free However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. File 2011 taxes online free Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. File 2011 taxes online free This includes expenses for the decedent's spouse and dependents as well as for the decedent. File 2011 taxes online free The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. File 2011 taxes online free The expenses must be paid within the 1-year period beginning with the day after the date of death. File 2011 taxes online free If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. File 2011 taxes online free Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. File 2011 taxes online free Amended returns and claims for refund are discussed in chapter 1. File 2011 taxes online free What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. File 2011 taxes online free The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. File 2011 taxes online free What Medical Expenses Are Includible? Use Table 21-1, later, as a guide to determine which medical and dental expenses you can include on Schedule A (Form 1040). File 2011 taxes online free This table does not include all possible medical expenses. File 2011 taxes online free To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. File 2011 taxes online free Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. File 2011 taxes online free Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). File 2011 taxes online free See Qualified Long-Term Care Insurance Contracts in Publication 502. File 2011 taxes online free If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. File 2011 taxes online free The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. File 2011 taxes online free Note. File 2011 taxes online free When figuring the amount of insurance premiums you can include in medical expenses on Schedule A, do not include any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. File 2011 taxes online free Also, do not include insurance premiums attributable to a nondependent child under age 27 if your premiums increased as a result of adding this child to your policy. File 2011 taxes online free Employer-sponsored health insurance plan. File 2011 taxes online free   Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included in box 1 of your Form W-2. File 2011 taxes online free Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form W-2. File 2011 taxes online free Example. File 2011 taxes online free You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. File 2011 taxes online free Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. File 2011 taxes online free Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. File 2011 taxes online free Long-term care services. File 2011 taxes online free   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. File 2011 taxes online free This amount will be reported as wages in box 1 of your Form W-2. File 2011 taxes online free Health reimbursement arrangement (HRA). File 2011 taxes online free   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. File 2011 taxes online free This is because an HRA is funded solely by the employer. File 2011 taxes online free Retired public safety officers. File 2011 taxes online free   If you are a retired public safety officer, do not include as medical expenses any health or long-term care premiums that you elected to have paid with tax-free distributions from your retirement plan. File 2011 taxes online free This applies only to distributions that would otherwise be included in income. File 2011 taxes online free Medicare A. File 2011 taxes online free   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. File 2011 taxes online free The payroll tax paid for Medicare A is not a medical expense. File 2011 taxes online free   If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. File 2011 taxes online free In this situation you can include the premiums you paid for Medicare A as a medical expense. File 2011 taxes online free Medicare B. File 2011 taxes online free   Medicare B is supplemental medical insurance. File 2011 taxes online free Premiums you pay for Medicare B are a medical expense. File 2011 taxes online free Check the information you received from the Social Security Administration to find out your premium. File 2011 taxes online free Medicare D. File 2011 taxes online free    Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. File 2011 taxes online free You can include as a medical expense premiums you pay for Medicare D. File 2011 taxes online free Prepaid insurance premiums. File 2011 taxes online free   Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). File 2011 taxes online free Unused sick leave used to pay premiums. File 2011 taxes online free   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. File 2011 taxes online free You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. File 2011 taxes online free You can include this cost of continuing participation in the health plan as a medical expense. File 2011 taxes online free   If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. File 2011 taxes online free You cannot include this cost of continuing participation in that health plan as a medical expense. File 2011 taxes online free Table 21-1. File 2011 taxes online free Medical and Dental Expenses Checklist. File 2011 taxes online free See Publication 502 for more information about these and other expenses. File 2011 taxes online free You can include: You cannot include: Bandages Birth control pills prescribed by your doctor Body scan Braille books Breast pump and supplies Capital expenses for equipment or improvements to your home needed for medical care (see the worksheet in Publication 502) Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Fertility enhancement, certain procedures Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. File 2011 taxes online free ) Lead-based paint removal Legal abortion Legal operation to prevent having children such as a vasectomy or tubal ligation Long-term care contracts, qualified Meals and lodging provided by a hospital during medical treatment Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Medical and hospital insurance premiums Nursing services Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Physical examination Pregnancy test kit Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services, below) Special items (artificial limbs, false teeth, eye-glasses, contact lenses, hearing aids, crutches, wheelchair, etc. File 2011 taxes online free ) Special education for mentally or physically disabled persons Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services Weight-loss, certain expenses for obesity Baby sitting and childcare Bottled water Contributions to Archer MSAs (see Publication 969) Diaper service Expenses for your general health (even if following your doctor's advice) such as— —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pre-tax basis) Funeral, burial, or cremation expenses Health savings account payments for medical expenses Illegal operation, treatment, or medicine Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. File 2011 taxes online free Maternity clothes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. File 2011 taxes online free , unless recommended by a medical practitioner as a treatment for a specific medical condition diagnosed by a physician Surgery for purely cosmetic reasons Toothpaste, toiletries, cosmetics, etc. File 2011 taxes online free Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to get medical care. File 2011 taxes online free See Nursing home , later. File 2011 taxes online free You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. File 2011 taxes online free You can include the cost of such lodging while away from home if all of the following requirements are met. File 2011 taxes online free The lodging is primarily for and essential to medical care. File 2011 taxes online free The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. File 2011 taxes online free The lodging is not lavish or extravagant under the circumstances. File 2011 taxes online free There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. File 2011 taxes online free The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. File 2011 taxes online free You can include lodging for a person traveling with the person receiving the medical care. File 2011 taxes online free For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. File 2011 taxes online free Meals are not included. File 2011 taxes online free Nursing home. File 2011 taxes online free   You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. File 2011 taxes online free This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. File 2011 taxes online free   Do not include the cost of meals and lodging if the reason for being in the home is personal. File 2011 taxes online free You can, however, include in medical expenses the part of the cost that is for medical or nursing care. File 2011 taxes online free Transportation Include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. File 2011 taxes online free You can include: Bus, taxi, train, or plane fares, or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. File 2011 taxes online free Car expenses. File 2011 taxes online free   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use your car for medical reasons. File 2011 taxes online free You cannot include depreciation, insurance, general repair, or maintenance expenses. File 2011 taxes online free   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents per mile. File 2011 taxes online free    You can also include parking fees and tolls. File 2011 taxes online free You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. File 2011 taxes online free Example. File 2011 taxes online free In 2013, Bill Jones drove 2,800 miles for medical reasons. File 2011 taxes online free He spent $500 for gas, $30 for oil, and $100 for tolls and parking. File 2011 taxes online free He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. File 2011 taxes online free He figures the actual expenses first. File 2011 taxes online free He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. File 2011 taxes online free He then figures the standard mileage amount. File 2011 taxes online free He multiplies 2,800 miles by 24 cents a mile for a total of $672. File 2011 taxes online free He then adds the $100 tolls and parking for a total of $772. File 2011 taxes online free Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. File 2011 taxes online free Transportation expenses you cannot include. File 2011 taxes online free   You cannot include in medical expenses the cost of transportation in the following situations. File 2011 taxes online free Going to and from work, even if your condition requires an unusual means of transportation. File 2011 taxes online free Travel for purely personal reasons to another city for an operation or other medical care. File 2011 taxes online free Travel that is merely for the general improvement of one's health. File 2011 taxes online free The costs of operating a specially equipped car for other than medical reasons. File 2011 taxes online free Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. File 2011 taxes online free (See chapter 32 and Publication 503, Child and Dependent Care Expenses. File 2011 taxes online free ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. File 2011 taxes online free How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the taxable year for which you received no insurance or other reimbursement. File 2011 taxes online free Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. File 2011 taxes online free This includes payments from Medicare. File 2011 taxes online free Even if a policy provides reimbursement for only certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. File 2011 taxes online free Example. File 2011 taxes online free You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. File 2011 taxes online free The insurance you receive for the hospital and doctors' bills is more than their charges. File 2011 taxes online free In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. File 2011 taxes online free Health reimbursement arrangement (HRA). File 2011 taxes online free   A health reimbursement arrangement is an employer-funded plan that reimburses employees for medical care expenses and allows unused amounts to be carried forward. File 2011 taxes online free An HRA is funded solely by the employer and the reimbursements for medical expenses, up to a maximum dollar amount for a coverage period, are not included in your income. File 2011 taxes online free Other reimbursements. File 2011 taxes online free   Generally, you do not reduce medical expenses by payments you receive for: Permanent loss or loss of use of a member or function of the body (loss of limb, sight, hearing, etc. File 2011 taxes online free ) or disfigurement to the extent the payment is based on the nature of the injury without regard to the amount of time lost from work, or Loss of earnings. File 2011 taxes online free   You must, however, reduce your medical expenses by any part of these payments that is designated for medical costs. File 2011 taxes online free See How Do You Figure and Report the Deduction on Your Tax Return , later. File 2011 taxes online free   For how to treat damages received for personal injury or sickness, see Damages for Personal Injuries , later. File 2011 taxes online free You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year. File 2011 taxes online free Excess reimbursement. File 2011 taxes online free   If you are reimbursed more than your medical expenses, you may have to include the excess in income. File 2011 taxes online free You may want to use Figure 21-A to help you decide if any of your reimbursement is taxable. File 2011 taxes online free Premiums paid by you. File 2011 taxes online free   If you pay either the entire premium for your medical insurance or all of the costs of a plan similar to medical insurance and your insurance payments or other reimbursements are more than your total medical expenses for the year, you have an excess reimbursement. File 2011 taxes online free Generally, you do not include the excess reimbursement in your gross income. File 2011 taxes online free Premiums paid by you and your employer. File 2011 taxes online free   If both you and your employer contribute to your medical insurance plan and your employer's contributions are not included in your gross income, you must include in your gross income the part of your excess reimbursement that is from your employer's contribution. File 2011 taxes online free   See Publication 502 to figure the amount of the excess reimbursement you must include in gross income. File 2011 taxes online free Reimbursement in a later year. File 2011 taxes online free   If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you generally must report the reimbursement as income up to the amount you previously deducted as medical expenses. File 2011 taxes online free   However, do not report as income the amount of reimbursement you received up to the amount of your medical deductions that did not reduce your tax for the earlier year. File 2011 taxes online free For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Itemized Deduction Recoveries in chapter 12. File 2011 taxes online free Figure 21-A. File 2011 taxes online free Is Your Excess Medical Reimbursement Taxable? Please click here for the text description of the image. File 2011 taxes online free Figure 21-A. File 2011 taxes online free Is Your Excess Medical Reimbursement Taxable? Medical expenses not deducted. File 2011 taxes online free   If you did not deduct a medical expense in the year you paid it because your medical expenses were not more than 10% of your AGI (7. File 2011 taxes online free 5% of your AGI if either you or your spouse was age 65 or older), or because you did not itemize deductions, do not include the reimbursement up to the amount of the expense in income. File 2011 taxes online free However, if the reimbursement is more than the expense, see Excess reimbursement , earlier. File 2011 taxes online free Example. File 2011 taxes online free For 2013, you were unmarried and under age 65 and you had medical expenses of $500. File 2011 taxes online free You cannot deduct the $500 because it is less than 10% of your AGI. File 2011 taxes online free If, in a later year, you are reimbursed for any of the $500 in medical expenses, you do not include the amount reimbursed in your gross income. File 2011 taxes online free Damages for Personal Injuries If you receive an amount in settlement of a personal injury suit, part of that award may be for medical expenses that you deducted in an earlier year. File 2011 taxes online free If it is, you must include that part in your income in the year you receive it to the extent it reduced your taxable income in the earlier year. File 2011 taxes online free See Reimbursement in a Later Year , discussed under How Do You Treat Reimbursements, earlier. File 2011 taxes online free Future medical expenses. File 2011 taxes online free   If you receive an amount in settlement of a damage suit for personal injuries, part of that award may be for future medical expenses. File 2011 taxes online free If it is, you must reduce any future medical expenses for these injuries until the amount you received has been completely used. File 2011 taxes online free How Do You Figure and Report the Deduction on Your Tax Return? Once you have determined which medical expenses you can include, you figure and report the deduction on your tax return. File 2011 taxes online free What Tax Form Do You Use? You figure your medical expense deduction on Schedule A (Form 1040). File 2011 taxes online free You cannot claim medical expenses on Form 1040A or Form 1040EZ. File 2011 taxes online free If you need more information on itemized deductions or you are not sure if you can itemize, see chapter 20. File 2011 taxes online free Enter the amount you paid for medical and dental expenses on Schedule A (Form 1040). File 2011 taxes online free This should be your expenses that were not reimbursed by insurance or any other sources. File 2011 taxes online free Generally, you can deduct only the amount of your medical and dental expenses that is more than 10% of your AGI (7. File 2011 taxes online free 5% if either you or your spouse was age 65 or older) shown on line 38, Form 1040. File 2011 taxes online free Impairment-Related Work Expenses If you are a person with a disability, you can take a business deduction for expenses that are necessary for you to be able to work. File 2011 taxes online free If you take a business deduction for impairment-related work expenses, do not take a medical deduction for the same expenses. File 2011 taxes online free You have a disability if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. File 2011 taxes online free Impairment-related expenses defined. File 2011 taxes online free   Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. File 2011 taxes online free Where to report. File 2011 taxes online free   If you are self-employed, deduct the business expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. File 2011 taxes online free   If you are an employee, complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. File 2011 taxes online free Enter on Schedule A (Form 1040), that part of the amount on Form 2106, or Form 2106-EZ, that is related to your impairment. File 2011 taxes online free Enter the amount that is unrelated to your impairment also on Schedule A (Form 1040). File 2011 taxes online free Your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. File 2011 taxes online free Example. File 2011 taxes online free You are blind. File 2011 taxes online free You must use a reader to do your work. File 2011 taxes online free You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. File 2011 taxes online free The reader's services are only for your work. File 2011 taxes online free You can deduct your expenses for the reader as business expenses. File 2011 taxes online free Health Insurance Costs for Self-Employed Persons If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and, your children who were under age 27 at the end of 2013. File 2011 taxes online free For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. File 2011 taxes online free The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business. File 2011 taxes online free You cannot deduct payments for medical insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or, an employer of your dependent or your child under age 27 at the end of 2013. File 2011 taxes online free You cannot deduct payments for a qualified long-term care insurance contract for any month in which you were eligible to participate in a long-term care insurance plan subsidized by your employer or your spouse's employer. File 2011 taxes online free If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. File 2011 taxes online free But if any of the following applies, do not use that worksheet. File 2011 taxes online free You had more than one source of income subject to self-employment tax. File 2011 taxes online free You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. File 2011 taxes online free You are using amounts paid for qualified long-term care insurance to figure the deduction. File 2011 taxes online free If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction. File 2011 taxes online free Note. File 2011 taxes online free When figuring the amount you can deduct for insurance premiums, do not include any advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. File 2011 taxes online free If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, from the total insurance premiums you paid. File 2011 taxes online free Do not include amounts paid for health insurance coverage with retirement plan distributions that were tax-free because you are a retired public safety officer. File 2011 taxes online free Where to report. File 2011 taxes online free    You take this deduction on Form 1040. File 2011 taxes online free If you itemize your deductions and do not claim 100% of your self-employed health insurance on Form 1040, you can generally include any remaining premiums with all other medical expenses on Schedule A (Form 1040), subject to the 10% limit (7. File 2011 taxes online free 5% if either you or your spouse was age 65 or older). File 2011 taxes online free See Self-Employed Health Insurance Deduction in chapter 6 of Publication 535, Business Expenses, and Medical and Dental Expenses in the Instructions for Schedule A (Form 1040), for more information. File 2011 taxes online free Prev  Up  Next   Home   More Online Publications