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Filing 1040x Electronically

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Filing 1040x Electronically

Filing 1040x electronically 37. Filing 1040x electronically   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. Filing 1040x electronically  The maximum adoption credit is $12,970 for 2013. Filing 1040x electronically See Adoption Credit . Filing 1040x electronically Plug-in electric vehicle credit. Filing 1040x electronically  This credit has expired. Filing 1040x electronically Credit for prior year minimum tax. Filing 1040x electronically  The refundable portion of the credit for prior year minimum tax has expired. Filing 1040x electronically Excess withholding of social security and railroad retirement tax. Filing 1040x electronically  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. Filing 1040x electronically 2% of wages up to $113,700. Filing 1040x electronically If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. Filing 1040x electronically See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . Filing 1040x electronically Introduction This chapter discusses the following nonrefundable credits. Filing 1040x electronically Adoption credit. Filing 1040x electronically Alternative motor vehicle credit. Filing 1040x electronically Alternative fuel vehicle refueling property credit. Filing 1040x electronically Credit to holders of tax credit bonds. Filing 1040x electronically Foreign tax credit. Filing 1040x electronically Mortgage interest credit. Filing 1040x electronically Nonrefundable credit for prior year minimum tax. Filing 1040x electronically Plug-in electric drive motor vehicle credit. Filing 1040x electronically Residential energy credits. Filing 1040x electronically Retirement savings contributions credit. Filing 1040x electronically This chapter also discusses the following refundable credits. Filing 1040x electronically Credit for tax on undistributed capital gain. Filing 1040x electronically Health coverage tax credit. Filing 1040x electronically Credit for excess social security tax or railroad retirement tax withheld. Filing 1040x electronically Several other credits are discussed in other chapters in this publication. Filing 1040x electronically Child and dependent care credit (chapter 32). Filing 1040x electronically Credit for the elderly or the disabled (chapter 33). Filing 1040x electronically Child tax credit (chapter 34). Filing 1040x electronically Education credits (chapter 35). Filing 1040x electronically Earned income credit (chapter 36). Filing 1040x electronically Nonrefundable credits. Filing 1040x electronically   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. Filing 1040x electronically These credits may reduce your tax to zero. Filing 1040x electronically If these credits are more than your tax, the excess is not refunded to you. Filing 1040x electronically Refundable credits. Filing 1040x electronically   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. Filing 1040x electronically These credits are added to the federal income tax withheld and any estimated tax payments you made. Filing 1040x electronically If this total is more than your total tax, the excess will be refunded to you. Filing 1040x electronically Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. Filing 1040x electronically However, if the total of these credits is more than your tax, the excess is not refunded to you. Filing 1040x electronically Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. Filing 1040x electronically The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. Filing 1040x electronically If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. Filing 1040x electronically If your modified AGI is $234,580 or more, you cannot take the credit. Filing 1040x electronically Qualified adoption expenses. Filing 1040x electronically   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. Filing 1040x electronically These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. Filing 1040x electronically Nonqualified expenses. Filing 1040x electronically   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. Filing 1040x electronically Eligible child. Filing 1040x electronically   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. Filing 1040x electronically Child with special needs. Filing 1040x electronically   An eligible child is a child with special needs if all three of the following apply. Filing 1040x electronically The child was a citizen or resident of the United States (including U. Filing 1040x electronically S. Filing 1040x electronically possessions) at the time the adoption process began. Filing 1040x electronically A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. Filing 1040x electronically The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Filing 1040x electronically Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. Filing 1040x electronically When to take the credit. Filing 1040x electronically   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. Filing 1040x electronically If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. Filing 1040x electronically See the Instructions for Form 8839 for more specific information on when to take the credit. Filing 1040x electronically Foreign child. Filing 1040x electronically   If the child is not a U. Filing 1040x electronically S. Filing 1040x electronically citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. Filing 1040x electronically You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. Filing 1040x electronically How to take the credit. Filing 1040x electronically   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. Filing 1040x electronically Include the credit in your total for Form 1040, line 53. Filing 1040x electronically Check box c and enter “8839” on the line next to that box. Filing 1040x electronically More information. Filing 1040x electronically   For more information, see the Instructions for Form 8839. Filing 1040x electronically Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. Filing 1040x electronically Amount of credit. Filing 1040x electronically   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. Filing 1040x electronically In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. Filing 1040x electronically   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. Filing 1040x electronically How to take the credit. Filing 1040x electronically   To take the credit, you must complete Form 8910 and attach it to your Form 1040. Filing 1040x electronically Include the credit in your total for Form 1040, line 53. Filing 1040x electronically Check box c and enter “8910” on the line next to that box. Filing 1040x electronically More information. Filing 1040x electronically   For more information on the credit, see the Instructions for Form 8910. Filing 1040x electronically Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. Filing 1040x electronically Qualified alternative fuel vehicle refueling property. Filing 1040x electronically   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. Filing 1040x electronically To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. Filing 1040x electronically To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. Filing 1040x electronically   The following are alternative fuels. Filing 1040x electronically Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. Filing 1040x electronically Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. Filing 1040x electronically Electricity. Filing 1040x electronically Amount of the credit. Filing 1040x electronically   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. Filing 1040x electronically For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Filing 1040x electronically How to take the credit. Filing 1040x electronically   To take the credit, you must complete Form 8911 and attach it to your Form 1040. Filing 1040x electronically Include the credit in your total for Form 1040, line 53. Filing 1040x electronically Check box c and enter “8911” on the line next to that box. Filing 1040x electronically More information. Filing 1040x electronically   For more information on the credit, see the Form 8911 instructions. Filing 1040x electronically Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. Filing 1040x electronically You may be able to take a credit if you are a holder of one of the following bonds. Filing 1040x electronically Clean renewable energy bonds (issued before 2010). Filing 1040x electronically New clean renewable energy bonds. Filing 1040x electronically Qualified energy conservation bonds. Filing 1040x electronically Qualified school construction bonds. Filing 1040x electronically Qualified zone academy bonds. Filing 1040x electronically Build America bonds. Filing 1040x electronically In some instances, an issuer may elect to receive a credit for interest paid on the bond. Filing 1040x electronically If the issuer makes this election, you cannot also claim a credit. Filing 1040x electronically Interest income. Filing 1040x electronically   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. Filing 1040x electronically How to take the credit. Filing 1040x electronically   Complete Form 8912 and attach it to your Form 1040. Filing 1040x electronically Include the credit in your total for Form 1040, line 53. Filing 1040x electronically Check box c and enter “8912” on the line next to that box. Filing 1040x electronically More information. Filing 1040x electronically   For more information, see the Instructions for Form 8912. Filing 1040x electronically Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. Filing 1040x electronically S. Filing 1040x electronically possession as a credit against your U. Filing 1040x electronically S. Filing 1040x electronically income tax. Filing 1040x electronically Or, you can deduct them as an itemized deduction (see chapter 22). Filing 1040x electronically You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. Filing 1040x electronically S. Filing 1040x electronically tax under any of the following. Filing 1040x electronically Foreign earned income exclusion. Filing 1040x electronically Foreign housing exclusion. Filing 1040x electronically Income from Puerto Rico exempt from U. Filing 1040x electronically S. Filing 1040x electronically tax. Filing 1040x electronically Possession exclusion. Filing 1040x electronically Limit on the credit. Filing 1040x electronically   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. Filing 1040x electronically S. Filing 1040x electronically tax liability (Form 1040, line 44), multiplied by a fraction. Filing 1040x electronically The numerator of the fraction is your taxable income from sources outside the United States. Filing 1040x electronically The denominator is your total taxable income from U. Filing 1040x electronically S. Filing 1040x electronically and foreign sources. Filing 1040x electronically See Publication 514 for more information. Filing 1040x electronically How to take the credit. Filing 1040x electronically   Complete Form 1116 and attach it to your Form 1040. Filing 1040x electronically Enter the credit on Form 1040, line 47. Filing 1040x electronically Exception. Filing 1040x electronically   You do not have to complete Form 1116 to take the credit if all of the following apply. Filing 1040x electronically All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). Filing 1040x electronically If you had dividend income from shares of stock, you held those shares for at least 16 days. Filing 1040x electronically You are not filing Form 4563 or excluding income from sources within Puerto Rico. Filing 1040x electronically The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). Filing 1040x electronically All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. Filing 1040x electronically More information. Filing 1040x electronically   For more information on the credit and these requirements, see the Instructions for Form 1116. Filing 1040x electronically Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. Filing 1040x electronically If you qualify, you can take the credit each year for part of the home mortgage interest you pay. Filing 1040x electronically Who qualifies. Filing 1040x electronically   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Filing 1040x electronically Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Filing 1040x electronically Amount of credit. Filing 1040x electronically   Figure your credit on Form 8396. Filing 1040x electronically If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Filing 1040x electronically   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Filing 1040x electronically To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Filing 1040x electronically      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. Filing 1040x electronically   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. Filing 1040x electronically If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. Filing 1040x electronically See Publication 530 for more information. Filing 1040x electronically Carryforward. Filing 1040x electronically   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. Filing 1040x electronically If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Filing 1040x electronically   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Filing 1040x electronically How to take the credit. Filing 1040x electronically    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. Filing 1040x electronically Be sure to include any credit carryforward from 2010, 2011, and 2012. Filing 1040x electronically   Include the credit in your total for Form 1040, line 53. Filing 1040x electronically Check box c and enter “8396” on the line next to that box. Filing 1040x electronically Reduced home mortgage interest deduction. Filing 1040x electronically   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Filing 1040x electronically You must do this even if part of that amount is to be carried forward to 2014. Filing 1040x electronically For more information about the home mortgage interest deduction, see chapter 23. Filing 1040x electronically Recapture of federal mortgage subsidy. Filing 1040x electronically   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. Filing 1040x electronically The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. Filing 1040x electronically See the Instructions for Form 8828 and chapter 15 for more information. Filing 1040x electronically More information. Filing 1040x electronically   For more information on the credit, see the Form 8396 instructions. Filing 1040x electronically Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. Filing 1040x electronically If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. Filing 1040x electronically This is called the alternative minimum tax. Filing 1040x electronically The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. Filing 1040x electronically If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. Filing 1040x electronically You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. Filing 1040x electronically How to take the credit. Filing 1040x electronically    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. Filing 1040x electronically Include the credit in your total for Form 1040, line 53, and check box b. Filing 1040x electronically You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. Filing 1040x electronically More information. Filing 1040x electronically   For more information on the credit, see the Instructions for Form 8801. Filing 1040x electronically Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. Filing 1040x electronically Qualified plug-in electric drive motor vehicle. Filing 1040x electronically   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Filing 1040x electronically Qualified two- or three-wheeled plug-in electric vehicle. Filing 1040x electronically   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. Filing 1040x electronically 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Filing 1040x electronically Certification and other requirements. Filing 1040x electronically   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. Filing 1040x electronically However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. Filing 1040x electronically   The following requirements must also be met to qualify for the credit. Filing 1040x electronically You are the owner of the vehicle. Filing 1040x electronically If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. Filing 1040x electronically You placed the vehicle in service during 2013. Filing 1040x electronically The vehicle is manufactured primarily for use on public streets, roads, and highways. Filing 1040x electronically The original use of the vehicle began with you. Filing 1040x electronically You acquired the vehicle for your use or to lease to others, and not for resale. Filing 1040x electronically In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. Filing 1040x electronically You use the vehicle primarily in the United States. Filing 1040x electronically How to take the credit. Filing 1040x electronically   To take the credit, you must complete Form 8936 and attach it to your Form 1040. Filing 1040x electronically Include the credit in your total for Form 1040, line 53. Filing 1040x electronically Check box c and enter “8936” on the line next to that box. Filing 1040x electronically More information. Filing 1040x electronically   For more information on the credit, see the Form 8936 instructions. Filing 1040x electronically Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. Filing 1040x electronically Nonbusiness energy property credit. Filing 1040x electronically Residential energy efficient property credit. Filing 1040x electronically If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. Filing 1040x electronically Nonbusiness energy property credit. Filing 1040x electronically   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. Filing 1040x electronically   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. Filing 1040x electronically    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. Filing 1040x electronically   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. Filing 1040x electronically Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. Filing 1040x electronically Exterior window (including skylights). Filing 1040x electronically Exterior doors. Filing 1040x electronically Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. Filing 1040x electronically   Residential energy property is any of the following. Filing 1040x electronically Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. Filing 1040x electronically Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. Filing 1040x electronically Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. Filing 1040x electronically Residential energy efficient property credit. Filing 1040x electronically   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. Filing 1040x electronically The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. Filing 1040x electronically Basis reduction. Filing 1040x electronically   You must reduce the basis of your home by the amount of any credit allowed. Filing 1040x electronically How to take the credit. Filing 1040x electronically   Complete Form 5695 and attach it to your Form 1040. Filing 1040x electronically Enter the credit on Form 1040, line 52. Filing 1040x electronically More information. Filing 1040x electronically   For more information on these credits, see the Form 5695 instructions. Filing 1040x electronically Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. Filing 1040x electronically However, you cannot take the credit if either of the following applies. Filing 1040x electronically The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). Filing 1040x electronically The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). Filing 1040x electronically Student. Filing 1040x electronically   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. Filing 1040x electronically School. Filing 1040x electronically   A school includes a technical, trade, or mechanical school. Filing 1040x electronically It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Filing 1040x electronically How to take the credit. Filing 1040x electronically   Figure the credit on Form 8880. Filing 1040x electronically Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. Filing 1040x electronically More information. Filing 1040x electronically   For more information on the credit, see the Form 8880 instructions. Filing 1040x electronically Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. Filing 1040x electronically If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. Filing 1040x electronically Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. Filing 1040x electronically If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. Filing 1040x electronically The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. Filing 1040x electronically How to take the credit. Filing 1040x electronically   To take the credit, attach Copy B of Form 2439 to your Form 1040. Filing 1040x electronically Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. Filing 1040x electronically More information. Filing 1040x electronically   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. Filing 1040x electronically Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. Filing 1040x electronically You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. Filing 1040x electronically You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. Filing 1040x electronically S. Filing 1040x electronically Treasury–HCTC. Filing 1040x electronically ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. Filing 1040x electronically You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). Filing 1040x electronically You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. Filing 1040x electronically S. Filing 1040x electronically military health system (TRICARE). Filing 1040x electronically You were not imprisoned under federal, state, or local authority. Filing 1040x electronically Your employer did not pay 50% or more of the cost of coverage. Filing 1040x electronically You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. Filing 1040x electronically But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. Filing 1040x electronically If you meet all of these conditions, you may be able to take a credit of up to 72. Filing 1040x electronically 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. Filing 1040x electronically You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. Filing 1040x electronically The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. Filing 1040x electronically You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Filing 1040x electronically If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. Filing 1040x electronically TAA recipient. Filing 1040x electronically   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). Filing 1040x electronically Example. Filing 1040x electronically You received a trade adjustment allowance for January 2013. Filing 1040x electronically You were an eligible TAA recipient on the first day of January and February. Filing 1040x electronically Alternative TAA recipient. Filing 1040x electronically   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. Filing 1040x electronically Example. Filing 1040x electronically You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. Filing 1040x electronically The program was established by the Department of Labor. Filing 1040x electronically You were an eligible alternative TAA recipient on the first day of October and November. Filing 1040x electronically RTAA recipient. Filing 1040x electronically   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. Filing 1040x electronically PBGC pension recipient. Filing 1040x electronically   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. Filing 1040x electronically You were age 55 or older on the first day of the month. Filing 1040x electronically You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Filing 1040x electronically If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. Filing 1040x electronically How to take the credit. Filing 1040x electronically   To take the credit, complete Form 8885 and attach it to your Form 1040. Filing 1040x electronically Include your credit in the total for Form 1040, line 71, and check box c. Filing 1040x electronically   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. Filing 1040x electronically For details, see Publication 502 or Form 8885. Filing 1040x electronically More information. Filing 1040x electronically   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. Filing 1040x electronically Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. Filing 1040x electronically If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Filing 1040x electronically If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. Filing 1040x electronically If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. Filing 1040x electronically 2% rate. Filing 1040x electronically You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. Filing 1040x electronically For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. Filing 1040x electronically 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. Filing 1040x electronically 45%) or the Additional Medicare Tax rate (. Filing 1040x electronically 9%). Filing 1040x electronically The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. Filing 1040x electronically Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. Filing 1040x electronically 40 RRTA tier 2 $84,300 $3,709. Filing 1040x electronically 20 All wages are subject to Medicare tax withholding. Filing 1040x electronically   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Filing 1040x electronically Be sure to attach a copy of all of your W-2 forms. Filing 1040x electronically Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. Filing 1040x electronically Employer's error. Filing 1040x electronically   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. Filing 1040x electronically The employer should adjust the tax for you. Filing 1040x electronically If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. Filing 1040x electronically Joint return. Filing 1040x electronically   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. Filing 1040x electronically Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. Filing 1040x electronically How to figure the credit if you did not work for a railroad. Filing 1040x electronically   If you did not work for a railroad during 2013, figure the credit as follows: 1. Filing 1040x electronically Add all social security tax withheld (but not more than $7,049. Filing 1040x electronically 40 for each employer). Filing 1040x electronically Enter the total here   2. Filing 1040x electronically Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Filing 1040x electronically Add lines 1 and 2. Filing 1040x electronically If $7,049. Filing 1040x electronically 40 or less, stop here. Filing 1040x electronically You cannot take  the credit   4. Filing 1040x electronically Social security tax limit 7,049. Filing 1040x electronically 40 5. Filing 1040x electronically Credit. Filing 1040x electronically Subtract line 4 from line 3. Filing 1040x electronically Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. Filing 1040x electronically You are married and file a joint return with your spouse who had no gross income in 2013. Filing 1040x electronically During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. Filing 1040x electronically Social security tax of $3,720 was withheld. Filing 1040x electronically You also worked for another employer in 2013 and earned $55,000 in wages. Filing 1040x electronically $3,410 of social security tax was withheld from these wages. Filing 1040x electronically Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. Filing 1040x electronically 60 for the excess social security tax withheld. Filing 1040x electronically 1. Filing 1040x electronically Add all social security tax withheld (but not more than $7,049. Filing 1040x electronically 40 for each employer). Filing 1040x electronically Enter the total here $7,130. Filing 1040x electronically 00 2. Filing 1040x electronically Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. Filing 1040x electronically Add lines 1 and 2. Filing 1040x electronically If $7,049. Filing 1040x electronically 40 or less, stop here. Filing 1040x electronically You cannot take the credit 7,130. Filing 1040x electronically 00 4. Filing 1040x electronically Social security tax limit 7,049. Filing 1040x electronically 40 5. Filing 1040x electronically Credit. Filing 1040x electronically Subtract line 4 from line 3. Filing 1040x electronically Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. Filing 1040x electronically 60 How to figure the credit if you worked for a railroad. Filing 1040x electronically   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. Filing 1040x electronically Add all social security and tier 1 RRTA tax withheld at the 6. Filing 1040x electronically 2% rate (but not more than $7,049. Filing 1040x electronically 40 for each employer). Filing 1040x electronically Enter the total here   2. Filing 1040x electronically Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Filing 1040x electronically Add lines 1 and 2. Filing 1040x electronically If $7,049. Filing 1040x electronically 40 or less, stop here. Filing 1040x electronically You cannot take  the credit   4. Filing 1040x electronically Social security and tier 1 RRTA  tax limit 7,049. Filing 1040x electronically 40 5. Filing 1040x electronically Credit. Filing 1040x electronically Subtract line 4 from line 3. Filing 1040x electronically Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. Filing 1040x electronically   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. Filing 1040x electronically More information. Filing 1040x electronically   For more information on the credit, see Publication 505. Filing 1040x electronically Prev  Up  Next   Home   More Online Publications
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Understanding Your CP563 Notice

We reviewed your Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, and we need additional information in order to process it.


What you need to do

  • Complete the CP563 response card and provide the requested information as described in your notice.

You may want to

  • Call the IRS at 1-512-460-7898 or 1-267-941-1000 (for international calls), if you have additional questions.

 

Page Last Reviewed or Updated: 27-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

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

The Filing 1040x Electronically

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