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Free Income Tax Return

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Free Income Tax Return

Free income tax return 4. Free income tax return   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. Free income tax return However, the information shown on the filled-in forms is not from any actual person or scenario. Free income tax return Example 1—Mortgage loan modification. Free income tax return    In 2007, Nancy Oak bought a main home for $435,000. Free income tax return Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. Free income tax return The loan was secured by the home. Free income tax return The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. Free income tax return In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. Free income tax return    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. Free income tax return The FMV of Nancy's home at the time of the refinancing was $500,000. Free income tax return Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. Free income tax return After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. Free income tax return   In 2013, Nancy was unable to make her mortgage loan payments. Free income tax return On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. Free income tax return Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. Free income tax return   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. Free income tax return Identifiable event code "F" appears in box 6. Free income tax return This box shows the reason the creditor has filed Form 1099-C. Free income tax return To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. Free income tax return Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. Free income tax return   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. Free income tax return Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. Free income tax return Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. Free income tax return Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). Free income tax return   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. Free income tax return Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). Free income tax return Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. Free income tax return You can see Nancy's Form 1099-C and a portion of her Form 1040 below. Free income tax return Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Free income tax return Please click the link to view the image. Free income tax return Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. Free income tax return Please click the link to view the image. Free income tax return Form 1040, U. Free income tax return S. Free income tax return Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. Free income tax return Please click the link to view the image. Free income tax return Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. Free income tax return    In 2005, John and Mary Elm bought a main home for $335,000. Free income tax return John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. Free income tax return The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. Free income tax return   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. Free income tax return Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. Free income tax return   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. Free income tax return Identifiable event code "D" appears in box 6. Free income tax return This box shows the reason the creditor has filed Form 1099-C. Free income tax return In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. Free income tax return In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. Free income tax return Their sample Form 1099-C is shown on this page. Free income tax return   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). Free income tax return However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. Free income tax return   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). Free income tax return Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. Free income tax return Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. Free income tax return As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. Free income tax return Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. Free income tax return Thus, John and Mary leave line 10b of Form 982 blank. Free income tax return   John and Mary must also determine whether they have a gain or loss from the foreclosure. Free income tax return John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. Free income tax return Because this loss relates to their home, it is a nondeductible loss. Free income tax return   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. Free income tax return John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Free income tax return Please click the link to view the image. Free income tax return Form 1099-C, Cancellation of Debt Table 1-1. Free income tax return Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. Free income tax return Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Free income tax return Otherwise, go to Part 2. Free income tax return 1. Free income tax return Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. Free income tax return 00 2. Free income tax return Enter the fair market value of the transferred property $290,000. Free income tax return 00 3. Free income tax return Ordinary income from the cancellation of debt upon foreclosure or repossession. Free income tax return * Subtract line 2 from line 1. Free income tax return If less than zero, enter zero. Free income tax return Next, go to Part 2 $ 25,000. Free income tax return 00 Part 2. Free income tax return Gain or loss from foreclosure or repossession. Free income tax return   4. Free income tax return Enter the smaller of line 1 or line 2. Free income tax return If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. Free income tax return 00 5. Free income tax return Enter any proceeds you received from the foreclosure sale   6. Free income tax return Add line 4 and line 5 $290,000. Free income tax return 00 7. Free income tax return Enter the adjusted basis of the transferred property $335,000. Free income tax return 00 8. Free income tax return Gain or loss from foreclosure or repossession. Free income tax return Subtract line 7 from line 6 ($ 45,000. Free income tax return 00) * The income may not be taxable. Free income tax return See chapter 1 for more details. Free income tax return Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. Free income tax return Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Free income tax return Credit card debt $ 5,500 2. Free income tax return Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. Free income tax return Car and other vehicle loans $ 4. Free income tax return Medical bills owed $ 5. Free income tax return Student loans $ 6. Free income tax return Accrued or past-due mortgage interest $ 7. Free income tax return Accrued or past-due real estate taxes $ 8. Free income tax return Accrued or past-due utilities (water, gas, electric) $ 9. Free income tax return Accrued or past-due child care costs $ 10. Free income tax return Federal or state income taxes remaining due (for prior tax years) $ 11. Free income tax return Judgments $ 12. Free income tax return Business debts (including those owed as a sole proprietor or partner) $ 13. Free income tax return Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Free income tax return Other liabilities (debts) not included above $ 15. Free income tax return Total liabilities immediately before the cancellation. Free income tax return Add lines 1 through 14. Free income tax return $ 320,500 Part II. Free income tax return Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Free income tax return Cash and bank account balances $ 6,000 17. Free income tax return Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. Free income tax return Cars and other vehicles $ 19. Free income tax return Computers $ 20. Free income tax return Household goods and furnishings (for example, appliances, electronics, furniture, etc. Free income tax return ) $ 21. Free income tax return Tools $ 22. Free income tax return Jewelry $ 23. Free income tax return Clothing $ 24. Free income tax return Books $ 25. Free income tax return Stocks and bonds $ 26. Free income tax return Investments in coins, stamps, paintings, or other collectibles $ 27. Free income tax return Firearms, sports, photographic, and other hobby equipment $ 28. Free income tax return Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. Free income tax return Interest in a pension plan $ 30. Free income tax return Interest in education accounts $ 31. Free income tax return Cash value of life insurance $ 32. Free income tax return Security deposits with landlords, utilities, and others $ 33. Free income tax return Interests in partnerships $ 34. Free income tax return Value of investment in a business $ 35. Free income tax return Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Free income tax return Other assets not included above $ 37. Free income tax return FMV of total assets immediately before the cancellation. Free income tax return Add lines 16 through 36. Free income tax return $ 309,000 Part III. Free income tax return Insolvency 38. Free income tax return Amount of Insolvency. Free income tax return Subtract line 37 from line 15. Free income tax return If zero or less, you are not insolvent. Free income tax return $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. Free income tax return Please click the link to view the image. Free income tax return Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. Free income tax return    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. Free income tax return Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. Free income tax return Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. Free income tax return   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. Free income tax return The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. Free income tax return On December 26, 2013, the lender canceled the remaining debt. Free income tax return Kathy and Frank have no tax attributes other than basis of personal-use property. Free income tax return   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). Free income tax return Identifiable event code "D" appears in box 6. Free income tax return This box shows the reason the creditor has filed Form 1099-C. Free income tax return Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. Free income tax return Kathy and Frank are filing a joint return for 2013. Free income tax return   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. Free income tax return Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). Free income tax return Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. Free income tax return Because this loss relates to their home, it is a nondeductible loss. Free income tax return   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. Free income tax return Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. Free income tax return Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. Free income tax return The household furnishings originally cost $30,000. Free income tax return The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. Free income tax return Kathy and Frank had no adjustments to the cost basis of the car. Free income tax return Kathy and Frank had no other assets or liabilities at the time of the cancellation. Free income tax return Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). Free income tax return   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. Free income tax return Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). Free income tax return Kathy and Frank had no other assets or liabilities at that time. Free income tax return Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. Free income tax return   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. Free income tax return The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. Free income tax return The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. Free income tax return Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. Free income tax return Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). Free income tax return This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. Free income tax return   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. Free income tax return Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. Free income tax return Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. Free income tax return Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). Free income tax return   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. Free income tax return Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. Free income tax return Thus, Kathy and Frank leave line 10b of Form 982 blank. Free income tax return However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. Free income tax return As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. Free income tax return Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). Free income tax return Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. Free income tax return Kathy and Frank reduce the basis in the car by $14,956. Free income tax return 52 ($43,000 x $16,000/$46,000). Free income tax return And they reduce the basis in the household furnishings by $28,043. Free income tax return 48 ($43,000 x $30,000/$46,000). Free income tax return   Following are Kathy and Frank's sample forms and worksheets. Free income tax return Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Free income tax return Please click the link to view the image. Free income tax return Form 1099-C, Cancellation of Debt Table 1-1. Free income tax return Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. Free income tax return Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Free income tax return Otherwise, go to Part 2. Free income tax return 1. Free income tax return Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. Free income tax return 00 2. Free income tax return Enter the fair market value of the transferred property $1,750,000. Free income tax return 00 3. Free income tax return Ordinary income from the cancellation of debt upon foreclosure or repossession. Free income tax return * Subtract line 2 from line 1. Free income tax return If less than zero, enter zero. Free income tax return Next, go to Part 2 $0. Free income tax return 00 Part 2. Free income tax return Gain or loss from foreclosure or repossession. Free income tax return   4. Free income tax return Enter the smaller of line 1 or line 2. Free income tax return If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. Free income tax return $1,750,000. Free income tax return 00 5. Free income tax return Enter any proceeds you received from the foreclosure sale   6. Free income tax return Add line 4 and line 5 $1,750,000. Free income tax return 00 7. Free income tax return Enter the adjusted basis of the transferred property $3,000,000. Free income tax return 00 8. Free income tax return Gain or loss from foreclosure or repossession. Free income tax return Subtract line 7 from line 6 ($1,250,000. Free income tax return 00) * The income may not be taxable. Free income tax return See chapter 1 for more details. Free income tax return    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. Free income tax return Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Free income tax return Credit card debt $ 18,000 2. Free income tax return Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. Free income tax return Car and other vehicle loans $ 4. Free income tax return Medical bills owed $ 5. Free income tax return Student loans $ 6. Free income tax return Accrued or past-due mortgage interest $ 7. Free income tax return Accrued or past-due real estate taxes $ 8. Free income tax return Accrued or past-due utilities (water, gas, electric) $ 9. Free income tax return Accrued or past-due child care costs $ 10. Free income tax return Federal or state income taxes remaining due (for prior tax years) $ 11. Free income tax return Judgments $ 12. Free income tax return Business debts (including those owed as a sole proprietor or partner) $ 13. Free income tax return Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Free income tax return Other liabilities (debts) not included above $ 15. Free income tax return Total liabilities immediately before the cancellation. Free income tax return Add lines 1 through 14. Free income tax return $ 768,000 Part II. Free income tax return Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Free income tax return Cash and bank account balances $ 15,000 17. Free income tax return Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. Free income tax return Cars and other vehicles $ 10,000 19. Free income tax return Computers $ 20. Free income tax return Household goods and furnishings (for example, appliances, electronics, furniture, etc. Free income tax return ) $ 17,000 21. Free income tax return Tools $ 22. Free income tax return Jewelry $ 23. Free income tax return Clothing $ 24. Free income tax return Books $ 25. Free income tax return Stocks and bonds $ 26. Free income tax return Investments in coins, stamps, paintings, or other collectibles $ 27. Free income tax return Firearms, sports, photographic, and other hobby equipment $ 28. Free income tax return Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. Free income tax return Interest in a pension plan $ 30. Free income tax return Interest in education accounts $ 31. Free income tax return Cash value of life insurance $ 32. Free income tax return Security deposits with landlords, utilities, and others $ 33. Free income tax return Interests in partnerships $ 34. Free income tax return Value of investment in a business $ 35. Free income tax return Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Free income tax return Other assets not included above $ 37. Free income tax return FMV of total assets immediately before the cancellation. Free income tax return Add lines 16 through 36. Free income tax return $ 42,000 Part III. Free income tax return Insolvency 38. Free income tax return Amount of Insolvency. Free income tax return Subtract line 37 from line 15. Free income tax return If zero or less, you are not insolvent. Free income tax return $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. Free income tax return Please click the link to view the image. Free income tax return Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications
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The Free Income Tax Return

Free income tax return 4. Free income tax return   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. Free income tax return 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. Free income tax return 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. Free income tax return This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Free income tax return The student loan interest deduction is taken as an adjustment to income. Free income tax return This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). Free income tax return 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. Free income tax return Table 4-1. Free income tax return Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. Free income tax return Do not rely on this table alone. Free income tax return Refer to the text for complete details. Free income tax return Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. Free income tax return 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. Free income tax return Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. Free income tax return Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. Free income tax return 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). Free income tax return Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Free income tax return It includes both required and voluntary interest payments. Free income tax return 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. Free income tax return Loans from the following sources are not qualified student loans. Free income tax return A related person. Free income tax return A qualified employer plan. Free income tax return Your dependent. Free income tax return   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. Free income tax return You can find more information about dependents in Publication 501. Free income tax return Exceptions. Free income tax return   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. Free income tax return An individual can be your dependent even if you are the dependent of another taxpayer. Free income tax return An individual can be your dependent even if the individual files a joint return with a spouse. Free income tax return 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). Free income tax return Reasonable period of time. Free income tax return   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. Free income tax return   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. Free income tax return 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. Free income tax return   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. Free income tax return Academic period. Free income tax return   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. Free income tax return 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. Free income tax return Eligible student. Free income tax return   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Free income tax return Enrolled at least half-time. Free income tax return   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. Free income tax return   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Free income tax return However, the standard may not be lower than any of those established by the U. Free income tax return S. Free income tax return Department of Education under the Higher Education Act of 1965. Free income tax return Related person. Free income tax return   You cannot deduct interest on a loan you get from a related person. Free income tax return Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Free income tax return ), Your lineal descendants (children, grandchildren, etc. Free income tax return ), and Certain corporations, partnerships, trusts, and exempt organizations. Free income tax return Qualified employer plan. Free income tax return   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Free income tax return 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. Free income tax return They include amounts paid for the following items. Free income tax return Tuition and fees. Free income tax return Room and board. Free income tax return Books, supplies, and equipment. Free income tax return Other necessary expenses (such as transportation). Free income tax return 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. Free income tax return Eligible educational institution. Free income tax return   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. Free income tax return S. Free income tax return Department of Education. Free income tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free income tax return   Certain educational institutions located outside the United States also participate in the U. Free income tax return S. Free income tax return Department of Education's Federal Student Aid (FSA) programs. Free income tax return   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. Free income tax return   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Free income tax return The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Free income tax return    The educational institution should be able to tell you if it is an eligible educational institution. Free income tax return 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. Free income tax return Employer-provided educational assistance. Free income tax return See chapter 11, Employer-Provided Educational Assistance . Free income tax return Tax-free distribution of earnings from a Coverdell education savings account (ESA). Free income tax return See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. Free income tax return Tax-free distribution of earnings from a qualified tuition program (QTP). Free income tax return See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. Free income tax return U. Free income tax return S. Free income tax return savings bond interest that you exclude from income because it is used to pay qualified education expenses. Free income tax return See chapter 10, Education Savings Bond Program . Free income tax return The tax-free part of scholarships and fellowships. Free income tax return See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Free income tax return Veterans' educational assistance. Free income tax return See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Free income tax return Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free income tax return 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. Free income tax return Loan origination fee. Free income tax return   In general, this is a one-time fee charged by the lender when a loan is made. Free income tax return 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. Free income tax return A loan origination fee treated as interest accrues over the term of the loan. Free income tax return   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. Free income tax return 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. Free income tax return 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. Free income tax return A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. Free income tax return Example. Free income tax return In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. Free income tax return The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. Free income tax return Bill began making payments on his student loan in 2013. Free income tax return 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. Free income tax return Bill's loan is payable in 120 equal monthly payments. Free income tax return He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). Free income tax return Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. Free income tax return 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. Free income tax return Capitalized interest. Free income tax return   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Free income tax return Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. Free income tax return No deduction for capitalized interest is allowed in a year in which no loan payments were made. Free income tax return Interest on revolving lines of credit. Free income tax return   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. Free income tax return See Qualified Education Expenses , earlier. Free income tax return Interest on refinanced student loans. Free income tax return   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. Free income tax return    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. Free income tax return Voluntary interest payments. Free income tax return   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. Free income tax return Example. Free income tax return The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. Free income tax return He began making payments as required. Free income tax return In September 2013, Roger enrolled in graduate school on a full-time basis. Free income tax return He applied for and was granted deferment of his loan payments while in graduate school. Free income tax return Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. Free income tax return Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. Free income tax return 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. Free income tax return 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. Free income tax return Example. Free income tax return In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. Free income tax return The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. Free income tax return The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. Free income tax return 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. Free income tax return The loan is payable over 60 months, with a payment of $200. Free income tax return 51 due on the first of each month, beginning November 2013. Free income tax return 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. Free income tax return 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). Free income tax return Payment Date   Payment   Stated Interest   Principal November 2013   $200. Free income tax return 51   $44. Free income tax return 27   $156. Free income tax return 24 December 2013   $200. Free income tax return 51   $43. Free income tax return 62   $156. Free income tax return 89 Totals   $401. Free income tax return 02   $87. Free income tax return 89   $313. Free income tax return 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. Free income tax return 89. Free income tax return Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). Free income tax return A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. Free income tax return 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. Free income tax return Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. Free income tax return 02 ($87. Free income tax return 89 + $10 + $303. Free income tax return 13). Free income tax return 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. Free income tax return She also will apply the remaining amount of capitalized interest ($625 − $303. Free income tax return 13 = $321. Free income tax return 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. Free income tax return Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. Free income tax return Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Free income tax return Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Free income tax return 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. Free income tax return For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. Free income tax return 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. Free income tax return Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Free income tax return Your filing status is any filing status except married filing separately. Free income tax return No one else is claiming an exemption for you on his or her tax return. Free income tax return You are legally obligated to pay interest on a qualified student loan. Free income tax return You paid interest on a qualified student loan. Free income tax return Claiming an exemption for you. Free income tax return   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. Free income tax return Example 1. Free income tax return During 2013, Josh paid $600 interest on his qualified student loan. Free income tax return Only he is legally obligated to make the payments. Free income tax return No one claimed an exemption for Josh for 2013. Free income tax return Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. Free income tax return Example 2. Free income tax return During 2013, Jo paid $1,100 interest on her qualified student loan. Free income tax return Only she is legally obligated to make the payments. Free income tax return Jo's parents claimed an exemption for her on their 2013 tax return. Free income tax return In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. Free income tax return Interest paid by others. Free income tax return   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. Free income tax return Example 1. Free income tax return Darla obtained a qualified student loan to attend college. Free income tax return After Darla's graduation from college, she worked as an intern for a nonprofit organization. Free income tax return As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. Free income tax return This payment was treated as additional compensation and reported in box 1 of her Form W-2. Free income tax return Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. Free income tax return Example 2. Free income tax return Ethan obtained a qualified student loan to attend college. Free income tax return After graduating from college, the first monthly payment on his loan was due in December. Free income tax return As a gift, Ethan's mother made this payment for him. Free income tax return No one is claiming a dependency exemption for Ethan on his or her tax return. Free income tax return Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. Free income tax return 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). Free income tax return Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Free income tax return However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. Free income tax return You can use Worksheet 4-1. Free income tax return Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. Free income tax return Form 1098-E. Free income tax return   To help you figure your student loan interest deduction, you should receive Form 1098-E. Free income tax return 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. Free income tax return   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. Free income tax return Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Free income tax return However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Free income tax return See Allocating Payments Between Interest and Principal , earlier. Free income tax return    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. Free income tax return The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. Free income tax return 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). Free income tax return 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). Free income tax return Modified adjusted gross income (MAGI). Free income tax return   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. Free income tax return However, as discussed below, there may be other modifications. Free income tax return Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. Free income tax return Table 4-2. Free income tax return Effect of MAGI on Student Loan Interest Deduction IF your filing status is. Free income tax return . Free income tax return . Free income tax return AND your MAGI is. Free income tax return . Free income tax return . Free income tax return THEN your student loan interest deduction is. Free income tax return . Free income tax return . Free income tax return single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. Free income tax return more than $60,000  but less than $75,000 reduced because of the phaseout. Free income tax return $75,000 or more eliminated by the phaseout. Free income tax return married filing joint return not more than $125,000 not affected by the phaseout. Free income tax return more than $125,000 but less than $155,000 reduced because of the phaseout. Free income tax return $155,000 or more eliminated by the phaseout. Free income tax return MAGI when using Form 1040A. Free income tax return   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). Free income tax return MAGI when using Form 1040. Free income tax return   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. Free income tax return MAGI when using Form 1040NR. Free income tax return   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). Free income tax return MAGI when using Form 1040NR-EZ. Free income tax return   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). Free income tax return Phaseout. Free income tax return   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. Free income tax return To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. Free income tax return The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). Free income tax return The denominator is $15,000 ($30,000 in the case of a joint return). Free income tax return Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. Free income tax return Example 1. Free income tax return During 2013 you paid $800 interest on a qualified student loan. Free income tax return Your 2013 MAGI is $145,000 and you are filing a joint return. Free income tax return You must reduce your deduction by $533, figured as follows. Free income tax return   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). Free income tax return Example 2. Free income tax return The facts are the same as in Example 1 except that you paid $2,750 interest. Free income tax return Your maximum deduction for 2013 is $2,500. Free income tax return You must reduce your maximum deduction by $1,667, figured as follows. Free income tax return   $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). Free income tax return 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. Free income tax return 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. Free income tax return Student Loan Interest Deduction Worksheet at the end of this chapter. Free income tax return Claiming the Deduction The student loan interest deduction is an adjustment to income. Free income tax return 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). Free income tax return Worksheet 4-1. Free income tax return 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. Free income tax return 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. Free income tax return 1. Free income tax return Enter the total interest you paid in 2013 on qualified student loans. Free income tax return Do not enter  more than $2,500 1. Free income tax return   2. Free income tax return Enter the amount from Form 1040, line 22 2. Free income tax return       3. Free income tax return Enter the total of the amounts from Form 1040,  lines 23 through 32 3. Free income tax return           4. Free income tax return Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. Free income tax return           5. Free income tax return Add lines 3 and 4 5. Free income tax return       6. Free income tax return Subtract line 5 from line 2 6. Free income tax return       7. Free income tax return Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. Free income tax return       8. Free income tax return Enter any foreign housing deduction (Form 2555, line 50) 8. Free income tax return       9. Free income tax return Enter the amount of income from Puerto Rico you are excluding 9. Free income tax return       10. Free income tax return Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. Free income tax return       11. Free income tax return Add lines 6 through 10. Free income tax return This is your modified adjusted gross income 11. Free income tax return   12. Free income tax return Enter the amount shown below for your filing status 12. Free income tax return     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. Free income tax return Is the amount on line 11 more than the amount on line 12?       □ No. Free income tax return Skip lines 13 and 14, enter -0- on line 15, and go to line 16. Free income tax return       □ Yes. Free income tax return Subtract line 12 from line 11 13. Free income tax return   14. Free income tax return Divide line 13 by $15,000 ($30,000 if married filing jointly). Free income tax return Enter the result as a decimal  (rounded to at least three places). Free income tax return If the result is 1. Free income tax return 000 or more, enter 1. Free income tax return 000 14. Free income tax return . Free income tax return 15. Free income tax return Multiply line 1 by line 14 15. Free income tax return   16. Free income tax return Student loan interest deduction. Free income tax return Subtract line 15 from line 1. Free income tax return Enter the result here  and on Form 1040, line 33. Free income tax return Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. Free income tax return ) 16. Free income tax return   Prev  Up  Next   Home   More Online Publications