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H&r Block Onlinetaxes Hrblock Com

H&r block onlinetaxes hrblock com 6. H&r block onlinetaxes hrblock com   How To Report Table of Contents Where To ReportGifts. H&r block onlinetaxes hrblock com Statutory employees. H&r block onlinetaxes hrblock com Vehicle Provided by Your Employer ReimbursementsAccountable Plans Nonaccountable Plans Rules for Independent Contractors and Clients How To Use Per Diem Rate TablesThe Two Substantiation Methods Transition Rules Completing Forms 2106 and 2106-EZInformation on use of cars. H&r block onlinetaxes hrblock com Standard mileage rate. H&r block onlinetaxes hrblock com Actual expenses. H&r block onlinetaxes hrblock com Car rentals. H&r block onlinetaxes hrblock com Hours of service limits. H&r block onlinetaxes hrblock com Allocating your reimbursement. H&r block onlinetaxes hrblock com 1. H&r block onlinetaxes hrblock com Limit on meals and entertainment. H&r block onlinetaxes hrblock com 2. H&r block onlinetaxes hrblock com Limit on miscellaneous itemized deductions. H&r block onlinetaxes hrblock com 3. H&r block onlinetaxes hrblock com Limit on total itemized deductions. H&r block onlinetaxes hrblock com Special Rules This chapter explains where and how to report the expenses discussed in this publication. H&r block onlinetaxes hrblock com It discusses reimbursements and how to treat them under accountable and nonaccountable plans. H&r block onlinetaxes hrblock com It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. H&r block onlinetaxes hrblock com The chapter ends with illustrations of how to report travel, entertainment, gift, and car expenses on Forms 2106 and 2106-EZ. H&r block onlinetaxes hrblock com Where To Report This section provides general information on where to report the expenses discussed in this publication. H&r block onlinetaxes hrblock com Self-employed. H&r block onlinetaxes hrblock com   You must report your income and expenses on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. H&r block onlinetaxes hrblock com You do not use Form 2106 or 2106-EZ. H&r block onlinetaxes hrblock com    If you claim car or truck expenses, you must provide certain information on the use of your vehicle. H&r block onlinetaxes hrblock com You provide this information on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Form 4562. H&r block onlinetaxes hrblock com   If you file Schedule C (Form 1040): Report your travel expenses, except meals, on line 24a, Report your deductible meals (actual cost or standard meal allowance) and entertainment on line 24b, Report your gift expenses and transportation expenses, other than car expenses, on line 27a, and Report your car expenses on line 9. H&r block onlinetaxes hrblock com Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization. H&r block onlinetaxes hrblock com   If you file Schedule C-EZ (Form 1040), report the total of all business expenses on line 2. H&r block onlinetaxes hrblock com You can only include 50% of your meals and entertainment in that total. H&r block onlinetaxes hrblock com If you include car expenses, you must also complete Part III of the form. H&r block onlinetaxes hrblock com    If you file Schedule F (Form 1040): Report your car expenses on line 10. H&r block onlinetaxes hrblock com Attach Form 4562 and provide information on the use of your car in Part V of Form 4562. H&r block onlinetaxes hrblock com Report all other business expenses discussed in this publication on line 32. H&r block onlinetaxes hrblock com You can only include 50% of your meals and entertainment on that line. H&r block onlinetaxes hrblock com See your form instructions for more information on how to complete your tax return. H&r block onlinetaxes hrblock com Both self-employed and an employee. H&r block onlinetaxes hrblock com   If you are both self-employed and an employee, you must keep separate records for each business activity. H&r block onlinetaxes hrblock com Report your business expenses for self-employment on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040), as discussed earlier. H&r block onlinetaxes hrblock com Report your business expenses for your work as an employee on Form 2106 or 2106-EZ, as discussed next. H&r block onlinetaxes hrblock com Employees. H&r block onlinetaxes hrblock com    If you are an employee, you generally must complete Form 2106 to deduct your travel, transportation, and entertainment expenses. H&r block onlinetaxes hrblock com However, you can use the shorter Form 2106-EZ instead of Form 2106 if you meet all of the following conditions. H&r block onlinetaxes hrblock com You are an employee deducting expenses attributable to your job. H&r block onlinetaxes hrblock com You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). H&r block onlinetaxes hrblock com If you claim car expenses, you use the standard mileage rate. H&r block onlinetaxes hrblock com   For more information on how to report your expenses on Forms 2106 and 2106-EZ, see Completing Forms 2106 and 2106-EZ , later. H&r block onlinetaxes hrblock com Gifts. H&r block onlinetaxes hrblock com   If you did not receive any reimbursements (or the reimbursements were all included in box 1 of your Form W-2), the only business expense you are claiming is for gifts, and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. H&r block onlinetaxes hrblock com Instead, claim the amount of your deductible gifts directly on line 21 of Schedule A (Form 1040). H&r block onlinetaxes hrblock com Statutory employees. H&r block onlinetaxes hrblock com    If you received a Form W-2 and the “Statutory employee” box in box 13 was checked, report your income and expenses related to that income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040). H&r block onlinetaxes hrblock com Do not complete Form 2106 or 2106-EZ. H&r block onlinetaxes hrblock com   Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers. H&r block onlinetaxes hrblock com If you are entitled to a reimbursement from your employer but you do not claim it, you cannot claim a deduction for the expenses to which that unclaimed reimbursement applies. H&r block onlinetaxes hrblock com Reimbursement for personal expenses. H&r block onlinetaxes hrblock com    If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report the reimbursement as wage income in box 1 of your Form W-2. H&r block onlinetaxes hrblock com You cannot deduct personal expenses. H&r block onlinetaxes hrblock com Income-producing property. H&r block onlinetaxes hrblock com   If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity. H&r block onlinetaxes hrblock com   For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. H&r block onlinetaxes hrblock com See Publication 527, Residential Rental Property, for more information on the rental of real estate. H&r block onlinetaxes hrblock com If you have deductible investment-related transportation expenses, report them on Schedule A (Form 1040), line 23. H&r block onlinetaxes hrblock com Vehicle Provided by Your Employer If your employer provides you with a car, you may be able to deduct the actual expenses of operating that car for business purposes. H&r block onlinetaxes hrblock com The amount you can deduct depends on the amount that your employer included in your income and the business and personal miles you drove during the year. H&r block onlinetaxes hrblock com You cannot use the standard mileage rate. H&r block onlinetaxes hrblock com Value reported on Form W-2. H&r block onlinetaxes hrblock com   Your employer can figure and report either the actual value of your personal use of the car or the value of the car as if you used it only for personal purposes (100% income inclusion). H&r block onlinetaxes hrblock com Your employer must separately state the amount if 100% of the annual lease value was included in your income. H&r block onlinetaxes hrblock com If you are unsure of the amount included on your Form W-2, ask your employer. H&r block onlinetaxes hrblock com Full value included in your income. H&r block onlinetaxes hrblock com   You can deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of the car in your income. H&r block onlinetaxes hrblock com On your 2013 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation, and box 14. H&r block onlinetaxes hrblock com    To claim your expenses, complete Form 2106, Part II, Sections A and C. H&r block onlinetaxes hrblock com Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. H&r block onlinetaxes hrblock com Complete the rest of the form. H&r block onlinetaxes hrblock com Less than full value included in your income. H&r block onlinetaxes hrblock com   If less than the full annual lease value of the car was included on your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. H&r block onlinetaxes hrblock com Do not enter this value on your Form 2106 because it is not deductible. H&r block onlinetaxes hrblock com   If you paid any actual costs (that your employer did not provide or reimburse you for) to operate the car, you can deduct the business portion of those costs. H&r block onlinetaxes hrblock com Examples of costs that you may have are gas, oil, and repairs. H&r block onlinetaxes hrblock com Complete Form 2106, Part II, Sections A and C. H&r block onlinetaxes hrblock com Enter your actual costs on line 23 of Section C and leave line 25 blank. H&r block onlinetaxes hrblock com Complete the rest of the form. H&r block onlinetaxes hrblock com Reimbursements This section explains what to do when you receive an advance or are reimbursed for any of the employee business expenses discussed in this publication. H&r block onlinetaxes hrblock com If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. H&r block onlinetaxes hrblock com This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses. H&r block onlinetaxes hrblock com It also covers rules for independent contractors. H&r block onlinetaxes hrblock com No reimbursement. H&r block onlinetaxes hrblock com   You are not reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. H&r block onlinetaxes hrblock com In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. H&r block onlinetaxes hrblock com Instead, see Completing Forms 2106 and 2106-EZ , later, for information on completing your tax return. H&r block onlinetaxes hrblock com Reimbursement, allowance, or advance. H&r block onlinetaxes hrblock com   A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. H&r block onlinetaxes hrblock com Arrangements include per diem and car allowances. H&r block onlinetaxes hrblock com    A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging, meals, and incidental expenses when you are away from home on business. H&r block onlinetaxes hrblock com (The term “ incidental expenses ” is defined in chapter 1 under Standard Meal Allowance. H&r block onlinetaxes hrblock com ) A car allowance is an amount your employer gives you for the business use of your car. H&r block onlinetaxes hrblock com   Your employer should tell you what method of reimbursement is used and what records you must provide. H&r block onlinetaxes hrblock com Employers. H&r block onlinetaxes hrblock com   If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. H&r block onlinetaxes hrblock com Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. H&r block onlinetaxes hrblock com Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. H&r block onlinetaxes hrblock com See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay. H&r block onlinetaxes hrblock com Accountable Plans To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules: Your expenses must have a business connection — that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. H&r block onlinetaxes hrblock com You must adequately account to your employer for these expenses within a reasonable period of time. H&r block onlinetaxes hrblock com You must return any excess reimbursement or allowance within a reasonable period of time. H&r block onlinetaxes hrblock com “ Adequate accounting ” and “ returning excess reimbursements ” are discussed later. H&r block onlinetaxes hrblock com An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. H&r block onlinetaxes hrblock com Reasonable period of time. H&r block onlinetaxes hrblock com   The definition of reasonable period of time depends on the facts and circumstances of your situation. H&r block onlinetaxes hrblock com However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. H&r block onlinetaxes hrblock com You receive an advance within 30 days of the time you have an expense. H&r block onlinetaxes hrblock com You adequately account for your expenses within 60 days after they were paid or incurred. H&r block onlinetaxes hrblock com You return any excess reimbursement within 120 days after the expense was paid or incurred. H&r block onlinetaxes hrblock com You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. H&r block onlinetaxes hrblock com Employee meets accountable plan rules. H&r block onlinetaxes hrblock com   If you meet the three rules for accountable plans, your employer should not include any reimbursements in your income in box 1 of your Form W-2. H&r block onlinetaxes hrblock com If your expenses equal your reimbursements, you do not complete Form 2106. H&r block onlinetaxes hrblock com You have no deduction since your expenses and reimbursement are equal. H&r block onlinetaxes hrblock com    If your employer included reimbursements in box 1 of your Form W-2 and you meet all the rules for accountable plans, ask your employer for a corrected Form W-2. H&r block onlinetaxes hrblock com Accountable plan rules not met. H&r block onlinetaxes hrblock com   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. H&r block onlinetaxes hrblock com All reimbursements that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan (discussed later). H&r block onlinetaxes hrblock com Failure to return excess reimbursements. H&r block onlinetaxes hrblock com   If you are reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of the substantiated amounts, the amounts paid in excess of the substantiated expenses are treated as paid under a nonaccountable plan. H&r block onlinetaxes hrblock com See Reasonable period of time , earlier, and Returning Excess Reimbursements , later. H&r block onlinetaxes hrblock com Reimbursement of nondeductible expenses. H&r block onlinetaxes hrblock com   You may be reimbursed under your employer's accountable plan for expenses related to that employer's business, some of which are deductible as employee business expenses and some of which are not deductible. H&r block onlinetaxes hrblock com The reimbursements you receive for the nondeductible expenses do not meet rule (1) for accountable plans, and they are treated as paid under a nonaccountable plan. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com Your employer's plan reimburses you for travel expenses while away from home on business and also for meals when you work late at the office, even though you are not away from home. H&r block onlinetaxes hrblock com The part of the arrangement that reimburses you for the nondeductible meals when you work late at the office is treated as paid under a nonaccountable plan. H&r block onlinetaxes hrblock com The employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan. H&r block onlinetaxes hrblock com If you are an employee who receives payments under a nonaccountable plan, you cannot convert these amounts to payments under an accountable plan by voluntarily accounting to your employer for the expenses and voluntarily returning excess reimbursements to the employer. H&r block onlinetaxes hrblock com Adequate Accounting One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. H&r block onlinetaxes hrblock com You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. H&r block onlinetaxes hrblock com (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses. H&r block onlinetaxes hrblock com ) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. H&r block onlinetaxes hrblock com See Per Diem and Car Allowances , later. H&r block onlinetaxes hrblock com You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. H&r block onlinetaxes hrblock com This includes amounts you charged to your employer by credit card or other method. H&r block onlinetaxes hrblock com You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. H&r block onlinetaxes hrblock com You must pay back the amount of any reimbursement or other expense allowance for which you do not adequately account or that is more than the amount for which you accounted. H&r block onlinetaxes hrblock com Per Diem and Car Allowances If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. H&r block onlinetaxes hrblock com A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply. H&r block onlinetaxes hrblock com Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business. H&r block onlinetaxes hrblock com The allowance is similar in form to and not more than the federal rate (defined later). H&r block onlinetaxes hrblock com You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1 ) within a reasonable period of time. H&r block onlinetaxes hrblock com You are not related to your employer (as defined next). H&r block onlinetaxes hrblock com If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement. H&r block onlinetaxes hrblock com If the IRS finds that an employer's travel allowance practices are not based on reasonably accurate estimates of travel costs (including recognition of cost differences in different areas for per diem amounts), you will not be considered to have accounted to your employer. H&r block onlinetaxes hrblock com In this case, you must be able to prove your expenses to the IRS. H&r block onlinetaxes hrblock com Related to employer. H&r block onlinetaxes hrblock com   You are related to your employer if: Your employer is your brother or sister, half brother or half sister, spouse, ancestor, or lineal descendant, Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock, or Certain relationships (such as grantor, fiduciary, or beneficiary) exist between you, a trust, and your employer. H&r block onlinetaxes hrblock com You may be considered to indirectly own stock, for purposes of (2), if you have an interest in a corporation, partnership, estate, or trust that owns the stock or if a member of your family or your partner owns the stock. H&r block onlinetaxes hrblock com The federal rate. H&r block onlinetaxes hrblock com   The federal rate can be figured using any one of the following methods. H&r block onlinetaxes hrblock com For per diem amounts: The regular federal per diem rate. H&r block onlinetaxes hrblock com The standard meal allowance. H&r block onlinetaxes hrblock com The high-low rate. H&r block onlinetaxes hrblock com For car expenses: The standard mileage rate. H&r block onlinetaxes hrblock com A fixed and variable rate (FAVR). H&r block onlinetaxes hrblock com    For per diem amounts, use the rate in effect for the area where you stop for sleep or rest. H&r block onlinetaxes hrblock com Regular federal per diem rate. H&r block onlinetaxes hrblock com   The regular federal per diem rate is the highest amount that the federal government will pay to its employees for lodging, meals, and incidental expenses (or meals and incidental expenses only) while they are traveling away from home in a particular area. H&r block onlinetaxes hrblock com The rates are different for different locations. H&r block onlinetaxes hrblock com Your employer should have these rates available. H&r block onlinetaxes hrblock com You can also find federal per diem rates at www. H&r block onlinetaxes hrblock com gsa. H&r block onlinetaxes hrblock com gov/perdiem. H&r block onlinetaxes hrblock com The standard meal allowance. H&r block onlinetaxes hrblock com   The standard meal allowance (discussed in chapter 1) is the federal rate for meals and incidental expenses (M&IE). H&r block onlinetaxes hrblock com The rate for most small localities in the United States is $46 a day. H&r block onlinetaxes hrblock com Most major cities and many other localities qualify for higher rates. H&r block onlinetaxes hrblock com You can find this information on the Internet at www. H&r block onlinetaxes hrblock com gsa. H&r block onlinetaxes hrblock com gov/perdiem. H&r block onlinetaxes hrblock com   You receive an allowance only for meals and incidental expenses when your employer does one of the following. H&r block onlinetaxes hrblock com Provides you with lodging (furnishes it in kind). H&r block onlinetaxes hrblock com Reimburses you, based on your receipts, for the actual cost of your lodging. H&r block onlinetaxes hrblock com Pays the hotel, motel, etc. H&r block onlinetaxes hrblock com , directly for your lodging. H&r block onlinetaxes hrblock com Does not have a reasonable belief that you had (or will have) lodging expenses, such as when you stay with friends or relatives or sleep in the cab of your truck. H&r block onlinetaxes hrblock com Figures the allowance on a basis similar to that used in computing your compensation, such as number of hours worked or miles traveled. H&r block onlinetaxes hrblock com High-low rate. H&r block onlinetaxes hrblock com   This is a simplified method of computing the federal per diem rate for travel within the continental United States. H&r block onlinetaxes hrblock com It eliminates the need to keep a current list of the per diem rates for each city. H&r block onlinetaxes hrblock com   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 (including $65 for M&IE) for certain high-cost locations. H&r block onlinetaxes hrblock com All other areas have a per diem amount of $163 (including $52 for M&IE). H&r block onlinetaxes hrblock com For more information, see Notice 2012-63, which can be found on the Internet at www. H&r block onlinetaxes hrblock com irs. H&r block onlinetaxes hrblock com gov/irb/2012-42_IRB/ar12. H&r block onlinetaxes hrblock com html. H&r block onlinetaxes hrblock com    Effective October 1, 2013, the per diem rate for certain high-cost locations increased to $251 (including $65 for M&IE). H&r block onlinetaxes hrblock com The rate for all other locations increased to $170 (including $52 for M&IE). H&r block onlinetaxes hrblock com Employers who did not use the high-low method during the first 9 months of 2013 cannot begin to use it before 2014. H&r block onlinetaxes hrblock com For more information, see Notice 2013-65, which can be found on the Internet at www. H&r block onlinetaxes hrblock com irs. H&r block onlinetaxes hrblock com gov/pub/irs-drop/n-13–65. H&r block onlinetaxes hrblock com pdf and Revenue Procedure 2011-47 at www. H&r block onlinetaxes hrblock com irs. H&r block onlinetaxes hrblock com gov/irb/2011-42_IRB/ar12. H&r block onlinetaxes hrblock com html. H&r block onlinetaxes hrblock com Prorating the standard meal allowance on partial days of travel. H&r block onlinetaxes hrblock com   The standard meal allowance is for a full 24-hour day of travel. H&r block onlinetaxes hrblock com If you travel for part of a day, such as on the days you depart and return, you must prorate the full-day M&IE rate. H&r block onlinetaxes hrblock com This rule also applies if your employer uses the regular federal per diem rate or the high-low rate. H&r block onlinetaxes hrblock com   You can use either of the following methods to figure the federal M&IE for that day. H&r block onlinetaxes hrblock com Method 1: For the day you depart, add 3/4 of the standard meal allowance amount for that day. H&r block onlinetaxes hrblock com For the day you return, add 3/4 of the standard meal allowance amount for the preceding day. H&r block onlinetaxes hrblock com Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. H&r block onlinetaxes hrblock com For example, an employer can treat 2 full days of per diem (that includes M&IE) paid for travel away from home from 9 a. H&r block onlinetaxes hrblock com m. H&r block onlinetaxes hrblock com of one day to 5 p. H&r block onlinetaxes hrblock com m. H&r block onlinetaxes hrblock com of the next day as being no more than the federal rate. H&r block onlinetaxes hrblock com This is true even though a federal employee would be limited to a reimbursement of M&IE for only 1½ days of the federal M&IE rate. H&r block onlinetaxes hrblock com The standard mileage rate. H&r block onlinetaxes hrblock com   This is a set rate per mile that you can use to compute your deductible car expenses. H&r block onlinetaxes hrblock com For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. H&r block onlinetaxes hrblock com Fixed and variable rate (FAVR). H&r block onlinetaxes hrblock com   This is an allowance your employer may use to reimburse your car expenses. H&r block onlinetaxes hrblock com Under this method, your employer pays an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your variable operating costs (such as gas, oil, etc. H&r block onlinetaxes hrblock com ) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc. H&r block onlinetaxes hrblock com ). H&r block onlinetaxes hrblock com If your employer chooses to use this method, your employer will request the necessary records from you. H&r block onlinetaxes hrblock com Reporting your expenses with a per diem or car allowance. H&r block onlinetaxes hrblock com   If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting. H&r block onlinetaxes hrblock com The federal rate. H&r block onlinetaxes hrblock com Whether the allowance or your actual expenses were more than the federal rate. H&r block onlinetaxes hrblock com The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate. H&r block onlinetaxes hrblock com Allowance less than or equal to the federal rate. H&r block onlinetaxes hrblock com   If your allowance is less than or equal to the federal rate, the allowance will not be included in box 1 of your Form W-2. H&r block onlinetaxes hrblock com You do not need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance. H&r block onlinetaxes hrblock com   However, if your actual expenses are more than your allowance, you can complete Form 2106 and deduct the excess amount on Schedule A (Form 1040). H&r block onlinetaxes hrblock com If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. H&r block onlinetaxes hrblock com If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount. H&r block onlinetaxes hrblock com Example 1. H&r block onlinetaxes hrblock com In April, Jeremy takes a 2-day business trip to Denver. H&r block onlinetaxes hrblock com The federal rate for Denver is $215 per day. H&r block onlinetaxes hrblock com As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. H&r block onlinetaxes hrblock com His employer reimburses him $215 a day ($430 total) for living expenses. H&r block onlinetaxes hrblock com Jeremy's living expenses in Denver are not more than $215 a day. H&r block onlinetaxes hrblock com Jeremy's employer does not include any of the reimbursement on his Form W-2 and Jeremy does not deduct the expenses on his return. H&r block onlinetaxes hrblock com Example 2. H&r block onlinetaxes hrblock com In June, Matt takes a 2-day business trip to Boston. H&r block onlinetaxes hrblock com Matt's employer uses the high-low method to reimburse employees. H&r block onlinetaxes hrblock com Since Boston is a high-cost area, Matt is given an advance of $242 a day ($484 total) for his lodging, meals, and incidental expenses. H&r block onlinetaxes hrblock com Matt's actual expenses totaled $700. H&r block onlinetaxes hrblock com Since Matt's $700 of expenses are more than his $484 advance, he includes the excess expenses when he itemizes his deductions. H&r block onlinetaxes hrblock com Matt completes Form 2106 (showing all of his expenses and reimbursements). H&r block onlinetaxes hrblock com He must also allocate his reimbursement between his meals and other expenses as discussed later under Completing Forms 2106 and 2106-EZ . H&r block onlinetaxes hrblock com Example 3. H&r block onlinetaxes hrblock com Nicole drives 10,000 miles in 2013 for business. H&r block onlinetaxes hrblock com Under her employer's accountable plan, she accounts for the time (dates), place, and business purpose of each trip. H&r block onlinetaxes hrblock com Her employer pays her a mileage allowance of 40 cents a mile. H&r block onlinetaxes hrblock com Since Nicole's $5,650 expense computed under the standard mileage rate (10,000 miles x 56½ cents) is more than her $4,000 reimbursement (10,000 miles × 40 cents), she itemizes her deductions to claim the excess expense. H&r block onlinetaxes hrblock com Nicole completes Form 2106 (showing all her expenses and reimbursements) and enters $1,650 ($5,650 − $4,000) as an itemized deduction. H&r block onlinetaxes hrblock com Allowance more than the federal rate. H&r block onlinetaxes hrblock com   If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate in box 12 of your Form W-2. H&r block onlinetaxes hrblock com This amount is not taxable. H&r block onlinetaxes hrblock com However, the excess allowance will be included in box 1 of your Form W-2. H&r block onlinetaxes hrblock com You must report this part of your allowance as if it were wage income. H&r block onlinetaxes hrblock com   If your actual expenses are less than or equal to the federal rate, you do not complete Form 2106 or claim any of your expenses on your return. H&r block onlinetaxes hrblock com   However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. H&r block onlinetaxes hrblock com You must report on Form 2106 your reimbursements up to the federal rate (as shown in box 12 of your Form W-2) and all your expenses. H&r block onlinetaxes hrblock com You should be able to prove these amounts to the IRS. H&r block onlinetaxes hrblock com Example 1. H&r block onlinetaxes hrblock com Laura lives and works in Austin. H&r block onlinetaxes hrblock com In July her employer sent her to Albuquerque for 4 days on business. H&r block onlinetaxes hrblock com Laura's employer paid the hotel directly for her lodging and reimbursed Laura $65 a day ($260 total) for meals and incidental expenses. H&r block onlinetaxes hrblock com Laura's actual meal expenses were not more than the federal rate for Albuquerque, which is $56 per day. H&r block onlinetaxes hrblock com Table 6-1. H&r block onlinetaxes hrblock com Reporting Travel, Entertainment, Gift, and Car Expenses and Reimbursements IF the type of reimbursement (or  other expense allowance)  arrangement is under: THEN the employer reports on Form W-2: AND the employee reports on  Form 2106: * An accountable plan with: Actual expense reimbursement: Adequate accounting made and excess returned. H&r block onlinetaxes hrblock com No amount. H&r block onlinetaxes hrblock com No amount. H&r block onlinetaxes hrblock com Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned. H&r block onlinetaxes hrblock com The excess amount as wages in box 1. H&r block onlinetaxes hrblock com No amount. H&r block onlinetaxes hrblock com Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned. H&r block onlinetaxes hrblock com No amount. H&r block onlinetaxes hrblock com All expenses and reimbursements only if excess expenses are claimed. H&r block onlinetaxes hrblock com Otherwise, form is not filed. H&r block onlinetaxes hrblock com Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned. H&r block onlinetaxes hrblock com The excess amount as wages in box 1. H&r block onlinetaxes hrblock com The amount up to the federal rate is reported only in box 12—it is not reported in box 1. H&r block onlinetaxes hrblock com No amount. H&r block onlinetaxes hrblock com Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. H&r block onlinetaxes hrblock com The excess amount as wages in box 1. H&r block onlinetaxes hrblock com The amount up to the federal rate is reported only in box 12—it is not reported in box 1. H&r block onlinetaxes hrblock com All expenses (and reimbursements reported on Form W-2, box 12) only if expenses in excess of the federal rate are claimed. H&r block onlinetaxes hrblock com Otherwise, form is not filed. H&r block onlinetaxes hrblock com A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan. H&r block onlinetaxes hrblock com The entire amount as wages in box 1. H&r block onlinetaxes hrblock com All expenses. H&r block onlinetaxes hrblock com No reimbursement plan: The entire amount as wages in box 1. H&r block onlinetaxes hrblock com All expenses. H&r block onlinetaxes hrblock com * You may be able to use Form 2106-EZ. H&r block onlinetaxes hrblock com See Completing Forms 2106 and 2106-EZ . H&r block onlinetaxes hrblock com Her employer included the $36 that was more than the federal rate (($65 − $56) × 4) in box 1 of Laura's Form W-2. H&r block onlinetaxes hrblock com Her employer shows $224 ($56 a day × 4) in box 12 of her Form W-2. H&r block onlinetaxes hrblock com This amount is not included in Laura's income. H&r block onlinetaxes hrblock com Laura does not have to complete Form 2106; however, she must include the $36 in her gross income as wages (by reporting the total amount shown in box 1 of her Form W-2). H&r block onlinetaxes hrblock com Example 2. H&r block onlinetaxes hrblock com Joe also lives in Austin and works for the same employer as Laura. H&r block onlinetaxes hrblock com In May the employer sent Joe to San Diego for 4 days and paid the hotel directly for Joe's hotel bill. H&r block onlinetaxes hrblock com The employer reimbursed Joe $75 a day for his meals and incidental expenses. H&r block onlinetaxes hrblock com The federal rate for San Diego is $71 a day. H&r block onlinetaxes hrblock com Joe can prove that his actual meal expenses totaled $380. H&r block onlinetaxes hrblock com His employer's accountable plan will not pay more than $75 a day for travel to San Diego, so Joe does not give his employer the records that prove that he actually spent $380. H&r block onlinetaxes hrblock com However, he does account for the time, place, and business purpose of the trip. H&r block onlinetaxes hrblock com This is Joe's only business trip this year. H&r block onlinetaxes hrblock com Joe was reimbursed $300 ($75 × 4 days), which is $16 more than the federal rate of $284 ($71 × 4 days). H&r block onlinetaxes hrblock com The employer includes the $16 as income on Joe's Form W-2 in box 1. H&r block onlinetaxes hrblock com The employer also enters $284 in box 12 of Joe's Form W-2. H&r block onlinetaxes hrblock com Joe completes Form 2106 to figure his deductible expenses. H&r block onlinetaxes hrblock com He enters the total of his actual expenses for the year ($380) on Form 2106. H&r block onlinetaxes hrblock com He also enters the reimbursements that were not included in his income ($284). H&r block onlinetaxes hrblock com His total deductible expense, before the 50% limit, is $96. H&r block onlinetaxes hrblock com After he figures the 50% limit on his unreimbursed meals and entertainment, he will include the balance, $48, as an itemized deduction. H&r block onlinetaxes hrblock com Example 3. H&r block onlinetaxes hrblock com Debbie drives 10,000 miles in 2013 for business. H&r block onlinetaxes hrblock com Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. H&r block onlinetaxes hrblock com Her total reimbursement is $6,000. H&r block onlinetaxes hrblock com Debbie's employer must include the reimbursement amount up to the standard mileage rate, $5,650 (10,000 × 56½ cents), in box 12 of her Form W-2. H&r block onlinetaxes hrblock com That amount is not taxable. H&r block onlinetaxes hrblock com Her employer must also include $350 ($6,000 − $5,650) in box 1 of her Form W-2. H&r block onlinetaxes hrblock com This is the reimbursement that is more than the standard mileage rate. H&r block onlinetaxes hrblock com If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. H&r block onlinetaxes hrblock com If her expenses are more than the standard mileage rate, she would complete Form 2106 and report her total expenses and reimbursement (shown in box 12 of her Form W-2). H&r block onlinetaxes hrblock com She would then claim the excess expenses as an itemized deduction. H&r block onlinetaxes hrblock com Returning Excess Reimbursements Under an accountable plan, you are required to return any excess reimbursement or other expense allowances for your business expenses to the person paying the reimbursement or allowance. H&r block onlinetaxes hrblock com Excess reimbursement means any amount for which you did not adequately account within a reasonable period of time. H&r block onlinetaxes hrblock com For example, if you received a travel advance and you did not spend all the money on business-related expenses or you do not have proof of all your expenses, you have an excess reimbursement. H&r block onlinetaxes hrblock com “ Adequate accounting ” and “ reasonable period of time ” were discussed earlier in this chapter. H&r block onlinetaxes hrblock com Travel advance. H&r block onlinetaxes hrblock com   You receive a travel advance if your employer provides you with an expense allowance before you actually have the expense, and the allowance is reasonably expected to be no more than your expense. H&r block onlinetaxes hrblock com Under an accountable plan, you are required to adequately account to your employer for this advance and to return any excess within a reasonable period of time. H&r block onlinetaxes hrblock com   If you do not adequately account for or do not return any excess advance within a reasonable period of time, the amount you do not account for or return will be treated as having been paid under a nonaccountable plan (discussed later). H&r block onlinetaxes hrblock com Unproved amounts. H&r block onlinetaxes hrblock com   If you do not prove that you actually traveled on each day for which you received a per diem or car allowance (proving the elements described in Table 5-1 ), you must return this unproved amount of the travel advance within a reasonable period of time. H&r block onlinetaxes hrblock com If you do not do this, the unproved amount will be considered paid under a nonaccountable plan (discussed later). H&r block onlinetaxes hrblock com Per diem allowance more than federal rate. H&r block onlinetaxes hrblock com   If your employer's accountable plan pays you an allowance that is higher than the federal rate, you do not have to return the difference between the two rates for the period you can prove business-related travel expenses. H&r block onlinetaxes hrblock com However, the difference will be reported as wages on your Form W-2. H&r block onlinetaxes hrblock com This excess amount is considered paid under a nonaccountable plan (discussed later). H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com Your employer sends you on a 5-day business trip to Phoenix in March 2013 and gives you a $400 ($80 × 5 days) advance to cover your meals and incidental expenses. H&r block onlinetaxes hrblock com The federal per diem for meals and incidental expenses for Phoenix is $71. H&r block onlinetaxes hrblock com Your trip lasts only 3 days. H&r block onlinetaxes hrblock com Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you did not travel. H&r block onlinetaxes hrblock com For the 3 days you did travel you do not have to return the $27 difference between the allowance you received and the federal rate for Phoenix (($80 − $71) × 3 days). H&r block onlinetaxes hrblock com However, the $27 will be reported on your Form W-2 as wages. H&r block onlinetaxes hrblock com Nonaccountable Plans A nonaccountable plan is a reimbursement or expense allowance arrangement that does not meet one or more of the three rules listed earlier under Accountable Plans. H&r block onlinetaxes hrblock com In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan: Excess reimbursements you fail to return to your employer, and Reimbursement of nondeductible expenses related to your employer's business. H&r block onlinetaxes hrblock com See Reimbursement of nondeductible expenses , earlier, under Accountable Plans. H&r block onlinetaxes hrblock com An arrangement that repays you for business expenses by reducing the amount reported as your wages, salary, or other pay will be treated as a nonaccountable plan. H&r block onlinetaxes hrblock com This is because you are entitled to receive the full amount of your pay whether or not you have any business expenses. H&r block onlinetaxes hrblock com If you are not sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer. H&r block onlinetaxes hrblock com Reporting your expenses under a nonaccountable plan. H&r block onlinetaxes hrblock com   Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. H&r block onlinetaxes hrblock com Your employer will report the total in box 1 of your Form W-2. H&r block onlinetaxes hrblock com    You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. H&r block onlinetaxes hrblock com Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. H&r block onlinetaxes hrblock com Also, your total expenses will be subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. H&r block onlinetaxes hrblock com Example 1. H&r block onlinetaxes hrblock com Kim's employer gives her $1,000 a month ($12,000 total for the year) for her business expenses. H&r block onlinetaxes hrblock com Kim does not have to provide any proof of her expenses to her employer, and Kim can keep any funds that she does not spend. H&r block onlinetaxes hrblock com Kim is being reimbursed under a nonaccountable plan. H&r block onlinetaxes hrblock com Her employer will include the $12,000 on Kim's Form W-2 as if it were wages. H&r block onlinetaxes hrblock com If Kim wants to deduct her business expenses, she must complete Form 2106 or 2106-EZ and itemize her deductions. H&r block onlinetaxes hrblock com Example 2. H&r block onlinetaxes hrblock com Kevin is paid $2,000 a month by his employer. H&r block onlinetaxes hrblock com On days that he travels away from home on business, his employer designates $50 a day of his salary as paid to reimburse his travel expenses. H&r block onlinetaxes hrblock com Because his employer would pay Kevin his monthly salary whether or not he was traveling away from home, the arrangement is a nonaccountable plan. H&r block onlinetaxes hrblock com No part of the $50 a day designated by his employer is treated as paid under an accountable plan. H&r block onlinetaxes hrblock com Rules for Independent Contractors and Clients This section provides rules for independent contractors who incur expenses on behalf of a client or customer. H&r block onlinetaxes hrblock com The rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both independent contractors and their clients or customers. H&r block onlinetaxes hrblock com You are considered an independent contractor if you are self-employed and you perform services for a customer or client. H&r block onlinetaxes hrblock com Accounting to Your Client If you received a reimbursement or an allowance for travel, entertainment, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. H&r block onlinetaxes hrblock com If you do not account to your client for these expenses, you must include any reimbursements or allowances in income. H&r block onlinetaxes hrblock com You must keep adequate records of these expenses whether or not you account to your client for these expenses. H&r block onlinetaxes hrblock com If you do not separately account for and seek reimbursement for meals and entertainment in connection with providing services for a client, you are subject to the 50% limit on those expenses. H&r block onlinetaxes hrblock com See 50% Limit in chapter 2. H&r block onlinetaxes hrblock com Adequate accounting. H&r block onlinetaxes hrblock com   As a self-employed person, you adequately account by reporting your actual expenses. H&r block onlinetaxes hrblock com You should follow the recordkeeping rules in chapter 5 . H&r block onlinetaxes hrblock com How to report. H&r block onlinetaxes hrblock com   For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter. H&r block onlinetaxes hrblock com Required Records for Clients or Customers If you are a client or customer, you generally do not have to keep records to prove the reimbursements or allowances you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your behalf. H&r block onlinetaxes hrblock com However, you must keep records if: You reimburse the contractor for entertainment expenses incurred on your behalf, and The contractor adequately accounts to you for these expenses. H&r block onlinetaxes hrblock com Contractor adequately accounts. H&r block onlinetaxes hrblock com   If the contractor adequately accounts to you for entertainment expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5 . H&r block onlinetaxes hrblock com Use your records as proof for a deduction on your tax return. H&r block onlinetaxes hrblock com If entertainment expenses are accounted for separately, you are subject to the 50% limit on entertainment. H&r block onlinetaxes hrblock com If the contractor adequately accounts to you for reimbursed amounts, you do not have to report the amounts on an information return. H&r block onlinetaxes hrblock com Contractor does not adequately account. H&r block onlinetaxes hrblock com    If the contractor does not adequately account to you for allowances or reimbursements of entertainment expenses, you do not have to keep records of these items. H&r block onlinetaxes hrblock com You are not subject to the 50% limit on entertainment in this case. H&r block onlinetaxes hrblock com You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. H&r block onlinetaxes hrblock com However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year. H&r block onlinetaxes hrblock com How To Use Per Diem Rate Tables This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year. H&r block onlinetaxes hrblock com The Two Substantiation Methods High-low method. H&r block onlinetaxes hrblock com   IRS notices list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. H&r block onlinetaxes hrblock com Notice 2012–63, available at www. H&r block onlinetaxes hrblock com irs. H&r block onlinetaxes hrblock com gov/irb/2012–42_IRB/ar12. H&r block onlinetaxes hrblock com html, lists the localities that are eligible for $242 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2012. H&r block onlinetaxes hrblock com For travel on or after October 1, 2012, all other localities within CONUS are eligible for $163 ($52 M&IE) per diem under the high-low method. H&r block onlinetaxes hrblock com   Notice 2013–65, available at www. H&r block onlinetaxes hrblock com irs. H&r block onlinetaxes hrblock com gov/pub/irs-drop/n-13–65. H&r block onlinetaxes hrblock com pdf, lists the localities that are eligible for $251 ($65 M&IE) per diem, effective October 1, 2013. H&r block onlinetaxes hrblock com For travel on or after October 1, 2013, the per diem for all other localities increased to $170 ($52 M&IE). H&r block onlinetaxes hrblock com Regular federal per diem rate method. H&r block onlinetaxes hrblock com   Regular federal per diem rates are published by the General Services Administration (GSA). H&r block onlinetaxes hrblock com Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. H&r block onlinetaxes hrblock com The rates listed for FY2013 at www. H&r block onlinetaxes hrblock com gsa. H&r block onlinetaxes hrblock com gov/perdiem are effective October 1, 2012 and those listed for FY2014 are effective October 1, 2013. H&r block onlinetaxes hrblock com The standard rate for all locations within CONUS not specifically listed for FY2013 is $123 ($77 for lodging and $46 for M&IE). H&r block onlinetaxes hrblock com For FY2014, this rate increased to $129 ($83 for lodging and $46 for M&IE). H&r block onlinetaxes hrblock com Transition Rules The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally October 1) through December 31. H&r block onlinetaxes hrblock com During this period, you generally may change to the new rates or finish out the year with the rates you had been using. H&r block onlinetaxes hrblock com High-low method. H&r block onlinetaxes hrblock com   If you use the high-low substantiation method, when new rates become effective (generally October 1) you can either continue with the rates you used for the first part of the year or change to the new rates. H&r block onlinetaxes hrblock com However, you must continue using the high-low method for the rest of the calendar year (through December 31). H&r block onlinetaxes hrblock com If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. H&r block onlinetaxes hrblock com   The new rates and localities for the high-low method are included each year in a notice that is generally published in mid-to-late-September. H&r block onlinetaxes hrblock com You can find the notice in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. H&r block onlinetaxes hrblock com irs. H&r block onlinetaxes hrblock com gov/irb. H&r block onlinetaxes hrblock com Federal per diem rate method. H&r block onlinetaxes hrblock com   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. H&r block onlinetaxes hrblock com Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). H&r block onlinetaxes hrblock com However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates. H&r block onlinetaxes hrblock com   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. H&r block onlinetaxes hrblock com Go to www. H&r block onlinetaxes hrblock com gsa. H&r block onlinetaxes hrblock com gov/perdiem. H&r block onlinetaxes hrblock com Per diem rates for localities listed for FY2014 may change at any time. H&r block onlinetaxes hrblock com To be sure you have the most current rate, check www. H&r block onlinetaxes hrblock com gsa. H&r block onlinetaxes hrblock com gov/perdiem. H&r block onlinetaxes hrblock com Completing Forms 2106 and 2106-EZ This section briefly describes how employees complete Forms 2106 and 2106-EZ. H&r block onlinetaxes hrblock com Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. H&r block onlinetaxes hrblock com The instructions for the forms have more information on completing them. H&r block onlinetaxes hrblock com If you are self-employed, do not file Form 2106 or 2106-EZ. H&r block onlinetaxes hrblock com Report your expenses on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). H&r block onlinetaxes hrblock com See the instructions for the form that you must file. H&r block onlinetaxes hrblock com Form 2106-EZ. H&r block onlinetaxes hrblock com   You may be able to use the shorter Form 2106-EZ to claim your employee business expenses. H&r block onlinetaxes hrblock com You can use this form if you meet all the following conditions. H&r block onlinetaxes hrblock com You are an employee deducting ordinary and necessary expenses attributable to your job. H&r block onlinetaxes hrblock com You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). H&r block onlinetaxes hrblock com If you are claiming car expenses, you are using the standard mileage rate. H&r block onlinetaxes hrblock com Car expenses. H&r block onlinetaxes hrblock com   If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. H&r block onlinetaxes hrblock com These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, Column A. H&r block onlinetaxes hrblock com Car expenses using the standard mileage rate can also be figured on Form 2106-EZ by completing Part II and Part I, line 1. H&r block onlinetaxes hrblock com Information on use of cars. H&r block onlinetaxes hrblock com   If you claim any deduction for the business use of a car, you must answer certain questions and provide information about the use of the car. H&r block onlinetaxes hrblock com The information relates to the following items. H&r block onlinetaxes hrblock com Date placed in service. H&r block onlinetaxes hrblock com Mileage (total, business, commuting, and other personal mileage). H&r block onlinetaxes hrblock com Percentage of business use. H&r block onlinetaxes hrblock com After-work use. H&r block onlinetaxes hrblock com Use of other vehicles. H&r block onlinetaxes hrblock com Whether you have evidence to support the deduction. H&r block onlinetaxes hrblock com Whether or not the evidence is written. H&r block onlinetaxes hrblock com Employees must complete Form 2106, Part II, Section A, or Form 2106-EZ, Part II, to provide this information. H&r block onlinetaxes hrblock com Standard mileage rate. H&r block onlinetaxes hrblock com   If you claim a deduction based on the standard mileage rate instead of your actual expenses, you must complete Form 2106, Part II, Section B. H&r block onlinetaxes hrblock com The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. H&r block onlinetaxes hrblock com In addition, on Part 1, line 2, you can deduct parking fees and tolls that apply to the business use of the car. H&r block onlinetaxes hrblock com If you file Form 2106-EZ, complete Part I, line 1, for the standard mileage rate and line 2 for parking fees and tolls. H&r block onlinetaxes hrblock com See Standard Mileage Rate in chapter 4 for information on using this rate. H&r block onlinetaxes hrblock com Actual expenses. H&r block onlinetaxes hrblock com   If you claim a deduction based on actual car expenses, you cannot use Form 2106-EZ. H&r block onlinetaxes hrblock com You must complete Form 2106, Part II, Section C. H&r block onlinetaxes hrblock com In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim. H&r block onlinetaxes hrblock com   If you are still using a car that is fully depreciated, continue to complete Section C. H&r block onlinetaxes hrblock com Since you have no depreciation deduction, enter zero on line 28. H&r block onlinetaxes hrblock com In this case, do not complete Section D. H&r block onlinetaxes hrblock com Car rentals. H&r block onlinetaxes hrblock com   If you claim car rental expenses on Form 2106, line 24a, you may have to reduce that expense by an inclusion amount as described in chapter 4. H&r block onlinetaxes hrblock com If so, you can show your car expenses and any inclusion amount as follows. H&r block onlinetaxes hrblock com Compute the inclusion amount without taking into account your business use percentage for the tax year. H&r block onlinetaxes hrblock com Report the inclusion amount from (1) on Form 2106, Part II, line 24b. H&r block onlinetaxes hrblock com Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)). H&r block onlinetaxes hrblock com The net amount of car rental expenses will be adjusted on Form 2106, Part II, line 27, to reflect the percentage of business use for the tax year. H&r block onlinetaxes hrblock com Transportation expenses. H&r block onlinetaxes hrblock com   Show your transportation expenses that did not involve overnight travel on Form 2106, line 2, Column A, or on Form 2106-EZ, Part I, line 2. H&r block onlinetaxes hrblock com Also include on this line business expenses you have for parking fees and tolls. H&r block onlinetaxes hrblock com Do not include expenses of operating your car or expenses of commuting between your home and work. H&r block onlinetaxes hrblock com Employee business expenses other than meals and entertainment. H&r block onlinetaxes hrblock com   Show your other employee business expenses on Form 2106, lines 3 and 4, Column A, or Form 2106-EZ, lines 3 and 4. H&r block onlinetaxes hrblock com Do not include expenses for meals and entertainment on those lines. H&r block onlinetaxes hrblock com Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications. H&r block onlinetaxes hrblock com    If line 4 expenses are the only ones you are claiming, you received no reimbursements (or the reimbursements were all included in box 1 of your Form W-2), and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. H&r block onlinetaxes hrblock com Claim these amounts directly on Schedule A (Form 1040), line 21. H&r block onlinetaxes hrblock com List the type and amount of each expense on the dotted lines and include the total on line 21. H&r block onlinetaxes hrblock com Meal and entertainment expenses. H&r block onlinetaxes hrblock com   Show the full amount of your expenses for business-related meals and entertainment on Form 2106, line 5, Column B. H&r block onlinetaxes hrblock com Include meals while away from your tax home overnight and other business meals and entertainment. H&r block onlinetaxes hrblock com Enter 50% of the line 8, Column B, meal and entertainment expenses on line 9, Column B. H&r block onlinetaxes hrblock com   If you file Form 2106-EZ, enter the full amount of your meals and entertainment on the line to the left of line 5 and multiply the total by 50%. H&r block onlinetaxes hrblock com Enter the result on line 5. H&r block onlinetaxes hrblock com Hours of service limits. H&r block onlinetaxes hrblock com   If you are subject to the Department of Transportation's “hours of service” limits (as explained earlier under Individuals subject to “hours of service” limits in chapter 2), use 80% instead of 50% for meals while away from your tax home. H&r block onlinetaxes hrblock com Reimbursements. H&r block onlinetaxes hrblock com   Enter on Form 2106, line 7 (you cannot use Form 2106-EZ) the amounts your employer (or third party) reimbursed you that were not reported to you in box 1 of your Form W-2. H&r block onlinetaxes hrblock com This includes any amount reported under code L in box 12 of Form W-2. H&r block onlinetaxes hrblock com Allocating your reimbursement. H&r block onlinetaxes hrblock com   If you were reimbursed under an accountable plan and want to deduct excess expenses that were not reimbursed, you may have to allocate your reimbursement. H&r block onlinetaxes hrblock com This is necessary when your employer pays your reimbursement in the following manner: Pays you a single amount that covers meals and/or entertainment, as well as other business expenses, and Does not clearly identify how much is for deductible meals and/or entertainment. H&r block onlinetaxes hrblock com You must allocate that single payment so that you know how much to enter on Form 2106, line 7, Column A and Column B. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. H&r block onlinetaxes hrblock com The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. H&r block onlinetaxes hrblock com The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. H&r block onlinetaxes hrblock com Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses). H&r block onlinetaxes hrblock com Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. H&r block onlinetaxes hrblock com To allocate the remaining $7,000, Rob uses the worksheet from the Instructions for Form 2106. H&r block onlinetaxes hrblock com His completed worksheet follows. H&r block onlinetaxes hrblock com Reimbursement Allocation Worksheet (Keep for your records)   1. H&r block onlinetaxes hrblock com Enter the total amount of reimbursements your employer gave you that were not reported to you in box 1 of Form W-2 $7,000   2. H&r block onlinetaxes hrblock com Enter the total amount of your expenses for the periods covered by this reimbursement 8,500   3. H&r block onlinetaxes hrblock com Of the amount on line 2, enter your total expense for meals and entertainment 4,500   4. H&r block onlinetaxes hrblock com Divide line 3 by line 2. H&r block onlinetaxes hrblock com Enter the result as a decimal (rounded to at least three places) . H&r block onlinetaxes hrblock com 529   5. H&r block onlinetaxes hrblock com Multiply line 1 by line 4. H&r block onlinetaxes hrblock com Enter the result here and in Column B, line 7 3,703   6. H&r block onlinetaxes hrblock com Subtract line 5 from line 1. H&r block onlinetaxes hrblock com Enter the result here and in Column A, line 7 $3,297 On line 7 of Form 2106, Rob enters $8,297 ($5,000 airfare and $3,297 of the $7,000) in Column A and $3,703 (of the $7,000) in Column B. H&r block onlinetaxes hrblock com After you complete the form. H&r block onlinetaxes hrblock com   After you have completed your Form 2106 or 2106-EZ, follow the directions on that form to deduct your expenses on the appropriate line of your tax return. H&r block onlinetaxes hrblock com For most taxpayers, this is line 21 of Schedule A (Form 1040). H&r block onlinetaxes hrblock com However, if you are a government official paid on a fee basis, a performing artist, an Armed Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules , later. H&r block onlinetaxes hrblock com Limits on employee business expenses. H&r block onlinetaxes hrblock com   Your employee business expenses may be subject to either of the limits described next. H&r block onlinetaxes hrblock com They are figured in the following order on the specified form. H&r block onlinetaxes hrblock com 1. H&r block onlinetaxes hrblock com Limit on meals and entertainment. H&r block onlinetaxes hrblock com   Certain meal and entertainment expenses are subject to a 50% limit. H&r block onlinetaxes hrblock com If you are an employee, you figure this limit on line 9 of Form 2106 or line 5 of Form 2106-EZ. H&r block onlinetaxes hrblock com (See 50% Limit in chapter 2. H&r block onlinetaxes hrblock com ) 2. H&r block onlinetaxes hrblock com Limit on miscellaneous itemized deductions. H&r block onlinetaxes hrblock com   If you are an employee, deduct your employee business expenses (as figured on Form 2106 or 2106-EZ) on line 21 of Schedule A (Form 1040). H&r block onlinetaxes hrblock com Most miscellaneous itemized deductions, including employee business expenses, are subject to a 2%-of-adjusted-gross-income limit. H&r block onlinetaxes hrblock com This limit is figured on line 26 of Schedule A (Form 1040). H&r block onlinetaxes hrblock com 3. H&r block onlinetaxes hrblock com Limit on total itemized deductions. H&r block onlinetaxes hrblock com   If your adjusted gross income (line 38 of Form 1040) is more than $300,000 ($150,000 if you are married filing separately), the total of certain itemized deductions, including employee business expenses, may be limited. H&r block onlinetaxes hrblock com See your form instructions for information on how to figure this limit. H&r block onlinetaxes hrblock com Special Rules This section discusses special rules that apply only to Armed Forces reservists, government officials who are paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. H&r block onlinetaxes hrblock com Armed Forces Reservists Traveling More Than 100 Miles From Home If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. H&r block onlinetaxes hrblock com The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. H&r block onlinetaxes hrblock com See Per Diem and Car Allowances , earlier, for more information. H&r block onlinetaxes hrblock com Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit. H&r block onlinetaxes hrblock com Member of a reserve component. H&r block onlinetaxes hrblock com   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service. H&r block onlinetaxes hrblock com How to report. H&r block onlinetaxes hrblock com   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106 or Form 2106-EZ. H&r block onlinetaxes hrblock com Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. H&r block onlinetaxes hrblock com Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. H&r block onlinetaxes hrblock com   You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. H&r block onlinetaxes hrblock com Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21. H&r block onlinetaxes hrblock com Officials Paid on a Fee Basis Certain fee-basis officials can claim their employee business expenses whether or not they itemize their other deductions on Schedule A (Form 1040). H&r block onlinetaxes hrblock com Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. H&r block onlinetaxes hrblock com They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction. H&r block onlinetaxes hrblock com If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. H&r block onlinetaxes hrblock com Expenses of Certain Performing Artists If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. H&r block onlinetaxes hrblock com To qualify, you must meet all of the following requirements. H&r block onlinetaxes hrblock com During the tax year, you perform services in the performing arts as an employee for at least two employers. H&r block onlinetaxes hrblock com You receive at least $200 each from any two of these employers. H&r block onlinetaxes hrblock com Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services. H&r block onlinetaxes hrblock com Your adjusted gross income is not more than $16,000 before deducting these business expenses. H&r block onlinetaxes hrblock com Special rules for married persons. H&r block onlinetaxes hrblock com   If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. H&r block onlinetaxes hrblock com If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. H&r block onlinetaxes hrblock com However, requirement (4) applies to your and your spouse's combined adjusted gross income. H&r block onlinetaxes hrblock com Where to report. H&r block onlinetaxes hrblock com   If you meet all of the above requirements, you should first complete Form 2106 or 2106-EZ. H&r block onlinetaxes hrblock com Then you include your performing-arts-related expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. H&r block onlinetaxes hrblock com   If you do not meet all of the above requirements, you do not qualify to deduct your expenses as an adjustment to gross income. H&r block onlinetaxes hrblock com Instead, you must complete Form 2106 or 2106-EZ and deduct your employee business expenses as an itemized deduction on Schedule A (Form 1040), line 21. H&r block onlinetaxes hrblock com Impairment-Related Work Expenses of Disabled Employees If you are an employee with a physical or mental disability, your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. H&r block onlinetaxes hrblock com After you complete Form 2106 or 2106-EZ, enter your impairment-related work expenses from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 28, and identify the type and amount of this expense on the dotted line next to line 28. H&r block onlinetaxes hrblock com Enter your employee business expenses that are unrelated to your disability from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 21. H&r block onlinetaxes hrblock com Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work. H&r block onlinetaxes hrblock com You are disabled if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. H&r block onlinetaxes hrblock com You can deduct impairment-related expenses as business expenses if they are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. H&r block onlinetaxes hrblock com Example 1. H&r block onlinetaxes hrblock com You are blind. H&r block onlinetaxes hrblock com You must use a reader to do your work. H&r block onlinetaxes hrblock com You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. H&r block onlinetaxes hrblock com The reader's services are only for your work. H&r block onlinetaxes hrblock com You can deduct your expenses for the reader as business expenses. H&r block onlinetaxes hrblock com Example 2. H&r block onlinetaxes hrblock com You are deaf. H&r block onlinetaxes hrblock com You must use a sign language interpreter during meetings while you are at work. H&r block onlinetaxes hrblock com The interpreter's services are used only for your work. H&r block onlinetaxes hrblock com You can deduct your expenses for the interpreter as business expenses. H&r block onlinetaxes hrblock com Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - Individual Tax Statistics

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Here you will find links to various studies relating to the individual taxpayer.

 

Individual Income Tax Numerous studies which provide statistics on income, deductions, tax, and credits reported on individual Form 1040 income tax returns and associated schedules are available in this area. Find statistics on high income tax returns, income tax rates, nonfarm sole proprietorships, data by geographic areas, and more...

Estate Tax

Estate Tax Statistics OneSheet

This annual study includes information on gross estate and its composition, deductions, and tax; and information on the age, sex, and marital status of decedents. Basic estate tax return data by year in which returns are filed are produced each year. Also included are data on nonresident aliens who had more than $60,000 of assets in the United States. These data come from taxpayers filing Form 706.
International Numerous studies which provide statistics on the individual taxpayer in the international context. Find statistics on foreign recipients of U.S. income, foreign trusts, individual foreign earned income and the foreign tax credit, international boycotts and nonresident alien estate tax returns. These data come from taxpayers filing Forms 706-NA, 1042-S, 1116, 2555, 3520, 5713 and more.
Personal Wealth This periodic study provides estimates of personal wealth of top wealth holders that are generated from estate tax return data using the "estate multiplier" technique, in conjunction with both filing-year and year-of-death estate databases.

Income from Trusts and Estates

Snapshot of Estate and Trust Income Tax Statistics

The U.S. Income Tax Return for Estates and Trusts (Form 1041) is used to report the income, deductions, gains, and losses of estates and trusts, as well as distributions to beneficiaries and income tax liability. Entities are classified into types based on their purpose.  

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Page Last Reviewed or Updated: 24-Mar-2014

The H&r Block Onlinetaxes Hrblock Com

H&r block onlinetaxes hrblock com 7. H&r block onlinetaxes hrblock com   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. H&r block onlinetaxes hrblock com For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. H&r block onlinetaxes hrblock com There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. H&r block onlinetaxes hrblock com However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. H&r block onlinetaxes hrblock com See Contributions , later. H&r block onlinetaxes hrblock com This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. H&r block onlinetaxes hrblock com What is the tax benefit of the Coverdell ESA. H&r block onlinetaxes hrblock com   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. H&r block onlinetaxes hrblock com   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. H&r block onlinetaxes hrblock com See Tax-Free Distributions , later. H&r block onlinetaxes hrblock com    Table 7-1 summarizes the main features of the Coverdell ESA. H&r block onlinetaxes hrblock com Table 7-1. H&r block onlinetaxes hrblock com Coverdell ESA at a Glance Do not rely on this table alone. H&r block onlinetaxes hrblock com It provides only general highlights. H&r block onlinetaxes hrblock com See the text for definitions of terms in bold type and for more complete explanations. H&r block onlinetaxes hrblock com Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. H&r block onlinetaxes hrblock com Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. H&r block onlinetaxes hrblock com Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. H&r block onlinetaxes hrblock com Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). H&r block onlinetaxes hrblock com Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. H&r block onlinetaxes hrblock com What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. H&r block onlinetaxes hrblock com When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. H&r block onlinetaxes hrblock com To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. H&r block onlinetaxes hrblock com The document creating and governing the account must be in writing and must satisfy the following requirements. H&r block onlinetaxes hrblock com The trustee or custodian must be a bank or an entity approved by the IRS. H&r block onlinetaxes hrblock com The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. H&r block onlinetaxes hrblock com The contribution is in cash. H&r block onlinetaxes hrblock com The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block onlinetaxes hrblock com The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. H&r block onlinetaxes hrblock com Money in the account cannot be invested in life insurance contracts. H&r block onlinetaxes hrblock com Money in the account cannot be combined with other property except in a common trust fund or common investment fund. H&r block onlinetaxes hrblock com The balance in the account generally must be distributed within 30 days after the earlier of the following events. H&r block onlinetaxes hrblock com The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. H&r block onlinetaxes hrblock com The beneficiary's death. H&r block onlinetaxes hrblock com Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. H&r block onlinetaxes hrblock com For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. H&r block onlinetaxes hrblock com Designated beneficiary. H&r block onlinetaxes hrblock com   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. H&r block onlinetaxes hrblock com Contributions to a qualified tuition program (QTP). H&r block onlinetaxes hrblock com   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. H&r block onlinetaxes hrblock com In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. H&r block onlinetaxes hrblock com See chapter 8, Qualified Tuition Program . H&r block onlinetaxes hrblock com Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. H&r block onlinetaxes hrblock com Eligible postsecondary school. H&r block onlinetaxes hrblock com   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. H&r block onlinetaxes hrblock com S. H&r block onlinetaxes hrblock com Department of Education. H&r block onlinetaxes hrblock com It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. H&r block onlinetaxes hrblock com The educational institution should be able to tell you if it is an eligible educational institution. H&r block onlinetaxes hrblock com   Certain educational institutions located outside the United States also participate in the U. H&r block onlinetaxes hrblock com S. H&r block onlinetaxes hrblock com Department of Education's Federal Student Aid (FSA) programs. H&r block onlinetaxes hrblock com Eligible elementary or secondary school. H&r block onlinetaxes hrblock com   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. H&r block onlinetaxes hrblock com Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. H&r block onlinetaxes hrblock com As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. H&r block onlinetaxes hrblock com The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. H&r block onlinetaxes hrblock com Tuition and fees. H&r block onlinetaxes hrblock com Books, supplies, and equipment. H&r block onlinetaxes hrblock com Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. H&r block onlinetaxes hrblock com Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). H&r block onlinetaxes hrblock com The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. H&r block onlinetaxes hrblock com The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. H&r block onlinetaxes hrblock com The actual amount charged if the student is residing in housing owned or operated by the school. H&r block onlinetaxes hrblock com Half-time student. H&r block onlinetaxes hrblock com   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. H&r block onlinetaxes hrblock com Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. H&r block onlinetaxes hrblock com As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. H&r block onlinetaxes hrblock com There are special rules for computer-related expenses. H&r block onlinetaxes hrblock com The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. H&r block onlinetaxes hrblock com Tuition and fees. H&r block onlinetaxes hrblock com Books, supplies, and equipment. H&r block onlinetaxes hrblock com Academic tutoring. H&r block onlinetaxes hrblock com Special needs services for a special needs beneficiary. H&r block onlinetaxes hrblock com The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. H&r block onlinetaxes hrblock com Room and board. H&r block onlinetaxes hrblock com Uniforms. H&r block onlinetaxes hrblock com Transportation. H&r block onlinetaxes hrblock com Supplementary items and services (including extended day programs). H&r block onlinetaxes hrblock com The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. H&r block onlinetaxes hrblock com (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. H&r block onlinetaxes hrblock com ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. H&r block onlinetaxes hrblock com For individuals filing joint returns, that amount is $220,000. H&r block onlinetaxes hrblock com Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. H&r block onlinetaxes hrblock com There is no requirement that an organization's income be below a certain level. H&r block onlinetaxes hrblock com Contributions must meet all of the following requirements. H&r block onlinetaxes hrblock com They must be in cash. H&r block onlinetaxes hrblock com They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block onlinetaxes hrblock com They must be made by the due date of the contributor's tax return (not including extensions). H&r block onlinetaxes hrblock com Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. H&r block onlinetaxes hrblock com Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. H&r block onlinetaxes hrblock com Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. H&r block onlinetaxes hrblock com When contributions considered made. H&r block onlinetaxes hrblock com   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. H&r block onlinetaxes hrblock com They must be made by the due date (not including extensions) for filing your return for the preceding year. H&r block onlinetaxes hrblock com   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. H&r block onlinetaxes hrblock com Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. H&r block onlinetaxes hrblock com Limit for each designated beneficiary. H&r block onlinetaxes hrblock com   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. H&r block onlinetaxes hrblock com This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. H&r block onlinetaxes hrblock com Rollovers are discussed under Rollovers and Other Transfers , later. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. H&r block onlinetaxes hrblock com In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. H&r block onlinetaxes hrblock com For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. H&r block onlinetaxes hrblock com Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. H&r block onlinetaxes hrblock com These contributions could be put into any of Maria's Coverdell ESA accounts. H&r block onlinetaxes hrblock com Limit for each contributor. H&r block onlinetaxes hrblock com   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. H&r block onlinetaxes hrblock com This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. H&r block onlinetaxes hrblock com If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. H&r block onlinetaxes hrblock com Reduced limit. H&r block onlinetaxes hrblock com   Your contribution limit may be reduced. H&r block onlinetaxes hrblock com If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). H&r block onlinetaxes hrblock com If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. H&r block onlinetaxes hrblock com Table 7-2. H&r block onlinetaxes hrblock com Coverdell ESA Contributions at a Glance Do not rely on this table alone. H&r block onlinetaxes hrblock com It provides only general highlights. H&r block onlinetaxes hrblock com See the text for more complete explanations. H&r block onlinetaxes hrblock com Question Answer Are contributions deductible? No. H&r block onlinetaxes hrblock com What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. H&r block onlinetaxes hrblock com What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. H&r block onlinetaxes hrblock com What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. H&r block onlinetaxes hrblock com Can contributions other than cash be made to a Coverdell ESA? No. H&r block onlinetaxes hrblock com When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block onlinetaxes hrblock com Modified adjusted gross income (MAGI). H&r block onlinetaxes hrblock com   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. H&r block onlinetaxes hrblock com MAGI when using Form 1040A. H&r block onlinetaxes hrblock com   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. H&r block onlinetaxes hrblock com MAGI when using Form 1040. H&r block onlinetaxes hrblock com   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. H&r block onlinetaxes hrblock com MAGI when using Form 1040NR. H&r block onlinetaxes hrblock com   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. H&r block onlinetaxes hrblock com MAGI when using Form 1040NR-EZ. H&r block onlinetaxes hrblock com   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. H&r block onlinetaxes hrblock com   If you have any of these adjustments, you can use Worksheet 7-1. H&r block onlinetaxes hrblock com MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. H&r block onlinetaxes hrblock com Worksheet 7-1. H&r block onlinetaxes hrblock com MAGI for a Coverdell ESA 1. H&r block onlinetaxes hrblock com Enter your adjusted gross income  (Form 1040, line 38)   1. H&r block onlinetaxes hrblock com   2. H&r block onlinetaxes hrblock com Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. H&r block onlinetaxes hrblock com       3. H&r block onlinetaxes hrblock com Enter your foreign housing deduction (Form 2555, line 50)   3. H&r block onlinetaxes hrblock com         4. H&r block onlinetaxes hrblock com Enter the amount of income from Puerto Rico you are excluding   4. H&r block onlinetaxes hrblock com       5. H&r block onlinetaxes hrblock com Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. H&r block onlinetaxes hrblock com       6. H&r block onlinetaxes hrblock com Add lines 2, 3, 4, and 5   6. H&r block onlinetaxes hrblock com   7. H&r block onlinetaxes hrblock com Add lines 1 and 6. H&r block onlinetaxes hrblock com This is your  modified adjusted gross income   7. H&r block onlinetaxes hrblock com   Figuring the limit. H&r block onlinetaxes hrblock com    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. H&r block onlinetaxes hrblock com The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). H&r block onlinetaxes hrblock com The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). H&r block onlinetaxes hrblock com Subtract the result from $2,000. H&r block onlinetaxes hrblock com This is the amount you can contribute for each beneficiary. H&r block onlinetaxes hrblock com You can use Worksheet 7-2. H&r block onlinetaxes hrblock com Coverdell ESA Contribution Limit to figure the limit on contributions. H&r block onlinetaxes hrblock com    Worksheet 7-2. H&r block onlinetaxes hrblock com Coverdell ESA Contribution Limit 1. H&r block onlinetaxes hrblock com Maximum contribution   1. H&r block onlinetaxes hrblock com $2,000 2. H&r block onlinetaxes hrblock com Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. H&r block onlinetaxes hrblock com   3. H&r block onlinetaxes hrblock com Enter $190,000 if married filing jointly; $95,000 for all other filers   3. H&r block onlinetaxes hrblock com   4. H&r block onlinetaxes hrblock com Subtract line 3 from line 2. H&r block onlinetaxes hrblock com If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. H&r block onlinetaxes hrblock com   5. H&r block onlinetaxes hrblock com Enter $30,000 if married filing jointly; $15,000 for all other filers   5. H&r block onlinetaxes hrblock com     Note. H&r block onlinetaxes hrblock com If the amount on line 4 is greater than or equal to the amount on line 5, stop here. H&r block onlinetaxes hrblock com You are not allowed to contribute to a Coverdell ESA for 2013. H&r block onlinetaxes hrblock com       6. H&r block onlinetaxes hrblock com Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. H&r block onlinetaxes hrblock com . H&r block onlinetaxes hrblock com 7. H&r block onlinetaxes hrblock com Multiply line 1 by line 6   7. H&r block onlinetaxes hrblock com   8. H&r block onlinetaxes hrblock com Subtract line 7 from line 1   8. H&r block onlinetaxes hrblock com   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com Paul, who is single, had a MAGI of $96,500 for 2013. H&r block onlinetaxes hrblock com Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. H&r block onlinetaxes hrblock com Worksheet 7-2. H&r block onlinetaxes hrblock com Coverdell ESA Contribution Limit—Illustrated 1. H&r block onlinetaxes hrblock com Maximum contribution   1. H&r block onlinetaxes hrblock com $2,000 2. H&r block onlinetaxes hrblock com Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. H&r block onlinetaxes hrblock com 96,500 3. H&r block onlinetaxes hrblock com Enter $190,000 if married filing jointly; $95,000 for all other filers   3. H&r block onlinetaxes hrblock com 95,000 4. H&r block onlinetaxes hrblock com Subtract line 3 from line 2. H&r block onlinetaxes hrblock com If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. H&r block onlinetaxes hrblock com 1,500 5. H&r block onlinetaxes hrblock com Enter $30,000 if married filing jointly; $15,000 for all other filers   5. H&r block onlinetaxes hrblock com 15,000   Note. H&r block onlinetaxes hrblock com If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. H&r block onlinetaxes hrblock com You are not allowed to  contribute to a Coverdell ESA for 2013. H&r block onlinetaxes hrblock com       6. H&r block onlinetaxes hrblock com Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. H&r block onlinetaxes hrblock com . H&r block onlinetaxes hrblock com 100 7. H&r block onlinetaxes hrblock com Multiply line 1 by line 6   7. H&r block onlinetaxes hrblock com 200 8. H&r block onlinetaxes hrblock com Subtract line 7 from line 1   8. H&r block onlinetaxes hrblock com 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. H&r block onlinetaxes hrblock com Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. H&r block onlinetaxes hrblock com Excess contributions are the total of the following two amounts. H&r block onlinetaxes hrblock com Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). H&r block onlinetaxes hrblock com Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. H&r block onlinetaxes hrblock com Exceptions. H&r block onlinetaxes hrblock com   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). H&r block onlinetaxes hrblock com   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. H&r block onlinetaxes hrblock com You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. H&r block onlinetaxes hrblock com Box 2 of that form will show the amount of earnings on your excess contributions. H&r block onlinetaxes hrblock com Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. H&r block onlinetaxes hrblock com See Instructions for Recipient on the back of copy B of your Form 1099-Q. H&r block onlinetaxes hrblock com Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. H&r block onlinetaxes hrblock com For more information, see Taxable Distributions , later. H&r block onlinetaxes hrblock com   The excise tax does not apply to any rollover contribution. H&r block onlinetaxes hrblock com Note. H&r block onlinetaxes hrblock com Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. H&r block onlinetaxes hrblock com Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. H&r block onlinetaxes hrblock com In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. H&r block onlinetaxes hrblock com Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. H&r block onlinetaxes hrblock com (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. H&r block onlinetaxes hrblock com Figuring and reporting the additional tax. H&r block onlinetaxes hrblock com   You figure this excise tax in Part V of Form 5329. H&r block onlinetaxes hrblock com Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). H&r block onlinetaxes hrblock com Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. H&r block onlinetaxes hrblock com The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. H&r block onlinetaxes hrblock com Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. H&r block onlinetaxes hrblock com This age limitation does not apply if the new beneficiary is a special needs beneficiary. H&r block onlinetaxes hrblock com An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. H&r block onlinetaxes hrblock com Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. H&r block onlinetaxes hrblock com These are not taxable distributions. H&r block onlinetaxes hrblock com Members of the beneficiary's family. H&r block onlinetaxes hrblock com   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. H&r block onlinetaxes hrblock com Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. H&r block onlinetaxes hrblock com Brother, sister, stepbrother, or stepsister. H&r block onlinetaxes hrblock com Father or mother or ancestor of either. H&r block onlinetaxes hrblock com Stepfather or stepmother. H&r block onlinetaxes hrblock com Son or daughter of a brother or sister. H&r block onlinetaxes hrblock com Brother or sister of father or mother. H&r block onlinetaxes hrblock com Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. H&r block onlinetaxes hrblock com The spouse of any individual listed above. H&r block onlinetaxes hrblock com First cousin. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. H&r block onlinetaxes hrblock com He wanted to give this money to his younger sister, who was still in high school. H&r block onlinetaxes hrblock com In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. H&r block onlinetaxes hrblock com Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. H&r block onlinetaxes hrblock com This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). H&r block onlinetaxes hrblock com Military death gratuity. H&r block onlinetaxes hrblock com   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). H&r block onlinetaxes hrblock com Such payments are made to an eligible survivor upon the death of a member of the armed forces. H&r block onlinetaxes hrblock com The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. H&r block onlinetaxes hrblock com   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . H&r block onlinetaxes hrblock com The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. H&r block onlinetaxes hrblock com   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. H&r block onlinetaxes hrblock com See Distributions , later. H&r block onlinetaxes hrblock com The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. H&r block onlinetaxes hrblock com Changing the Designated Beneficiary The designated beneficiary can be changed. H&r block onlinetaxes hrblock com See Members of the beneficiary's family , earlier. H&r block onlinetaxes hrblock com There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com Assume the same situation for Aaron as in the last example (see Rollovers , earlier). H&r block onlinetaxes hrblock com Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. H&r block onlinetaxes hrblock com Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. H&r block onlinetaxes hrblock com After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com In their divorce settlement, Peg received her ex-husband's Coverdell ESA. H&r block onlinetaxes hrblock com In this process, the account was transferred into her name. H&r block onlinetaxes hrblock com Peg now treats the funds in this Coverdell ESA as if she were the original owner. H&r block onlinetaxes hrblock com Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. H&r block onlinetaxes hrblock com Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. H&r block onlinetaxes hrblock com See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. H&r block onlinetaxes hrblock com Table 7-3. H&r block onlinetaxes hrblock com Coverdell ESA Distributions at a Glance Do not rely on this table alone. H&r block onlinetaxes hrblock com It provides only general highlights. H&r block onlinetaxes hrblock com See the text for definitions of terms in bold type and for more complete explanations. H&r block onlinetaxes hrblock com Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. H&r block onlinetaxes hrblock com After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. H&r block onlinetaxes hrblock com Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. H&r block onlinetaxes hrblock com Also, certain transfers to members of the beneficiary's family are permitted. H&r block onlinetaxes hrblock com Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. H&r block onlinetaxes hrblock com Adjusted qualified education expenses. H&r block onlinetaxes hrblock com   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. H&r block onlinetaxes hrblock com Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. H&r block onlinetaxes hrblock com The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. H&r block onlinetaxes hrblock com Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. H&r block onlinetaxes hrblock com Do not report tax-free distributions (including qualifying rollovers) on your tax return. H&r block onlinetaxes hrblock com Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. H&r block onlinetaxes hrblock com Excess distribution. H&r block onlinetaxes hrblock com   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. H&r block onlinetaxes hrblock com Earnings and basis. H&r block onlinetaxes hrblock com   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. H&r block onlinetaxes hrblock com The amount of your gross distribution will be shown in box 1. H&r block onlinetaxes hrblock com For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. H&r block onlinetaxes hrblock com This will be shown in the blank box below boxes 5 and 6. H&r block onlinetaxes hrblock com   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. H&r block onlinetaxes hrblock com Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. H&r block onlinetaxes hrblock com Figure the taxable portion for 2013 as shown in the following steps. H&r block onlinetaxes hrblock com Multiply the total amount distributed by a fraction. H&r block onlinetaxes hrblock com The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. H&r block onlinetaxes hrblock com Subtract the amount figured in (1) from the total amount distributed during 2013. H&r block onlinetaxes hrblock com The result is the amount of earnings included in the distribution(s). H&r block onlinetaxes hrblock com Multiply the amount of earnings figured in (2) by a fraction. H&r block onlinetaxes hrblock com The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. H&r block onlinetaxes hrblock com Subtract the amount figured in (3) from the amount figured in (2). H&r block onlinetaxes hrblock com The result is the amount the beneficiary must include in income. H&r block onlinetaxes hrblock com The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. H&r block onlinetaxes hrblock com There were no contributions in 2013. H&r block onlinetaxes hrblock com This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. H&r block onlinetaxes hrblock com The value (balance) of your account on December 31, 2013, was $950. H&r block onlinetaxes hrblock com You had $700 of adjusted qualified education expenses (AQEE) for the year. H&r block onlinetaxes hrblock com Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. H&r block onlinetaxes hrblock com   1. H&r block onlinetaxes hrblock com $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. H&r block onlinetaxes hrblock com $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. H&r block onlinetaxes hrblock com $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. H&r block onlinetaxes hrblock com $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. H&r block onlinetaxes hrblock com Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. H&r block onlinetaxes hrblock com Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). H&r block onlinetaxes hrblock com Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. H&r block onlinetaxes hrblock com This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. H&r block onlinetaxes hrblock com Example. H&r block onlinetaxes hrblock com Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. H&r block onlinetaxes hrblock com He paid his college expenses from the following sources. H&r block onlinetaxes hrblock com     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. H&r block onlinetaxes hrblock com Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. H&r block onlinetaxes hrblock com Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. H&r block onlinetaxes hrblock com     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. H&r block onlinetaxes hrblock com The balance in Derek's account was $1,800 on December 31, 2013. H&r block onlinetaxes hrblock com Prior to 2013, $2,100 had been contributed to this account. H&r block onlinetaxes hrblock com Contributions for 2013 totaled $400. H&r block onlinetaxes hrblock com Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. H&r block onlinetaxes hrblock com   1. H&r block onlinetaxes hrblock com $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. H&r block onlinetaxes hrblock com $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. H&r block onlinetaxes hrblock com $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. H&r block onlinetaxes hrblock com $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). H&r block onlinetaxes hrblock com This is the amount of distributed earnings not used for adjusted qualified higher education expenses. H&r block onlinetaxes hrblock com Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. H&r block onlinetaxes hrblock com The following two examples illustrate possible allocations. H&r block onlinetaxes hrblock com Example 1. H&r block onlinetaxes hrblock com In 2013, Beatrice graduated from high school and began her first semester of college. H&r block onlinetaxes hrblock com That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. H&r block onlinetaxes hrblock com To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. H&r block onlinetaxes hrblock com No one claimed Beatrice as a dependent, nor was she eligible for an education credit. H&r block onlinetaxes hrblock com She did not receive any tax-free educational assistance in 2013. H&r block onlinetaxes hrblock com Beatrice must allocate her total qualified education expenses between the two distributions. H&r block onlinetaxes hrblock com Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. H&r block onlinetaxes hrblock com The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. H&r block onlinetaxes hrblock com Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). H&r block onlinetaxes hrblock com She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. H&r block onlinetaxes hrblock com Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. H&r block onlinetaxes hrblock com (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. H&r block onlinetaxes hrblock com ) Example 2. H&r block onlinetaxes hrblock com Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. H&r block onlinetaxes hrblock com In this case, she allocates her qualified education expenses as follows. H&r block onlinetaxes hrblock com Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. H&r block onlinetaxes hrblock com Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). H&r block onlinetaxes hrblock com   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). H&r block onlinetaxes hrblock com See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. H&r block onlinetaxes hrblock com   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). H&r block onlinetaxes hrblock com The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. H&r block onlinetaxes hrblock com However, you do not have to allocate your expenses in the same way. H&r block onlinetaxes hrblock com You can use any reasonable method. H&r block onlinetaxes hrblock com Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. H&r block onlinetaxes hrblock com You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. H&r block onlinetaxes hrblock com Your basis is the total amount of contributions to that Coverdell ESA. H&r block onlinetaxes hrblock com You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. H&r block onlinetaxes hrblock com If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. H&r block onlinetaxes hrblock com ) from all such accounts in order to determine your taxable earnings for the year. H&r block onlinetaxes hrblock com By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. H&r block onlinetaxes hrblock com For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. H&r block onlinetaxes hrblock com Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. H&r block onlinetaxes hrblock com Exceptions. H&r block onlinetaxes hrblock com   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. H&r block onlinetaxes hrblock com Made because the designated beneficiary is disabled. H&r block onlinetaxes hrblock com A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. H&r block onlinetaxes hrblock com A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. H&r block onlinetaxes hrblock com Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. H&r block onlinetaxes hrblock com Made on account of the attendance of the designated beneficiary at a U. H&r block onlinetaxes hrblock com S. H&r block onlinetaxes hrblock com military academy (such as the USMA at West Point). H&r block onlinetaxes hrblock com This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. H&r block onlinetaxes hrblock com S. H&r block onlinetaxes hrblock com Code) attributable to such attendance. H&r block onlinetaxes hrblock com Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier). H&r block onlinetaxes hrblock com Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). H&r block onlinetaxes hrblock com The distributed earnings must be included in gross income for the year in which the excess contribution was made. H&r block onlinetaxes hrblock com Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. H&r block onlinetaxes hrblock com Figuring the additional tax. H&r block onlinetaxes hrblock com    Use Part II of Form 5329, to figure any additional tax. H&r block onlinetaxes hrblock com Report the amount on Form 1040, line 58, or Form 1040NR, line 56. H&r block onlinetaxes hrblock com When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. H&r block onlinetaxes hrblock com The designated beneficiary reaches age 30. H&r block onlinetaxes hrblock com In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. H&r block onlinetaxes hrblock com However, this rule does not apply if the beneficiary is a special needs beneficiary. H&r block onlinetaxes hrblock com The designated beneficiary dies before reaching age 30. H&r block onlinetaxes hrblock com In this case, the remaining assets must generally be distributed within 30 days after the date of death. H&r block onlinetaxes hrblock com Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. H&r block onlinetaxes hrblock com (“Family member” was defined earlier under Rollovers . H&r block onlinetaxes hrblock com ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. H&r block onlinetaxes hrblock com This age limitation does not apply if the new beneficiary is a special needs beneficiary. H&r block onlinetaxes hrblock com There are no tax consequences as a result of the transfer. H&r block onlinetaxes hrblock com How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. H&r block onlinetaxes hrblock com You determine these earnings as shown in the following two steps. H&r block onlinetaxes hrblock com Multiply the amount distributed by a fraction. H&r block onlinetaxes hrblock com The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. H&r block onlinetaxes hrblock com Subtract the amount figured in (1) from the total amount distributed during 2013. H&r block onlinetaxes hrblock com The result is the amount of earnings included in the distribution. H&r block onlinetaxes hrblock com For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. H&r block onlinetaxes hrblock com The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. H&r block onlinetaxes hrblock com Worksheet 7-3 Instructions. H&r block onlinetaxes hrblock com Coverdell ESA—Taxable Distributions and Basis Line G. H&r block onlinetaxes hrblock com Enter the total distributions received from all Coverdell ESAs during 2013. H&r block onlinetaxes hrblock com Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). H&r block onlinetaxes hrblock com Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. H&r block onlinetaxes hrblock com Line 2. H&r block onlinetaxes hrblock com Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. H&r block onlinetaxes hrblock com   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. H&r block onlinetaxes hrblock com For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. H&r block onlinetaxes hrblock com For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. H&r block onlinetaxes hrblock com You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. H&r block onlinetaxes hrblock com Line 4. H&r block onlinetaxes hrblock com Enter the total distributions received from this Coverdell ESA in 2013. H&r block onlinetaxes hrblock com Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). H&r block onlinetaxes hrblock com   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. H&r block onlinetaxes hrblock com Line 7. H&r block onlinetaxes hrblock com Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. H&r block onlinetaxes hrblock com A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. H&r block onlinetaxes hrblock com   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. H&r block onlinetaxes hrblock com An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. H&r block onlinetaxes hrblock com Worksheet 7-3. H&r block onlinetaxes hrblock com Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. H&r block onlinetaxes hrblock com • • • Complete Part I, lines A through H, on only one worksheet. H&r block onlinetaxes hrblock com  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. H&r block onlinetaxes hrblock com  Complete Part III, the Summary (line 16), on only one worksheet. H&r block onlinetaxes hrblock com Part I. H&r block onlinetaxes hrblock com Qualified Education Expenses (Complete for total expenses)       A. H&r block onlinetaxes hrblock com Enter your total qualified education expenses for 2013   A. H&r block onlinetaxes hrblock com   B. H&r block onlinetaxes hrblock com Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. H&r block onlinetaxes hrblock com         C. H&r block onlinetaxes hrblock com Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). H&r block onlinetaxes hrblock com Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. H&r block onlinetaxes hrblock com         D. H&r block onlinetaxes hrblock com Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. H&r block onlinetaxes hrblock com         E. H&r block onlinetaxes hrblock com Add lines B, C, and D   D. H&r block onlinetaxes hrblock com   F. H&r block onlinetaxes hrblock com Subtract line E from line A. H&r block onlinetaxes hrblock com This is your adjusted qualified education expense for 2013   E. H&r block onlinetaxes hrblock com   G. H&r block onlinetaxes hrblock com Enter your total distributions from all Coverdell ESAs during 2013. H&r block onlinetaxes hrblock com Do not include rollovers  or the return of excess contributions (see instructions)   F. H&r block onlinetaxes hrblock com   H. H&r block onlinetaxes hrblock com Divide line F by line G. H&r block onlinetaxes hrblock com Enter the result as a decimal (rounded to at least 3 places). H&r block onlinetaxes hrblock com If the  result is 1. H&r block onlinetaxes hrblock com 000 or more, enter 1. H&r block onlinetaxes hrblock com 000   G. H&r block onlinetaxes hrblock com . H&r block onlinetaxes hrblock com Part II. H&r block onlinetaxes hrblock com Taxable Distributions and Basis (Complete separately for each account) 1. H&r block onlinetaxes hrblock com Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. H&r block onlinetaxes hrblock com Do not include rollovers or the return of excess contributions   1. H&r block onlinetaxes hrblock com   2. H&r block onlinetaxes hrblock com Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. H&r block onlinetaxes hrblock com   3. H&r block onlinetaxes hrblock com Add lines 1 and 2   3. H&r block onlinetaxes hrblock com   4. H&r block onlinetaxes hrblock com Enter the total distributions from this Coverdell ESA during 2013. H&r block onlinetaxes hrblock com Do not include rollovers  or the return of excess contributions (see instructions)   4. H&r block onlinetaxes hrblock com   5. H&r block onlinetaxes hrblock com Multiply line 4 by line H. H&r block onlinetaxes hrblock com This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. H&r block onlinetaxes hrblock com         6. H&r block onlinetaxes hrblock com Subtract line 5 from line 4   6. H&r block onlinetaxes hrblock com         7. H&r block onlinetaxes hrblock com Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. H&r block onlinetaxes hrblock com         8. H&r block onlinetaxes hrblock com Add lines 4 and 7   8. H&r block onlinetaxes hrblock com         9. H&r block onlinetaxes hrblock com Divide line 3 by line 8. H&r block onlinetaxes hrblock com Enter the result as a decimal (rounded to  at least 3 places). H&r block onlinetaxes hrblock com If the result is 1. H&r block onlinetaxes hrblock com 000 or more, enter 1. H&r block onlinetaxes hrblock com 000   9. H&r block onlinetaxes hrblock com . H&r block onlinetaxes hrblock com       10. H&r block onlinetaxes hrblock com Multiply line 4 by line 9. H&r block onlinetaxes hrblock com This is the amount of basis allocated to your  distributions, and is tax free   10. H&r block onlinetaxes hrblock com     Note. H&r block onlinetaxes hrblock com If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. H&r block onlinetaxes hrblock com       11. H&r block onlinetaxes hrblock com Subtract line 10 from line 4   11. H&r block onlinetaxes hrblock com   12. H&r block onlinetaxes hrblock com Divide line 5 by line 4. H&r block onlinetaxes hrblock com Enter the result as a decimal (rounded to  at least 3 places). H&r block onlinetaxes hrblock com If the result is 1. H&r block onlinetaxes hrblock com 000 or more, enter 1. H&r block onlinetaxes hrblock com 000   12. H&r block onlinetaxes hrblock com . H&r block onlinetaxes hrblock com       13. H&r block onlinetaxes hrblock com Multiply line 11 by line 12. H&r block onlinetaxes hrblock com This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. H&r block onlinetaxes hrblock com   14. H&r block onlinetaxes hrblock com Subtract line 13 from line 11. H&r block onlinetaxes hrblock com This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. H&r block onlinetaxes hrblock com   15. H&r block onlinetaxes hrblock com Subtract line 10 from line 3. H&r block onlinetaxes hrblock com This is your basis in this Coverdell ESA as of December 31, 2013   15. H&r block onlinetaxes hrblock com   Part III. H&r block onlinetaxes hrblock com Summary (Complete only once)       16. H&r block onlinetaxes hrblock com Taxable amount. H&r block onlinetaxes hrblock com Add together all amounts on line 14 for all your Coverdell ESAs. H&r block onlinetaxes hrblock com Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. H&r block onlinetaxes hrblock com   Prev  Up  Next   Home   More Online Publications