How Much Do Students Get Back In Taxes
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How much do students get back in taxes 3. How much do students get back in taxes Gifts Table of Contents If you give gifts in the course of your trade or business, you can deduct all or part of the cost. How much do students get back in taxes This chapter explains the limits and rules for deducting the costs of gifts. How much do students get back in taxes $25 limit. How much do students get back in taxes You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. How much do students get back in taxes A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. How much do students get back in taxes If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. How much do students get back in taxes This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use. How much do students get back in taxes If you and your spouse both give gifts, both of you are treated as one taxpayer. How much do students get back in taxes It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. How much do students get back in taxes If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. How much do students get back in taxes Example. How much do students get back in taxes Bob Jones sells products to Local Company. How much do students get back in taxes He and his wife, Jan, gave Local Company three gourmet gift baskets to thank them for their business. How much do students get back in taxes They paid $80 for each gift basket, or $240 total. How much do students get back in taxes Three of Local Company's executives took the gift baskets home for their families' use. How much do students get back in taxes Bob and Jan have no independent business relationship with any of the executives' other family members. How much do students get back in taxes They can deduct a total of $75 ($25 limit × 3) for the gift baskets. How much do students get back in taxes Incidental costs. How much do students get back in taxes Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. How much do students get back in taxes A cost is incidental only if it does not add substantial value to the gift. How much do students get back in taxes For example, the cost of gift wrapping is an incidental cost. How much do students get back in taxes However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. How much do students get back in taxes Exceptions. How much do students get back in taxes The following items are not considered gifts for purposes of the $25 limit. How much do students get back in taxes An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. How much do students get back in taxes Examples include pens, desk sets, and plastic bags and cases. How much do students get back in taxes Signs, display racks, or other promotional material to be used on the business premises of the recipient. How much do students get back in taxes Figure B. How much do students get back in taxes When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. How much do students get back in taxes (Do not use this chart if your home is your principal place of business. How much do students get back in taxes See Office in the home . How much do students get back in taxes ) Please click here for the text description of the image. How much do students get back in taxes Figure B. How much do students get back in taxes When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1. How much do students get back in taxes 162-1(a); RR 55–109; RR 94–47 Gift or entertainment. How much do students get back in taxes Any item that might be considered either a gift or entertainment generally will be considered entertainment. How much do students get back in taxes However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. How much do students get back in taxes If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. How much do students get back in taxes You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. How much do students get back in taxes You can change your treatment of the tickets at a later date by filing an amended return. How much do students get back in taxes Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. How much do students get back in taxes If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. How much do students get back in taxes You cannot choose, in this case, to treat the cost of the tickets as a gift expense. 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How much do students get back in taxes 4. How much do students get back in taxes Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. How much do students get back in taxes However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. How much do students get back in taxes For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. How much do students get back in taxes This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. How much do students get back in taxes The student loan interest deduction is taken as an adjustment to income. How much do students get back in taxes This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). How much do students get back in taxes This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. How much do students get back in taxes Table 4-1. How much do students get back in taxes Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. How much do students get back in taxes Do not rely on this table alone. How much do students get back in taxes Refer to the text for complete details. How much do students get back in taxes Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. How much do students get back in taxes Loan qualifications Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. How much do students get back in taxes Student qualifications The student must be: •you, your spouse, or your dependent, and •enrolled at least half-time in a degree program. How much do students get back in taxes Time limit on deduction You can deduct interest paid during the remaining period of your student loan. How much do students get back in taxes Limit on modified adjusted gross income (MAGI) $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). How much do students get back in taxes Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. How much do students get back in taxes It includes both required and voluntary interest payments. How much do students get back in taxes Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. How much do students get back in taxes Loans from the following sources are not qualified student loans. How much do students get back in taxes A related person. How much do students get back in taxes A qualified employer plan. How much do students get back in taxes Your dependent. How much do students get back in taxes Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. How much do students get back in taxes You can find more information about dependents in Publication 501. How much do students get back in taxes Exceptions. How much do students get back in taxes For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. How much do students get back in taxes An individual can be your dependent even if you are the dependent of another taxpayer. How much do students get back in taxes An individual can be your dependent even if the individual files a joint return with a spouse. How much do students get back in taxes An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). How much do students get back in taxes Reasonable period of time. How much do students get back in taxes Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. How much do students get back in taxes Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. How much do students get back in taxes The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. How much do students get back in taxes If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. How much do students get back in taxes Academic period. How much do students get back in taxes An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. How much do students get back in taxes In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. How much do students get back in taxes Eligible student. How much do students get back in taxes This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. How much do students get back in taxes Enrolled at least half-time. How much do students get back in taxes A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. How much do students get back in taxes The standard for what is half of the normal full-time work load is determined by each eligible educational institution. How much do students get back in taxes However, the standard may not be lower than any of those established by the U. How much do students get back in taxes S. How much do students get back in taxes Department of Education under the Higher Education Act of 1965. How much do students get back in taxes Related person. How much do students get back in taxes You cannot deduct interest on a loan you get from a related person. How much do students get back in taxes Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. How much do students get back in taxes ), Your lineal descendants (children, grandchildren, etc. How much do students get back in taxes ), and Certain corporations, partnerships, trusts, and exempt organizations. How much do students get back in taxes Qualified employer plan. How much do students get back in taxes You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. How much do students get back in taxes Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. How much do students get back in taxes They include amounts paid for the following items. How much do students get back in taxes Tuition and fees. How much do students get back in taxes Room and board. How much do students get back in taxes Books, supplies, and equipment. How much do students get back in taxes Other necessary expenses (such as transportation). How much do students get back in taxes The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. How much do students get back in taxes Eligible educational institution. How much do students get back in taxes An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. How much do students get back in taxes S. How much do students get back in taxes Department of Education. How much do students get back in taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. How much do students get back in taxes Certain educational institutions located outside the United States also participate in the U. How much do students get back in taxes S. How much do students get back in taxes Department of Education's Federal Student Aid (FSA) programs. How much do students get back in taxes For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. How much do students get back in taxes An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. How much do students get back in taxes The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. How much do students get back in taxes The educational institution should be able to tell you if it is an eligible educational institution. How much do students get back in taxes Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. How much do students get back in taxes Employer-provided educational assistance. How much do students get back in taxes See chapter 11, Employer-Provided Educational Assistance . How much do students get back in taxes Tax-free distribution of earnings from a Coverdell education savings account (ESA). How much do students get back in taxes See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. How much do students get back in taxes Tax-free distribution of earnings from a qualified tuition program (QTP). How much do students get back in taxes See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. How much do students get back in taxes U. How much do students get back in taxes S. How much do students get back in taxes savings bond interest that you exclude from income because it is used to pay qualified education expenses. How much do students get back in taxes See chapter 10, Education Savings Bond Program . How much do students get back in taxes The tax-free part of scholarships and fellowships. How much do students get back in taxes See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How much do students get back in taxes Veterans' educational assistance. How much do students get back in taxes See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How much do students get back in taxes Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. How much do students get back in taxes Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. How much do students get back in taxes Loan origination fee. How much do students get back in taxes In general, this is a one-time fee charged by the lender when a loan is made. How much do students get back in taxes To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. How much do students get back in taxes A loan origination fee treated as interest accrues over the term of the loan. How much do students get back in taxes Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. How much do students get back in taxes If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. How much do students get back in taxes The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. How much do students get back in taxes A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. How much do students get back in taxes Example. How much do students get back in taxes In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. How much do students get back in taxes The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. How much do students get back in taxes Bill began making payments on his student loan in 2013. How much do students get back in taxes Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. How much do students get back in taxes Bill's loan is payable in 120 equal monthly payments. How much do students get back in taxes He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). How much do students get back in taxes Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. How much do students get back in taxes To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. How much do students get back in taxes Capitalized interest. How much do students get back in taxes This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. How much do students get back in taxes Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. How much do students get back in taxes No deduction for capitalized interest is allowed in a year in which no loan payments were made. How much do students get back in taxes Interest on revolving lines of credit. How much do students get back in taxes This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. How much do students get back in taxes See Qualified Education Expenses , earlier. How much do students get back in taxes Interest on refinanced student loans. How much do students get back in taxes This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. How much do students get back in taxes If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. How much do students get back in taxes Voluntary interest payments. How much do students get back in taxes These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. How much do students get back in taxes Example. How much do students get back in taxes The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. How much do students get back in taxes He began making payments as required. How much do students get back in taxes In September 2013, Roger enrolled in graduate school on a full-time basis. How much do students get back in taxes He applied for and was granted deferment of his loan payments while in graduate school. How much do students get back in taxes Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. How much do students get back in taxes Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. How much do students get back in taxes Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. How much do students get back in taxes To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. How much do students get back in taxes Example. How much do students get back in taxes In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. How much do students get back in taxes The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. How much do students get back in taxes The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. How much do students get back in taxes At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. How much do students get back in taxes The loan is payable over 60 months, with a payment of $200. How much do students get back in taxes 51 due on the first of each month, beginning November 2013. How much do students get back in taxes Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. How much do students get back in taxes However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). How much do students get back in taxes Payment Date Payment Stated Interest Principal November 2013 $200. How much do students get back in taxes 51 $44. How much do students get back in taxes 27 $156. How much do students get back in taxes 24 December 2013 $200. How much do students get back in taxes 51 $43. How much do students get back in taxes 62 $156. How much do students get back in taxes 89 Totals $401. How much do students get back in taxes 02 $87. How much do students get back in taxes 89 $313. How much do students get back in taxes 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. How much do students get back in taxes 89. How much do students get back in taxes Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). How much do students get back in taxes A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. How much do students get back in taxes Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. How much do students get back in taxes Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. How much do students get back in taxes 02 ($87. How much do students get back in taxes 89 + $10 + $303. How much do students get back in taxes 13). How much do students get back in taxes For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. How much do students get back in taxes She also will apply the remaining amount of capitalized interest ($625 − $303. How much do students get back in taxes 13 = $321. How much do students get back in taxes 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. How much do students get back in taxes Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. How much do students get back in taxes Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. How much do students get back in taxes Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. How much do students get back in taxes Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. How much do students get back in taxes For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. How much do students get back in taxes When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. How much do students get back in taxes Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. How much do students get back in taxes Your filing status is any filing status except married filing separately. How much do students get back in taxes No one else is claiming an exemption for you on his or her tax return. How much do students get back in taxes You are legally obligated to pay interest on a qualified student loan. How much do students get back in taxes You paid interest on a qualified student loan. How much do students get back in taxes Claiming an exemption for you. How much do students get back in taxes Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. How much do students get back in taxes Example 1. How much do students get back in taxes During 2013, Josh paid $600 interest on his qualified student loan. How much do students get back in taxes Only he is legally obligated to make the payments. How much do students get back in taxes No one claimed an exemption for Josh for 2013. How much do students get back in taxes Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. How much do students get back in taxes Example 2. How much do students get back in taxes During 2013, Jo paid $1,100 interest on her qualified student loan. How much do students get back in taxes Only she is legally obligated to make the payments. How much do students get back in taxes Jo's parents claimed an exemption for her on their 2013 tax return. How much do students get back in taxes In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. How much do students get back in taxes Interest paid by others. How much do students get back in taxes If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. How much do students get back in taxes Example 1. How much do students get back in taxes Darla obtained a qualified student loan to attend college. How much do students get back in taxes After Darla's graduation from college, she worked as an intern for a nonprofit organization. How much do students get back in taxes As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. How much do students get back in taxes This payment was treated as additional compensation and reported in box 1 of her Form W-2. How much do students get back in taxes Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. How much do students get back in taxes Example 2. How much do students get back in taxes Ethan obtained a qualified student loan to attend college. How much do students get back in taxes After graduating from college, the first monthly payment on his loan was due in December. How much do students get back in taxes As a gift, Ethan's mother made this payment for him. How much do students get back in taxes No one is claiming a dependency exemption for Ethan on his or her tax return. How much do students get back in taxes Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. How much do students get back in taxes No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). How much do students get back in taxes Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. How much do students get back in taxes However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. How much do students get back in taxes You can use Worksheet 4-1. How much do students get back in taxes Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. How much do students get back in taxes Form 1098-E. How much do students get back in taxes To help you figure your student loan interest deduction, you should receive Form 1098-E. How much do students get back in taxes Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. How much do students get back in taxes For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. How much do students get back in taxes Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. How much do students get back in taxes However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. How much do students get back in taxes See Allocating Payments Between Interest and Principal , earlier. How much do students get back in taxes The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. How much do students get back in taxes The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. How much do students get back in taxes Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). How much do students get back in taxes You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). How much do students get back in taxes Modified adjusted gross income (MAGI). How much do students get back in taxes For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. How much do students get back in taxes However, as discussed below, there may be other modifications. How much do students get back in taxes Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. How much do students get back in taxes Table 4-2. How much do students get back in taxes Effect of MAGI on Student Loan Interest Deduction IF your filing status is. How much do students get back in taxes . How much do students get back in taxes . How much do students get back in taxes AND your MAGI is. How much do students get back in taxes . How much do students get back in taxes . How much do students get back in taxes THEN your student loan interest deduction is. How much do students get back in taxes . How much do students get back in taxes . How much do students get back in taxes single, head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. How much do students get back in taxes more than $60,000 but less than $75,000 reduced because of the phaseout. How much do students get back in taxes $75,000 or more eliminated by the phaseout. How much do students get back in taxes married filing joint return not more than $125,000 not affected by the phaseout. How much do students get back in taxes more than $125,000 but less than $155,000 reduced because of the phaseout. How much do students get back in taxes $155,000 or more eliminated by the phaseout. How much do students get back in taxes MAGI when using Form 1040A. How much do students get back in taxes If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). How much do students get back in taxes MAGI when using Form 1040. How much do students get back in taxes If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. How much do students get back in taxes MAGI when using Form 1040NR. How much do students get back in taxes If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). How much do students get back in taxes MAGI when using Form 1040NR-EZ. How much do students get back in taxes If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). How much do students get back in taxes Phaseout. How much do students get back in taxes If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. How much do students get back in taxes To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. How much do students get back in taxes The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). How much do students get back in taxes The denominator is $15,000 ($30,000 in the case of a joint return). How much do students get back in taxes Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. How much do students get back in taxes Example 1. How much do students get back in taxes During 2013 you paid $800 interest on a qualified student loan. How much do students get back in taxes Your 2013 MAGI is $145,000 and you are filing a joint return. How much do students get back in taxes You must reduce your deduction by $533, figured as follows. How much do students get back in taxes $800 × $145,000 − $125,000 $30,000 = $533 Your reduced student loan interest deduction is $267 ($800 − $533). How much do students get back in taxes Example 2. How much do students get back in taxes The facts are the same as in Example 1 except that you paid $2,750 interest. How much do students get back in taxes Your maximum deduction for 2013 is $2,500. How much do students get back in taxes You must reduce your maximum deduction by $1,667, figured as follows. How much do students get back in taxes $2,500 × $145,000 − $125,000 $30,000 = $1,667 In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). How much do students get back in taxes Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. How much do students get back in taxes However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. How much do students get back in taxes Student Loan Interest Deduction Worksheet at the end of this chapter. How much do students get back in taxes Claiming the Deduction The student loan interest deduction is an adjustment to income. How much do students get back in taxes To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). How much do students get back in taxes Worksheet 4-1. How much do students get back in taxes Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. How much do students get back in taxes Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. How much do students get back in taxes 1. How much do students get back in taxes Enter the total interest you paid in 2013 on qualified student loans. How much do students get back in taxes Do not enter more than $2,500 1. How much do students get back in taxes 2. How much do students get back in taxes Enter the amount from Form 1040, line 22 2. How much do students get back in taxes 3. How much do students get back in taxes Enter the total of the amounts from Form 1040, lines 23 through 32 3. How much do students get back in taxes 4. How much do students get back in taxes Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. How much do students get back in taxes 5. How much do students get back in taxes Add lines 3 and 4 5. How much do students get back in taxes 6. How much do students get back in taxes Subtract line 5 from line 2 6. How much do students get back in taxes 7. How much do students get back in taxes Enter any foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. How much do students get back in taxes 8. How much do students get back in taxes Enter any foreign housing deduction (Form 2555, line 50) 8. How much do students get back in taxes 9. How much do students get back in taxes Enter the amount of income from Puerto Rico you are excluding 9. How much do students get back in taxes 10. How much do students get back in taxes Enter the amount of income from American Samoa you are excluding (Form 4563, line 15) 10. How much do students get back in taxes 11. How much do students get back in taxes Add lines 6 through 10. How much do students get back in taxes This is your modified adjusted gross income 11. How much do students get back in taxes 12. How much do students get back in taxes Enter the amount shown below for your filing status 12. How much do students get back in taxes •Single, head of household, or qualifying widow(er)—$60,000 •Married filing jointly—$125,000 13. How much do students get back in taxes Is the amount on line 11 more than the amount on line 12? □ No. How much do students get back in taxes Skip lines 13 and 14, enter -0- on line 15, and go to line 16. How much do students get back in taxes □ Yes. How much do students get back in taxes Subtract line 12 from line 11 13. How much do students get back in taxes 14. How much do students get back in taxes Divide line 13 by $15,000 ($30,000 if married filing jointly). How much do students get back in taxes Enter the result as a decimal (rounded to at least three places). How much do students get back in taxes If the result is 1. How much do students get back in taxes 000 or more, enter 1. How much do students get back in taxes 000 14. How much do students get back in taxes . How much do students get back in taxes 15. How much do students get back in taxes Multiply line 1 by line 14 15. How much do students get back in taxes 16. How much do students get back in taxes Student loan interest deduction. How much do students get back in taxes Subtract line 15 from line 1. How much do students get back in taxes Enter the result here and on Form 1040, line 33. How much do students get back in taxes Do not include this amount in figuring any other deduction on your return (such as on Schedule A, C, E, etc. How much do students get back in taxes ) 16. 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