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How To Do 1040x

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How To Do 1040x

How to do 1040x 3. How to do 1040x   Credit for Withholding and Estimated Tax for 2013 Table of Contents Introduction Topics - This chapter discusses: WithholdingForm W-2 Form W-2G The 1099 Series Form Not Correct Form Received After Filing Separate Returns Fiscal Years (FY) Estimated TaxSeparate Returns Divorced Taxpayers Excess Social Security or Railroad Retirement Tax WithholdingJoint returns. How to do 1040x Worksheet for Nonrailroad Employees Worksheets for Railroad Employees Introduction When you file your 2013 income tax return, take credit for all the income tax and excess social security or railroad retirement tax withheld from your salary, wages, pensions, etc. How to do 1040x Also take credit for the estimated tax you paid for 2013. How to do 1040x These credits are subtracted from your total tax. How to do 1040x Because these credits are refundable, you should file a return and claim these credits, even if you do not owe tax. How to do 1040x If the total of your withholding and your estimated tax payments for any payment period is less than the amount you needed to pay by the due date for that period, you may be charged a penalty, even if the total of these credits is more than your tax for the year. How to do 1040x Topics - This chapter discusses: How to take credit for withholding, How to take credit for estimated taxes you paid, and How to take credit for excess social security, Medicare, or railroad retirement tax withholding. How to do 1040x Withholding If you had income tax withheld during 2013, you generally should be sent a statement by January 31, 2014, showing your income and the tax withheld. How to do 1040x Depending on the source of your income, you will receive: Form W-2, Wage and Tax Statement, Form W-2G, Certain Gambling Winnings, or A form in the 1099 series. How to do 1040x Form W-2 Your employer is required to provide or send Form W-2 to you no later than January 31, 2014. How to do 1040x You should receive a separate Form W-2 from each employer you worked for. How to do 1040x If you stopped working before the end of 2013, your employer could have given you your Form W-2 at any time after you stopped working. How to do 1040x However, your employer must provide or send it to you by January 31, 2014. How to do 1040x If you ask for the form, your employer must send it to you within 30 days after receiving your written request or within 30 days after your final wage payment, whichever is later. How to do 1040x If you have not received your Form W-2 by January 31, contact your employer or payer to request a copy. How to do 1040x If you still do not get the form by February 15, the IRS can help you by requesting the form from your employer. How to do 1040x The phone number for the IRS is listed in chapter 5. How to do 1040x You will be asked for the following information. How to do 1040x Your name, address, city and state, zip code, and social security number. How to do 1040x Your employer's name, address, city, state, zip code, and the employer's identification number (if known). How to do 1040x An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. How to do 1040x The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible. How to do 1040x Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. How to do 1040x Total the federal income tax withheld (shown in box 2 of all Forms W-2 received) and enter that amount on the appropriate line of your tax return. How to do 1040x In addition, Form W-2 is used to report any taxable sick pay you received and any income tax withheld from your sick pay. How to do 1040x Your sick pay may be combined with other wages in one Form W-2 or you may receive a separate Form W-2 for sick pay. How to do 1040x If you file a paper tax return, attach Copy B of Form W-2 to your return. How to do 1040x Form W-2G If you had gambling winnings in 2013, the payer may have withheld income tax. How to do 1040x If tax was withheld, the payer will give you a Form W-2G showing the amount you won and the amount of tax withheld. How to do 1040x Report the amounts you won on line 21 of Form 1040. How to do 1040x Take credit for the tax withheld on line 62 of Form 1040. How to do 1040x If you had gambling winnings, you must use Form 1040; you cannot use Form 1040A or Form 1040EZ. How to do 1040x Gambling losses can be deducted on Schedule A (Form 1040) as a miscellaneous itemized deduction. How to do 1040x However, you cannot deduct more than the gambling winnings you report on Form 1040. How to do 1040x File Form W-2G with your income tax return only if it shows any federal income tax withheld in box 2. How to do 1040x The 1099 Series Most forms in the 1099 series are not filed with your return. How to do 1040x In general, these forms should be furnished to you by January 31, 2014. How to do 1040x Unless instructed to file any of these forms with your return, keep them for your records. How to do 1040x There are several different forms in this series, including: Form 1099-B, Proceeds From Broker and Barter Exchange Transactions; Form 1099-C, Cancellation of Debt; Form 1099-DIV, Dividends and Distributions; Form 1099-G, Certain Government Payments; Form 1099-INT, Interest Income; Form 1099-K, Payment Card and Third-Party Network Transactions; Form 1099-MISC, Miscellaneous Income; Form 1099-OID, Original Issue Discount; Form 1099-PATR, Taxable Distributions Received From Cooperatives; Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530); Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. How to do 1040x ; Form SSA-1099, Social Security Benefit Statement; and Form RRB-1099, Payments by the Railroad Retirement Board. How to do 1040x If you received the types of income reported on some forms in the 1099 series, you may not be able to use Form 1040A or Form 1040EZ. How to do 1040x See the instructions to these forms for details. How to do 1040x Reporting your withholding. How to do 1040x   Report on your tax return all federal income tax withholding shown on your Form 1099, Form SSA-1099, and/or Form RRB-1099. How to do 1040x Include the amount withheld in the total on line 62 of Form 1040, line 36 of Form 1040A, or line 7 of Form 1040EZ. How to do 1040x Form 1099-R. How to do 1040x   Attach Form 1099-R to your paper return if federal income tax withholding is shown in box 4. How to do 1040x Do not attach any other Form 1099. How to do 1040x Form Not Correct If you receive a form with incorrect information, you should ask the payer for a corrected form. How to do 1040x Call the telephone number or write to the address given for the payer on the form. How to do 1040x The corrected Form W-2G or Form 1099 you receive will have an “X” in the “CORRECTED” box at the top of the form. How to do 1040x A special form, Form W-2c, Corrected Wage and Tax Statement, is used to correct a Form W-2. How to do 1040x In certain situations, you will receive two forms in place of the original incorrect form. How to do 1040x This will happen when your taxpayer identification number is wrong or missing, your name and address are wrong, or you received the wrong type of form (for example, a Form 1099-DIV instead of a Form 1099-INT). How to do 1040x One new form you receive will be the same incorrect form or have the same incorrect information, but all money amounts will be zero. How to do 1040x This form will have an “X” in the “CORRECTED” box at the top of the form. How to do 1040x The second new form should have all the correct information, prepared as though it is the original (the “CORRECTED” box will not be checked). How to do 1040x Form Received After Filing If you file your return and you later receive a form for income that you did not include on your return, report the income and take credit for any income tax withheld by filing Form 1040X, Amended U. How to do 1040x S. How to do 1040x Individual Income Tax Return. How to do 1040x Separate Returns If you are married but file a separate return, you can take credit only for the tax withheld from your own income. How to do 1040x Do not include any amount withheld from your spouse's income. How to do 1040x However, different rules may apply if you live in a community property state. How to do 1040x Community property states. How to do 1040x   The following are community property states. How to do 1040x Arizona. How to do 1040x California. How to do 1040x Idaho. How to do 1040x Louisiana. How to do 1040x Nevada. How to do 1040x New Mexico. How to do 1040x Texas. How to do 1040x Washington. How to do 1040x Wisconsin. How to do 1040x Generally, if you live in a community property state and file a separate return, you and your spouse each must report half of all community income in addition to your own separate income. How to do 1040x If you are required to report half of all community income, you are entitled to take credit for half of all taxes withheld on the community income. How to do 1040x If you were divorced during the year, each of you generally must report half the community income and can take credit for half the withholding on that community income for the period before the divorce. How to do 1040x   For more information on these rules, and some exceptions, see Publication 555, Community Property. How to do 1040x Fiscal Years (FY) If you file your tax return on the basis of a fiscal year (a 12-month period ending on the last day of any month except December), you must follow special rules, described below, to determine your credit for federal income tax withholding. How to do 1040x Fiscal year withholding. How to do 1040x    You can claim credit on your tax return only for the tax withheld during the calendar year (CY) ending within your fiscal year. How to do 1040x You cannot claim credit for any of the tax withheld during the calendar year beginning in your fiscal year. How to do 1040x You will be able to claim credit for that withholding on your return for your next fiscal year. How to do 1040x   The Form W-2 or 1099 you receive for the calendar year that ends during your fiscal year will show the tax withheld and the income you received during that calendar year. How to do 1040x   Although you take credit for all the withheld tax shown on the form, report only the part of the income shown on the form that you received during your fiscal year. How to do 1040x Add to that the income you received during the rest of your fiscal year. How to do 1040x Example. How to do 1040x Miles Hanson files his return for a fiscal year ending June 30, 2013. How to do 1040x In January 2013, he received a Form W-2 that showed that his wages for 2012 were $31,200 and that his income tax withheld was $3,380. How to do 1040x His records show that he had received $15,000 of the wages by June 30, 2012, and $16,200 from July 1 through December 31, 2012. How to do 1040x See Table 3-1 . How to do 1040x On his return for the fiscal year ending June 30, 2013, Miles will report the $16,200 he was paid in July through December of 2012, plus the $18,850 he was paid during the rest of the fiscal year, January 1, 2013, through June 30, 2013. How to do 1040x However, he takes credit for all $3,380 that was withheld during 2012. How to do 1040x On his return for the fiscal year ending June 30, 2012, he reported the $15,000 he was paid in January through June 2012, but took no credit for the tax withheld during that time. How to do 1040x On his return for the fiscal year ending June 30, 2014, he will take the credit for any tax withheld during 2013 but not for any tax withheld during 2014. How to do 1040x Table 3-1. How to do 1040x Example for Fiscal Year Ending June 30, 2013—Miles Hanson Date Form W-2 Miles' records Tax return for FY ending 6/30/20121 Tax return for FY ending 6/30/2013 Wages With- holding Wages With- holding Wages With- holding Wages With- holding CY 20122 $31,200 $3,380             1/1/2012 –  6/30/2012     $15,000 $1,600 $15,000       7/1/2012 –  12/31/2012     $16,200 $1,780     $16,200 $3,380 CY 2013 $37,700 $4,316 3             1/1/2013 –  6/30/2013     $18,850 $2,158     $18,850   7/1/2013 –  12/31/2013     $18,850 4 $2,158         1Miles' tax return for FY ending 6/30/2012 also included his wages for 7/1–12/31/2011 and the withholding shown on his 2011 Form W-2. How to do 1040x  2Calendar year (January 1 – December 31). How to do 1040x   3Withholding shown on 2013 Form W-2 ($4,316) will be included in Miles' tax return for FY ending 6/30/2014, the fiscal year in which calendar year 2013 ends. How to do 1040x   4Wages for 7/1–12/31/2013 ($18,850) will be included in Miles' tax return for FY ending 6/30/2014, the fiscal year in which the wages were received. How to do 1040x Backup withholding. How to do 1040x   If income tax has been withheld under the backup withholding rule, take credit for it on your tax return for the fiscal year in which you received the income. How to do 1040x Example. How to do 1040x Emily Smith's records show that she received income in November 2013 and February 2014 from which there was backup withholding ($100 and $50, respectively). How to do 1040x Emily takes credit for the entire $150 of backup withholding on her tax return for the fiscal year ending September 30, 2014. How to do 1040x Estimated Tax Take credit for all your estimated tax payments for 2013 on line 63 of Form 1040 or line 37 of Form 1040A. How to do 1040x Include any overpayment from 2012 that you had credited to your 2013 estimated tax. How to do 1040x You must use Form 1040 or Form 1040A if you paid estimated tax. How to do 1040x You cannot file Form 1040EZ. How to do 1040x If you were a beneficiary of an estate or trust, you should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. How to do 1040x , from the fiduciary. How to do 1040x If you have estimated taxes credited to you from the estate or trust (from Schedule K-1 (Form 1041)), you must report the estimated taxes on Schedule E (Form 1040). How to do 1040x On the dotted line next to the entry space for line 37 of Schedule E (Form 1040), enter “ES payment claimed” and the amount. How to do 1040x However, do not include this amount in the total on line 37. How to do 1040x Instead, enter the amount on Form 1040, line 63. How to do 1040x This estimated tax payment for 2013 is treated as being made by you on January 15, 2014. How to do 1040x Name changed. How to do 1040x   If you changed your name, and you made estimated tax payments using your former name, attach a statement to the front of your paper tax return indicating: When you made the payments, The amount of each payment, Your name when you made the payments, and The social security number under which you made the payments. How to do 1040x  The statement should cover payments you made jointly with your spouse as well as any you made separately. How to do 1040x   Be sure to report the change to your local Social Security Administration office before filing your 2014 tax return. How to do 1040x This prevents delays in processing your return and issuing refunds. How to do 1040x It also safeguards your future social security benefits. How to do 1040x For more information, call the Social Security Administration at 1-800-772-1213. How to do 1040x Separate Returns If you and your spouse made separate estimated tax payments for 2013 and you file separate returns, you can take credit only for your own payments. How to do 1040x If you made joint estimated tax payments, you must decide how to divide the payments between your returns. How to do 1040x One of you can claim all of the estimated tax paid and the other none, or you can divide it in any other way you agree on. How to do 1040x If you cannot agree, you must divide the payments in proportion to each spouse's individual tax as shown on your separate returns for 2013. How to do 1040x Example. How to do 1040x James and Evelyn Brown made joint estimated tax payments for 2013 totaling $3,000. How to do 1040x They file separate 2013 Forms 1040. How to do 1040x James' tax is $4,000 and Evelyn's is $1,000. How to do 1040x If they do not agree on how to divide the $3,000, they must divide it proportionately between their returns. How to do 1040x Because James' tax ($4,000) is 80% of the total tax ($5,000), his share of the estimated tax is $2,400 (80% of $3,000). How to do 1040x The balance, $600 (20% of $3,000), is Evelyn's share. How to do 1040x Divorced Taxpayers If you made joint estimated tax payments for 2013 and you were divorced during the year, either you or your former spouse can claim all of the joint payments, or you each can claim part of them. How to do 1040x If you cannot agree on how to divide the payments, you must divide them in proportion to each spouse's individual tax as shown on your separate returns for 2013. How to do 1040x See Example earlier under Separate Returns. How to do 1040x If you claim any of the joint payments on your tax return, enter your former spouse's social security number (SSN) in the space provided at the top of page 1 of Form 1040 or Form 1040A. How to do 1040x If you divorced and remarried in 2013, enter your present spouse's SSN in that space. How to do 1040x Enter your former spouse's SSN, followed by “DIV,” under Payments to the left of Form 1040, line 63, or in the blank space to the left of Form 1040A, line 37. How to do 1040x Excess Social Security or Railroad Retirement Tax Withholding Most employers must withhold social security tax from your wages. How to do 1040x In some cases, however, the federal government and state and local governments do not have to withhold social security tax from their employees' wages. How to do 1040x If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. How to do 1040x Two or more employers. How to do 1040x   If you worked for two or more employers in 2013, too much social security tax or tier 1 RRTA tax may have been withheld from your pay. How to do 1040x You may be able to claim the excess as a credit against your income tax when you file your return. How to do 1040x Table 3-2 shows the maximum amount that should have been withheld for any of these taxes for 2013. How to do 1040x Figure the excess withholding on the appropriate worksheet. How to do 1040x    Table 3-2. How to do 1040x Maximum Social Security and RRTA Withholding for 2013 Type of tax Maximum wages subject to tax Tax rate Maximum tax to be withheld Social security $113,700 6. How to do 1040x 2% $7,049. How to do 1040x 40 Tier 1 RRTA $113,700 6. How to do 1040x 2% $7,049. How to do 1040x 40 Tier 2 RRTA $84,300 4. How to do 1040x 4% $3,709. How to do 1040x 20 Joint returns. How to do 1040x   If you are filing a joint return, you and your spouse must figure any excess social security or tier 1 RRTA separately. How to do 1040x Note. How to do 1040x All wages are subject to Medicare tax withholding. How to do 1040x Employer's error. How to do 1040x   If you had only one employer and he or she withheld too much social security, Medicare, or tier 1 RRTA tax, ask the employer to refund the excess amount to you. How to do 1040x If the employer refuses to refund the overcollection, ask for a statement indicating the amount of the overcollection to support your claim. How to do 1040x File a claim for refund using Form 843, Claim for Refund and Request for Abatement. How to do 1040x Worksheet for Nonrailroad Employees If you did not work for a railroad during 2013, figure the excess social security withholding on Worksheet 3-1. How to do 1040x Note. How to do 1040x If you worked for both a railroad employer and a nonrailroad employer, use Worksheet 3-2, to figure excess social security and tier 1 RRTA tax. How to do 1040x Where to claim credit for excess social security withholding. How to do 1040x   If you file Form 1040, enter the excess on line 69. How to do 1040x   If you file Form 1040A, include the excess in the total on line 41. How to do 1040x Write “Excess SST” and show the amount of the credit in the space to the left of the line. How to do 1040x   You cannot claim excess social security tax withholding on Form 1040EZ. How to do 1040x Worksheets for Railroad Employees If you worked for a railroad during 2013, figure your excess withholding on Worksheet 3-2 and 3-3, as appropriate. How to do 1040x Where to claim credit for excess tier 1 RRTA withholding. How to do 1040x   If you file Form 1040, enter the excess on line 69. How to do 1040x   If you file Form 1040A, include the excess in the total on line 41. How to do 1040x Write “Excess SST” and show the amount of the credit in the space to the left of the line. How to do 1040x   You cannot claim excess tier 1 RRTA withholding on Form 1040EZ. How to do 1040x How to claim refund of excess tier 2 RRTA. How to do 1040x   To claim a refund of tier 2 tax, use Form 843. How to do 1040x Be sure to attach a copy of all of your Forms W-2. How to do 1040x   See Worksheet 3-3 and the Instructions for Form 843, for more details. How to do 1040x Worksheet 3-1. How to do 1040x Excess Social Security—Nonrailroad Employees 1. How to do 1040x Add all social security tax withheld (but not more than  $7,049. How to do 1040x 40 for each employer). How to do 1040x This tax should be shown  in box 4 of your Forms W-2. How to do 1040x Enter the total here 1. How to do 1040x   2. How to do 1040x Enter any uncollected social security tax on tips or group-term life insurance on Form 1040, line 60, identified by “UT” 2. How to do 1040x   3. How to do 1040x Add lines 1 and 2. How to do 1040x If $7,049. How to do 1040x 40 or less, stop here. How to do 1040x You cannot claim the credit 3. How to do 1040x   4. How to do 1040x Social security limit 4. How to do 1040x $7,049. How to do 1040x 40 5. How to do 1040x Excess. How to do 1040x Subtract line 4 from line 3 5. How to do 1040x   Worksheet 3-2. How to do 1040x Excess Social Security and Tier 1 RRTA—Railroad Employees 1. How to do 1040x Add all social security and tier 1 RRTA tax withheld (but not more than $7,049. How to do 1040x 40 for each employer). How to do 1040x Social security tax should be shown in box 4 and tier 1 RRTA should be shown  in box 14 of your Forms W-2. How to do 1040x Enter the total here 1. How to do 1040x   2. How to do 1040x Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance on Form 1040, line 60, identified by “UT” 2. How to do 1040x   3. How to do 1040x Add lines 1 and 2. How to do 1040x If $7,049. How to do 1040x 40 or less, stop here. How to do 1040x You cannot claim the credit 3. How to do 1040x   4. How to do 1040x Social security and tier 1 RRTA tax limit 4. How to do 1040x $7,049. How to do 1040x 40 5. How to do 1040x Excess. How to do 1040x Subtract line 4 from line 3 5. How to do 1040x   Worksheet 3-3. How to do 1040x Excess Tier 2 RRTA—Railroad Employees 1. How to do 1040x Add all tier 2 RRTA tax withheld (but not more than $3,709. How to do 1040x 20 for each employer). How to do 1040x Box 14 of your Forms W-2 should show tier 2 RRTA tax. How to do 1040x Enter the total here 1. How to do 1040x   2. How to do 1040x Enter any uncollected tier 2 RRTA tax on tips or group-term life insurance on Form 1040, line 60, identified by “UT” 2. How to do 1040x   3. How to do 1040x Add lines 1 and 2. How to do 1040x If $3,709. How to do 1040x 20 or less, stop here. How to do 1040x You cannot claim the credit. How to do 1040x 3. How to do 1040x   4. How to do 1040x Tier 2 RRTA tax limit 4. How to do 1040x $3,709. How to do 1040x 20 5. How to do 1040x Excess. How to do 1040x Subtract line 4 from line 3. How to do 1040x 5. How to do 1040x   Prev  Up  Next   Home   More Online Publications
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The How To Do 1040x

How to do 1040x 2. How to do 1040x   American Opportunity Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible StudentException. How to do 1040x Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Refundable Part of Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. How to do 1040x They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). How to do 1040x This chapter explains: Who can claim the American opportunity credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. How to do 1040x What is the tax benefit of the American opportunity credit. How to do 1040x   For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student. How to do 1040x   A tax credit reduces the amount of income tax you may have to pay. How to do 1040x Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. How to do 1040x Forty percent of the American opportunity credit may be refundable. How to do 1040x This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. How to do 1040x   Your allowable American opportunity credit may be limited by the amount of your income. How to do 1040x Also, the nonrefundable part of the credit may be limited by the amount of your tax. How to do 1040x Overview of the American opportunity credit. How to do 1040x   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. How to do 1040x The details are discussed in this chapter. How to do 1040x Can you claim more than one education credit this year. How to do 1040x   For each student, you can elect for any year only one of the credits. How to do 1040x For example, if you elect to take the American opportunity credit for a child on your 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013. How to do 1040x   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. How to do 1040x If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. How to do 1040x This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. How to do 1040x Differences between the American opportunity and lifetime learning credits. How to do 1040x   There are several differences between these two credits. How to do 1040x For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope Scholarship Credit for that student. How to do 1040x However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. How to do 1040x The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. How to do 1040x If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. How to do 1040x If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. How to do 1040x Table 2-1. How to do 1040x Overview of the American Opportunity Credit Maximum credit Up to $2,500 credit per eligible student Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship Credit was claimed) Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return. How to do 1040x Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. How to do 1040x You pay qualified education expenses of higher education. How to do 1040x You pay the education expenses for an eligible student. How to do 1040x The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. How to do 1040x Student qualifications. How to do 1040x   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. How to do 1040x As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. How to do 1040x For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. How to do 1040x Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. How to do 1040x If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. How to do 1040x For at least one academic period beginning (or treated as beginning) in 2013, the student both: Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and Carried at least one-half the normal full-time workload for his or her course of study. How to do 1040x The standard for what is half of the normal full-time work load is determined by each eligible educational institution. How to do 1040x However, the standard may not be lower than any of those established by the U. How to do 1040x S. How to do 1040x Department of Education under the Higher Education Act of 1965. How to do 1040x For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. How to do 1040x See Prepaid expenses, later. How to do 1040x As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. How to do 1040x Example 1. How to do 1040x Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. How to do 1040x Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. How to do 1040x Sharon claimed the American opportunity credit on her 2012 tax return. How to do 1040x The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. How to do 1040x Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. How to do 1040x If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. How to do 1040x Example 2. How to do 1040x Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. How to do 1040x His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. How to do 1040x No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. How to do 1040x The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. How to do 1040x Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. How to do 1040x If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. How to do 1040x If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. How to do 1040x Example 3. How to do 1040x Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. How to do 1040x Glenda pays her tuition for the 2014 Spring semester in December 2013. How to do 1040x Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. How to do 1040x If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. How to do 1040x You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. How to do 1040x Note. How to do 1040x Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. How to do 1040x “Qualified education expenses” are defined later under Qualified Education Expenses . How to do 1040x “Eligible students” are defined later under Who Is an Eligible Student . How to do 1040x A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . How to do 1040x You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2013 , later, helpful in determining if you can claim an American opportunity credit on your tax return. How to do 1040x This image is too large to be displayed in the current screen. How to do 1040x Please click the link to view the image. How to do 1040x Figure 2-1 Can you claim the American opportunity credit for 2012? Who Cannot Claim the Credit You cannot claim the American opportunity credit for 2013 if any of the following apply. How to do 1040x Your filing status is married filing separately. How to do 1040x You are listed as a dependent on another person's tax return (such as your parents'). How to do 1040x See Who Can Claim a Dependent's Expenses , later. How to do 1040x Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). How to do 1040x MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . How to do 1040x You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. How to do 1040x More information on nonresident aliens can be found in Publication 519, U. How to do 1040x S. How to do 1040x Tax Guide for Aliens. How to do 1040x What Expenses Qualify The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. How to do 1040x Generally, the credit is allowed for adjusted qualified education expenses paid in 2013 for an academic period beginning in 2013 or beginning in the first three months of 2014. How to do 1040x For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning January 2014, you can use that $1,500 in figuring your 2013 credit. How to do 1040x Academic period. How to do 1040x   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 to do 1040x 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 to do 1040x Paid with borrowed funds. How to do 1040x   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. How to do 1040x Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. How to do 1040x Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. How to do 1040x Student withdraws from class(es). How to do 1040x   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. How to do 1040x Qualified Education Expenses For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. How to do 1040x Eligible educational institution. How to do 1040x   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 to do 1040x S. How to do 1040x Department of Education. How to do 1040x It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. How to do 1040x The educational institution should be able to tell you if it is an eligible educational institution. How to do 1040x   Certain educational institutions located outside the United States also participate in the U. How to do 1040x S. How to do 1040x Department of Education's Federal Student Aid (FSA) programs. How to do 1040x Related expenses. How to do 1040x   Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. How to do 1040x   However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. How to do 1040x Prepaid expenses. How to do 1040x   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. How to do 1040x See Academic period, earlier. How to do 1040x For example, if you pay $2,000 in December 2013, for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). How to do 1040x    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). How to do 1040x   In the following examples, assume that each student is an eligible student at an eligible educational institution. How to do 1040x Example 1. How to do 1040x Jefferson is a sophomore in University V's degree program in dentistry. How to do 1040x This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. How to do 1040x Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. How to do 1040x Example 2. How to do 1040x Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. How to do 1040x The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. How to do 1040x William bought his books from a friend; Grace bought hers at College W's bookstore. How to do 1040x Both are qualified education expenses for the American opportunity credit. How to do 1040x Example 3. How to do 1040x When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. How to do 1040x This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. How to do 1040x No portion of the fee covers personal expenses. How to do 1040x Although labeled as a student activity fee, the fee is required for Kelly's enrollment and attendance at College X and is a qualified expense. How to do 1040x No Double Benefit Allowed You cannot do any of the following. How to do 1040x Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an American opportunity credit based on those same expenses. How to do 1040x Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. How to do 1040x Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. How to do 1040x Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. How to do 1040x See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. How to do 1040x Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. How to do 1040x See Adjustments to Qualified Education Expenses, next. How to do 1040x Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. How to do 1040x The result is the amount of adjusted qualified education expenses for each student. How to do 1040x Tax-free educational assistance. How to do 1040x   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. How to do 1040x See Academic period, earlier. How to do 1040x   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. How to do 1040x This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). How to do 1040x   If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. How to do 1040x If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. How to do 1040x   Tax-free educational assistance includes: The tax-free parts of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). How to do 1040x Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. How to do 1040x Generally, any scholarship or fellowship is treated as tax free. How to do 1040x However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. How to do 1040x The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How to do 1040x The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How to do 1040x You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. How to do 1040x For examples, see Coordination with Pell grants and other scholarships, later. How to do 1040x Refunds. How to do 1040x   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. How to do 1040x Some tax-free educational assistance received after 2013 may be treated as a refund. How to do 1040x See Tax-free educational assistance, earlier. How to do 1040x Refunds received in 2013. How to do 1040x   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. How to do 1040x Refunds received after 2013 but before your income tax return is filed. How to do 1040x   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. How to do 1040x Refunds received after 2013 and after your income tax return is filed. How to do 1040x   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. How to do 1040x See Credit recapture, next. How to do 1040x Credit recapture. How to do 1040x    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. How to do 1040x You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. How to do 1040x You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you claimed the refigured credit(s). How to do 1040x Include that amount as an additional tax for the year the refund or tax-free assistance was received. How to do 1040x Example. How to do 1040x   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. How to do 1040x You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. How to do 1040x After you filed your return, you received a refund of $4,000. How to do 1040x You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. How to do 1040x The refigured credit is $2,250. How to do 1040x The increase to your tax liability is also $250. How to do 1040x Include the difference of $250 as additional tax on your 2014 tax return. How to do 1040x See the instructions for your 2014 income tax return to determine where to include this tax. How to do 1040x If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. How to do 1040x Amounts that do not reduce qualified education expenses. How to do 1040x   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. How to do 1040x   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. How to do 1040x The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How to do 1040x The use of the money is not restricted. How to do 1040x Example 1. How to do 1040x Joan paid $3,000 for tuition and $5,000 for room and board at University X. How to do 1040x The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. How to do 1040x To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. How to do 1040x The terms of the scholarship state that it can be used to pay any of Joan's college expenses. How to do 1040x University X applies the $2,000 scholarship against Joan's $8,000 total bill, and Joan pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. How to do 1040x Joan does not report any portion of the scholarship as income on her tax return. How to do 1040x In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. How to do 1040x The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. How to do 1040x Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). How to do 1040x Example 2. How to do 1040x The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. How to do 1040x Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. How to do 1040x Joan is treated as having paid $3,000 in qualified education expenses. How to do 1040x Coordination with Pell grants and other scholarships. How to do 1040x   In some cases, you may be able to reduce your tax liability by including scholarships in income. How to do 1040x If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. How to do 1040x The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. How to do 1040x Example 1—No scholarship. How to do 1040x Bill Pass, age 28 and unmarried, enrolled full-time in 2013 as a first-year student at a local college to earn a degree in law enforcement. How to do 1040x This was his first year of postsecondary education. How to do 1040x During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. How to do 1040x He and the college meet all the requirements for the American opportunity credit. How to do 1040x Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. How to do 1040x Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. How to do 1040x His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. How to do 1040x He figures his American opportunity credit based on qualified education expenses of $4,000, which results in a credit of $2,500 and tax after credits of $99. How to do 1040x Example 2—Scholarship excluded from income. How to do 1040x The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. How to do 1040x Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. How to do 1040x If Bill excludes the scholarship from income, he will be deemed (for purposes of computing his education credit) to have used the scholarship to pay for tuition, required fees, and course materials. How to do 1040x His adjusted qualified education expenses will be zero and he will not have an education credit. How to do 1040x Therefore, Bill's tax after credits would be $2,599. How to do 1040x Example 3—Scholarship partially included in income. How to do 1040x The facts are the same as in Example 2—Scholarship excluded from income. How to do 1040x If, unlike Example 2, Bill includes $4,000 of the scholarship in income, he will be deemed to have used that amount to pay for room and board. How to do 1040x The remaining $1,600 of the $5,600 scholarship will reduce his qualified education expenses and his adjusted qualified education expenses will be $4,000. How to do 1040x Bill's AGI will increase to $34,000, his taxable income will increase to $24,250, and his tax before credits will increase to $3,199. How to do 1040x Based on his adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity tax credit of $2,500 and his tax after credits would be $699. How to do 1040x Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. How to do 1040x This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. How to do 1040x Sports, games, hobbies, and noncredit courses. How to do 1040x   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. How to do 1040x However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. How to do 1040x Comprehensive or bundled fees. How to do 1040x   Some eligible educational institutions combine all of their fees for an academic period into one amount. How to do 1040x If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed earlier, contact the institution. How to do 1040x The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. How to do 1040x See Figuring the Credit , later, for more information about Form 1098-T. How to do 1040x Who Is an Eligible Student To claim the American opportunity credit, the student for whom you pay qualified education expenses must be an eligible student. How to do 1040x This is a student who meets all of the following requirements. How to do 1040x The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. How to do 1040x This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. How to do 1040x The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. How to do 1040x For at least one academic period beginning in 2013, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. How to do 1040x The student has not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2013. How to do 1040x These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. How to do 1040x Completion of first 4 years. How to do 1040x   A student has completed the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4 years of academic credit at that institution for coursework completed by the student before 2013. How to do 1040x This student generally would not be an eligible student for purposes of the American opportunity credit. How to do 1040x Exception. How to do 1040x   Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education. How to do 1040x Enrolled at least half-time. How to do 1040x   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 to do 1040x   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. How to do 1040x However, the standard may not be lower than any of those established by the U. How to do 1040x S. How to do 1040x Department of Education under the Higher Education Act of 1965. How to do 1040x Please click here for the text description of the image. How to do 1040x Figure 2-2 Example 1. How to do 1040x Mack graduated from high school in June 2012. How to do 1040x In September, he enrolled in an undergraduate degree program at College U, and attended full-time for both the 2012 fall and 2013 spring semesters. How to do 1040x For the 2013 fall semester, Mack was enrolled less than half-time. How to do 1040x Because Mack was enrolled in an undergraduate degree program on at least a half-time basis for at least one academic period that began during 2012 and at least one academic period that began during 2013, he is an eligible student for tax years 2012 and 2013 (including the 2013 fall semester when he enrolled at College U on less than a half-time basis). How to do 1040x Example 2. How to do 1040x After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2013 spring semester. How to do 1040x College V classified Shelly as a second-semester senior (fourth year) for the 2013 spring semester and as a first-semester graduate student (fifth year) for the 2013 fall semester. How to do 1040x Because College V did not classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2013, Shelly is an eligible student for tax year 2013. How to do 1040x Therefore, the qualified education expenses paid for the 2013 spring semester and the 2013 fall semester are taken into account in calculating the American opportunity credit for 2013. How to do 1040x Example 3. How to do 1040x During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. How to do 1040x Larry was not enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. How to do 1040x Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. How to do 1040x Example 4. How to do 1040x The facts are the same as in Example 3. How to do 1040x During the 2013 spring semester, Larry again attended College X but not as part of a degree program. How to do 1040x Larry graduated from high school in June 2013. How to do 1040x For the 2013 fall semester, Larry enrolled as a full-time student in College X as part of a degree program, and College X awarded Larry credit for his prior coursework at College X. How to do 1040x Because Larry was enrolled in a degree program at College X for the 2013 fall term on at least a half-time basis, Larry is an eligible student for all of tax year 2013. How to do 1040x Therefore, the qualified education expenses paid for classes taken at College X during both the 2013 spring semester (during which Larry was not enrolled in a degree program) and the 2013 fall semester are taken into account in computing any American opportunity credit. How to do 1040x Example 5. How to do 1040x Dee graduated from high school in June 2012. How to do 1040x In January 2013, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a travel agent. How to do 1040x Dee completed the program in December 2013, and was awarded a certificate. How to do 1040x In January 2014, she enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a computer programmer. How to do 1040x Dee is an eligible student for both tax years 2013 and 2014 because she meets the degree requirement, the work load requirement, and the year of study requirement for those years. How to do 1040x Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim an American opportunity credit for your dependent's expenses for that year. How to do 1040x For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. How to do 1040x You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. How to do 1040x IF you. How to do 1040x . How to do 1040x . How to do 1040x THEN only. How to do 1040x . How to do 1040x . How to do 1040x claim an exemption on  your tax return for a  dependent who is an  eligible student you can claim the American opportunity credit based on that dependent's expenses. How to do 1040x The dependent cannot claim the credit. How to do 1040x do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the American opportunity credit. How to do 1040x You cannot claim the credit based on this dependent's expenses. How to do 1040x Expenses paid by dependent. How to do 1040x   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. How to do 1040x Include these expenses when figuring the amount of your American opportunity credit. How to do 1040x    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. How to do 1040x Expenses paid by you. How to do 1040x   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the American opportunity credit. How to do 1040x If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the American opportunity credit. How to do 1040x Expenses paid by others. How to do 1040x   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. How to do 1040x In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. How to do 1040x If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. How to do 1040x Example. How to do 1040x In 2013, Ms. How to do 1040x Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. How to do 1040x For purposes of claiming an American opportunity credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. How to do 1040x Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim an American opportunity credit. How to do 1040x If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim an American opportunity credit. How to do 1040x If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. How to do 1040x Tuition reduction. How to do 1040x    When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. How to do 1040x If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. How to do 1040x For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How to do 1040x Figuring the Credit The amount of the American opportunity credit (per eligible student) is the sum of: 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and 25% of the next $2,000 of qualified education expenses you paid for that student. How to do 1040x The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. How to do 1040x You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. How to do 1040x However, the credit may be reduced based on your MAGI. How to do 1040x See Effect of the Amount of Your Income on the Amount of Your Credit , later. How to do 1040x Example. How to do 1040x Jack and Kay Ford are married and file a joint tax return. How to do 1040x For 2013, they claim an exemption for their dependent daughter on their tax return. How to do 1040x Their MAGI is $70,000. How to do 1040x Their daughter is in her junior (third) year of studies at the local university. How to do 1040x Jack and Kay paid qualified education expenses of $4,300 in 2013. How to do 1040x Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. How to do 1040x Jack and Kay can claim a $2,500 American opportunity credit in 2013. How to do 1040x This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. How to do 1040x Form 1098-T. How to do 1040x   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. How to do 1040x Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. How to do 1040x An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. How to do 1040x However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. How to do 1040x When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. How to do 1040x   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. How to do 1040x    The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. How to do 1040x Effect of the Amount of Your Income on the Amount of Your Credit The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). How to do 1040x You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). How to do 1040x Modified adjusted gross income (MAGI). How to do 1040x   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. How to do 1040x MAGI when using Form 1040A. How to do 1040x   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. How to do 1040x MAGI when using Form 1040. How to do 1040x   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. How to do 1040x You can use Worksheet 2-1, next, to figure your MAGI. How to do 1040x    Worksheet 2-1. How to do 1040x MAGI for the American Opportunity Credit 1. How to do 1040x Enter your adjusted gross income  (Form 1040, line 38)   1. How to do 1040x   2. How to do 1040x Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. How to do 1040x       3. How to do 1040x Enter your foreign housing deduction (Form 2555, line 50)   3. How to do 1040x       4. How to do 1040x Enter the amount of income from Puerto Rico you are excluding   4. How to do 1040x       5. How to do 1040x Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. How to do 1040x       6. How to do 1040x Add the amounts on lines 2, 3, 4, and 5   6. How to do 1040x   7. How to do 1040x Add the amounts on lines 1 and 6. How to do 1040x  This is your modified adjusted  gross income. How to do 1040x Enter here and  on Form 8863, line 3   7. How to do 1040x   Phaseout. How to do 1040x   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2-7, of Form 8863, Part I. How to do 1040x The same method is shown in the following example. How to do 1040x Example. How to do 1040x You are filing a joint return and your MAGI is $165,000. How to do 1040x In 2013, you paid $5,000 of qualified education expenses. How to do 1040x You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses). How to do 1040x Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. How to do 1040x The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. How to do 1040x The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). How to do 1040x The result is the amount of your phased out (reduced) American opportunity credit ($1,875). How to do 1040x      $2,500 × $180,000 − $165,000  $20,000 = $1,875   Refundable Part of Credit Forty percent of the American opportunity credit is refundable for most taxpayers. How to do 1040x However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. How to do 1040x Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. How to do 1040x You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. How to do 1040x You were: Under age 18 at the end of 2013, or Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). How to do 1040x At least one of your parents was alive at the end of 2013. How to do 1040x You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. How to do 1040x Earned income. How to do 1040x   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. How to do 1040x Earned income includes the part of any scholarship or fellowship that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship. How to do 1040x Earned income does not include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. How to do 1040x   If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). How to do 1040x However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. How to do 1040x Support. How to do 1040x   Your support includes food, shelter, clothing, medical and dental care, education, and the like. How to do 1040x Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. How to do 1040x If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. How to do 1040x However, a scholarship received by you is not considered support if you are a full-time student. How to do 1040x See Publication 501 for details. How to do 1040x Full-time student. How to do 1040x   You are a full-time student for 2013 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. How to do 1040x Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. How to do 1040x Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. How to do 1040x Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. How to do 1040x A filled-in Form 8863 is shown at the end of this publication. How to do 1040x Note. How to do 1040x In Appendix A. How to do 1040x at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. How to do 1040x Prev  Up  Next   Home   More Online Publications