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Hr block online 1. Hr block online   Filing Information Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Filing RequirementsWhen To File and Pay Foreign Currency Does My Return Have To Be On Paper? Where To File Nonresident Alien Spouse Treated as a ResidentSocial Security Number (SSN) How To Make the Choice Suspending the Choice Ending the Choice Estimated Tax Other Forms You May Have To File Topics - This chapter discusses: Whether you have to file a return, When to file your return and pay any tax due, How to treat foreign currency, How to file electronically, Where to file your return, When you can treat your nonresident alien spouse as a resident, and When you may have to make estimated tax payments. Hr block online Useful Items - You may want to see: Publication 3 Armed Forces' Tax Guide 501 Exemptions, Standard Deduction, and Filing Information 505 Tax Withholding and Estimated Tax 519 U. Hr block online S. Hr block online Tax Guide for Aliens 970 Tax Benefits for Education Form (and Instructions) 1040-ES Estimated Tax for Individuals 1040X Amended U. Hr block online S. Hr block online Individual Income Tax Return 2350 Application for Extension of Time To File U. Hr block online S. Hr block online Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 4868 Application for Automatic Extension of Time To File U. Hr block online S. Hr block online Individual Income Tax Return 8822 Change of Address See chapter 7 for information about getting these publications and forms. Hr block online Filing Requirements If you are a U. Hr block online S. Hr block online citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad. Hr block online Your income, filing status, and age generally determine whether you must file an income tax return. Hr block online Generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table. Hr block online Filing Status*   Amount Single $10,000 65 or older $11,500 Head of household $12,850 65 or older $14,350 Qualifying widow(er) $16,100 65 or older $17,300 Married filing jointly $20,000 Not living with spouse at end of year $3,900 One spouse 65 or older $21,200 Both spouses 65 or older $22,400 Married filing separately $3,900 *If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return. Hr block online Gross income. Hr block online   This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax. Hr block online   For purposes of determining whether you must file a return, gross income includes any income that you can exclude as foreign earned income or as a foreign housing amount. Hr block online If you are self-employed, your gross income includes the amount on Part I, line 7 of Schedule C (Form 1040), Profit or Loss From Business, or line 1 of Schedule C-EZ (Form 1040), Net Profit From Business. Hr block online Self-employed individuals. Hr block online   If your net earnings from self-employment are $400 or more, you must file a return even if your gross income is below the amount listed for your filing status in the table shown earlier. Hr block online Net earnings from self-employment are defined in Publication 334, Tax Guide for Small Business. Hr block online 65 or older. Hr block online   You are considered to be age 65 on the day before your 65th birthday. Hr block online For example, if your 65th birthday is on January 1, 2014, you are considered 65 for 2013. Hr block online Residents of U. Hr block online S. Hr block online possessions. Hr block online   If you are (or were) a bona fide resident of a U. Hr block online S. Hr block online possession, you may be required to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U. Hr block online S. Hr block online Possession. Hr block online See the instructions for the form for more information. Hr block online When To File and Pay If you file on a calendar year basis, the due date for filing your return is April 15 of the following year. Hr block online If you file on a fiscal year basis (a year ending on the last day of any month except December), the due date is 3 months and 15 days after the close of your fiscal year. Hr block online In general, the tax shown on your return should be paid by the due date of the return, without regard to any extension of time for filing the return. Hr block online When the due date for doing any act for tax purposes—filing a return, paying taxes, etc. Hr block online — falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. Hr block online A tax return delivered by the U. Hr block online S. Hr block online mail or a designated delivery service that is postmarked or dated by the delivery service on or before the due date is considered to have been filed on or before that date. Hr block online See your Form 1040 or Form 1040A instructions for a list of designated delivery services. Hr block online Foreign wire transfers. Hr block online   If you have a U. Hr block online S. Hr block online bank account, you can use: EFTPS (Electronic Federal Tax Payment System), or Federal Tax Application (same-day wire transfer). Hr block online If you do not have a U. Hr block online S. Hr block online bank account, ask if your financial institution has a U. Hr block online S. Hr block online affiliate that can help you make same-day wire transfers. Hr block online   For more information, visit www. Hr block online eftps. Hr block online gov. Hr block online Extensions You can get an extension of time to file your return. Hr block online In some circumstances, you also can get an extension of time to file and pay any tax due. Hr block online However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Hr block online This publication discusses four extensions: an automatic 2-month extension, an automatic 6-month extension, an additional extension for taxpayers out of the country, and an extension of time to meet tests. Hr block online If you served in a combat zone or qualified hazardous duty area, see Publication 3 for a discussion of extensions of deadlines. Hr block online Automatic 2-month extension. Hr block online   You are allowed an automatic 2-month extension to file your return and pay federal income tax if you are a U. Hr block online S. Hr block online citizen or resident alien, and on the regular due date of your return: You are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Hr block online   If you use a calendar year, the regular due date of your return is April 15. Hr block online Even if you are allowed an extension, you will have to pay interest on any tax not paid by the regular due date of your return. Hr block online Married taxpayers. Hr block online   If you file a joint return, either you or your spouse can qualify for the automatic extension. Hr block online If you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies for it. Hr block online How to get the extension. Hr block online   To use this automatic 2-month extension, you must attach a statement to your return explaining which of the two situations listed earlier qualified you for the extension. Hr block online Automatic 6-month extension. Hr block online   If you are not able to file your return by the due date, you generally can get an automatic 6-month extension of time to file (but not of time to pay). Hr block online To get this automatic extension, you must file a paper Form 4868 or use IRS e-file (electronic filing). Hr block online For more information about filing electronically, see E-file options , later. Hr block online   The form must show your properly estimated tax liability based on the information available to you. Hr block online    You may not be eligible. Hr block online You cannot use the automatic 6-month extension of time to file if: You want the IRS to figure your tax, or You are under a court order to file by the regular due date. Hr block online E-file options. Hr block online    You can use e-file to get an extension of time to file. Hr block online You can either file Form 4868 electronically or you can pay part or all of your estimate of tax due using a credit or debit card. Hr block online   First, complete Form 4868 to use as a worksheet. Hr block online If you think you may owe tax when you file your return, use Part II of the form to estimate your balance due. Hr block online    Then, do one of the following. Hr block online E-file Form 4868. Hr block online You can use a tax software package with your personal computer or a tax professional to file Form 4868 electronically. Hr block online You will need to provide certain information from your tax return for 2012. Hr block online If you wish to make a payment by electronic funds withdrawal, see the instructions for Form 4868. Hr block online If you e-file Form 4868, do not also send a paper Form 4868. Hr block online E-file and pay by credit or debit card. Hr block online You can get an extension by paying part or all of your estimate of tax due by using a credit or debit card. Hr block online You can do this by phone or over the Internet. Hr block online If you do this, you do not file Form 4868. Hr block online For more information, see the instructions for your tax return. Hr block online When to file. Hr block online   Generally, you must request the 6-month extension by the regular due date of your return. Hr block online Previous 2-month extension. Hr block online   If you cannot file your return within the automatic 2-month extension period, you generally can get an additional 4 months to file your return, for a total of 6 months. Hr block online The 2-month period and the 6-month period start at the same time. Hr block online You have to request the additional 4 months by the new due date allowed by the 2-month extension. Hr block online   The additional 4 months of time to file (unlike the original 2-month extension) is not an extension of time to pay. Hr block online You must make an accurate estimate of your tax based on the information available to you. Hr block online If you find you cannot pay the full amount due with Form 4868, you can still get the extension. Hr block online You will owe interest on the unpaid amount from the original due date of the return. Hr block online   You also may be charged a penalty for paying the tax late unless you have reasonable cause for not paying your tax when due. Hr block online Penalties for paying the tax late are assessed from the original due date of your return, unless you qualify for the automatic 2-month extension. Hr block online In that situation, penalties for paying late are assessed from the extended due date of the payment (June 15 for calendar year taxpayers). Hr block online Additional extension of time for taxpayers out of the country. Hr block online   In addition to the 6-month extension, taxpayers who are out of the country can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Hr block online   To request this extension, you must send the Internal Revenue Service a letter explaining the reasons why you need the additional 2 months. Hr block online Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You will not receive any notification from the Internal Revenue Service unless your request is denied. Hr block online   The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350, discussed next. Hr block online Extension of time to meet tests. Hr block online   You generally cannot get an extension of more than 6 months. Hr block online However, if you are outside the United States and meet certain requirements, you may be able to get a longer extension. Hr block online   You can get an extension of more than 6 months to file your tax return if you need the time to meet either the bona fide residence test or the physical presence test to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction. Hr block online The tests, the exclusions, and the deduction are explained in chapter 4. Hr block online   You should request an extension if all three of the following apply. Hr block online You are a U. Hr block online S. Hr block online citizen or resident alien. Hr block online You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due. Hr block online Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies. Hr block online   If you are granted an extension, it generally will be to 30 days beyond the date on which you can reasonably expect to qualify for an exclusion or deduction under either the bona fide residence test or the physical presence test. Hr block online However, if you have moving expenses that are for services performed in 2 years, you may be granted an extension until after the end of the second year. Hr block online How to get an extension. Hr block online   To obtain an extension, file Form 2350 either by giving it to a local IRS representative or other IRS employee or by mailing it to the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You must file Form 2350 by the due date for filing your return. Hr block online Generally, if both your tax home and your abode are outside the United States and Puerto Rico on the regular due date of your return and you file on a calendar year basis, the due date for filing your return is June 15. Hr block online What if tests are not met. Hr block online   If you obtain an extension and unforeseen events make it impossible for you to meet either the bona fide residence test or the physical presence test, you should file your income tax return as soon as possible because you must pay interest on any tax due after the regular due date of the return (even though an extension was granted). Hr block online    You should make any request for an extension early, so that if it is denied you still can file your return on time. Hr block online Otherwise, if you file late and additional tax is due, you may be subject to a penalty. Hr block online Return filed before test is met. Hr block online   If you file a return before you meet the bona fide residence test or the physical presence test, you must include all income from both U. Hr block online S. Hr block online and foreign sources and pay the tax on that income. Hr block online If you later meet either of the tests, you can claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction on Form 1040X. Hr block online Foreign Currency You must express the amounts you report on your U. Hr block online S. Hr block online tax return in U. Hr block online S. Hr block online dollars. Hr block online If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. Hr block online S. Hr block online dollars. Hr block online How you do this depends on your functional currency. Hr block online Your functional currency generally is the U. Hr block online S. Hr block online dollar unless you are required to use the currency of a foreign country. Hr block online You must make all federal income tax determinations in your functional currency. Hr block online The U. Hr block online S. Hr block online dollar is the functional currency for all taxpayers except some qualified business units (QBUs). Hr block online A QBU is a separate and clearly identified unit of a trade or business that maintains separate books and records. Hr block online Even if you have a QBU, your functional currency is the dollar if any of the following apply. Hr block online You conduct the business in U. Hr block online S. Hr block online dollars. Hr block online The principal place of business is located in the United States. Hr block online You choose to or are required to use the U. Hr block online S. Hr block online dollar as your functional currency. Hr block online The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. Hr block online Make all income tax determinations in your functional currency. Hr block online If your functional currency is the U. Hr block online S. Hr block online dollar, you must immediately translate into U. Hr block online S. Hr block online dollars all items of income, expense, etc. Hr block online (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Hr block online Use the exchange rate prevailing when you receive, pay, or accrue the item. Hr block online If there is more than one exchange rate, use the one that most properly reflects your income. Hr block online You can generally get exchange rates from banks and U. Hr block online S. Hr block online Embassies. Hr block online If your functional currency is not the U. Hr block online S. Hr block online dollar, make all income tax determinations in your functional currency. Hr block online At the end of the year, translate the results, such as income or loss, into U. Hr block online S. Hr block online dollars to report on your income tax return. Hr block online Blocked Income You generally must report your foreign income in terms of U. Hr block online S. Hr block online dollars and, with one exception (see Fulbright Grant, later), you must pay taxes due on it in U. Hr block online S. Hr block online dollars. Hr block online If, because of restrictions in a foreign country, your income is not readily convertible into U. Hr block online S. Hr block online dollars or into other money or property that is readily convertible into U. Hr block online S. Hr block online dollars, your income is “blocked” or “deferrable” income. Hr block online You can report this income in one of two ways: Report the income and pay your federal income tax with U. Hr block online S. Hr block online dollars that you have in the United States or in some other country, or Postpone the reporting of the income until it becomes unblocked. Hr block online If you choose to postpone the reporting of the income, you must file an information return with your tax return. Hr block online For this information return, you should use another Form 1040 labeled “Report of Deferrable Foreign Income, pursuant to Rev. Hr block online Rul. Hr block online 74-351. Hr block online ” You must declare on the information return that you will include the deferrable income in your taxable income for the year that it becomes unblocked. Hr block online You also must state that you waive any right to claim that the deferrable income was includible in your income for any earlier year. Hr block online You must report your income on your information return using the foreign currency in which you received that income. Hr block online If you have blocked income from more than one foreign country, include a separate information return for each country. Hr block online Income becomes unblocked and reportable for tax purposes when it becomes convertible, or when it is converted, into U. Hr block online S. Hr block online dollars or into other money or property that is convertible into U. Hr block online S. Hr block online currency. Hr block online Also, if you use blocked income for your personal expenses or dispose of it by gift, bequest, or devise, you must treat it as unblocked and reportable. Hr block online If you have received blocked income on which you have not paid tax, you should check to see whether that income is still blocked. Hr block online If it is not, you should take immediate steps to pay tax on it, file a declaration or amended declaration of estimated tax, and include the income on your tax return for the year in which the income became unblocked. Hr block online If you choose to postpone reporting blocked income and in a later tax year you wish to begin including it in gross income although it is still blocked, you must obtain the permission of the IRS to do so. Hr block online To apply for permission, file Form 3115, Application for Change in Accounting Method. Hr block online You also must request permission from the IRS on Form 3115 if you have not chosen to defer the reporting of blocked income in the past, but now wish to begin reporting blocked income under the deferred method. Hr block online See the instructions for Form 3115 for information on changing your accounting method. Hr block online Fulbright Grant All income must be reported in U. Hr block online S. Hr block online dollars. Hr block online In most cases, the tax also must be paid in U. Hr block online S. Hr block online dollars. Hr block online If, however, at least 70% of your Fulbright grant has been paid in nonconvertible foreign currency (blocked income), you can use the currency of the host country to pay the part of the U. Hr block online S. Hr block online tax that is based on the blocked income. Hr block online Paying U. Hr block online S. Hr block online tax in foreign currency. Hr block online   To qualify for this method of payment, you must prepare a statement that shows the following information. Hr block online You were a Fulbright grantee and were paid in nonconvertible foreign currency. Hr block online The total grant you received during the year and the amount you received in nonconvertible foreign currency. Hr block online At least 70% of the grant was paid in nonconvertible foreign currency. Hr block online The statement must be certified by the U. Hr block online S. Hr block online educational foundation or commission paying the grant or other person having control of grant payments to you. Hr block online   You should prepare at least two copies of this statement. Hr block online Attach one copy to your Form 1040 and keep the other copy for identification purposes when you make a tax deposit of nonconvertible foreign currency. Hr block online Figuring actual tax. Hr block online   When you prepare your income tax return, you may owe tax or the entire liability may have been satisfied with your estimated tax payments. Hr block online If you owe tax, figure the part due to (and payable in) the nonconvertible foreign currency by using the following formula. Hr block online   Adjusted gross income that is blocked income × Total U. Hr block online S. Hr block online tax = Tax on blocked income     Total adjusted  gross income     You must attach all of the following to the return. Hr block online A copy of the certified statement discussed earlier. Hr block online A detailed statement showing the allocation of tax attributable to amounts received in foreign currency and the rates of exchange used in determining your tax liability in U. Hr block online S. Hr block online dollars. Hr block online The original deposit receipt for any balance of tax due that you paid in nonconvertible foreign currency. Hr block online Figuring estimated tax on nonconvertible foreign currency. Hr block online   If you are liable for estimated tax (discussed later), figure the amount you can pay to the IRS in nonconvertible foreign currency using the following formula. Hr block online   Adjusted gross income that is blocked income × Total estimated U. Hr block online S. Hr block online tax = Estimated tax on blocked income     Total adjusted  gross income     If you must pay your host country income tax on your grant, subtract any estimated foreign tax credit that applies to your grant from the estimated tax on the blocked income. Hr block online Deposit of foreign currency with disbursing officer. Hr block online   Once you have determined the amount of the actual tax or estimated tax that you can pay in nonconvertible foreign currency, deposit that amount with the disbursing officer of the Department of State in the foreign country in which the foundation or commission paying the grant is located. Hr block online Estimated tax installments. Hr block online   You can either deposit the full estimated tax amount before the first installment due date or make four equal payments before the installment due dates. Hr block online See Estimated Tax , later. Hr block online Deposit receipt. Hr block online   Upon accepting the foreign currency, the disbursing officer will give you a receipt in duplicate. Hr block online The original of this receipt (showing the amount of foreign currency deposited and its equivalent in U. Hr block online S. Hr block online dollars) should be attached to your Form 1040 or payment voucher from Form 1040-ES. Hr block online Keep the copy for your records. Hr block online Does My Return Have To Be On Paper? IRS e-file (electronic filing) is the fastest, easiest, and most convenient way to file your income tax return electronically. Hr block online IRS e-file offers accurate, safe, and fast alternatives to filing on paper. Hr block online IRS computers quickly and automatically check for errors or other missing information. Hr block online Even returns with a foreign address can be e-filed! How to e-file. Hr block online   There are three ways you can e-file. Hr block online Use your personal computer. Hr block online Use a volunteer. Hr block online Many programs offering free tax help can e-file your return. Hr block online Use a tax professional. Hr block online Most tax professionals can e-file your return. Hr block online These methods are explained in detail in the instructions for your tax return. Hr block online Where To File If any of the following situations apply to you, do not file your return with the service center listed for your home state. Hr block online You claim the foreign earned income exclusion. Hr block online You claim the foreign housing exclusion or deduction. Hr block online You live in a foreign country. Hr block online Instead, use one of the following special addresses. Hr block online If you are not enclosing a check or money order, file your return with the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 USA If you are enclosing a check or money order, file your return with: Internal Revenue Service Center P. Hr block online O. Hr block online Box 1303 Charlotte, NC 28201-1303 USA If you do not know where your legal residence is and you do not have a principal place of business in the United States, you can file with the appropriate address listed above. Hr block online However, you should not file with the addresses listed above if you are a bona fide resident of the U. Hr block online S. Hr block online Virgin Islands, Guam, or the Commonwealth of the Northern Mariana Islands during your entire tax year. Hr block online Resident of U. Hr block online S. Hr block online Virgin Islands (USVI). Hr block online   If you are a bona fide resident of the USVI during your entire tax year, you generally are not required to file a U. Hr block online S. Hr block online return. Hr block online However, you must file a return with the USVI. Hr block online    Send your return to the:     Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. Hr block online Thomas, Virgin Islands 00802 Non-USVI resident with USVI income. Hr block online   If you are a U. Hr block online S. Hr block online citizen or resident alien and you have income from sources in the USVI or income effectively connected with the conduct of a trade or business in the USVI, and you are not a bona fide resident of the USVI during your entire tax year, you must file identical tax returns with the United States and the USVI. Hr block online File the original return with the United States and file a signed copy of the U. Hr block online S. Hr block online return (including all attachments, forms, and schedules) with the Virgin Islands Bureau of Internal Revenue. Hr block online   You must complete Form 8689, Allocation of Individual Income Tax to the U. Hr block online S. Hr block online Virgin Islands, and attach a copy to both your U. Hr block online S. Hr block online return and your USVI return. Hr block online You should file your U. Hr block online S. Hr block online return with the address listed under Where To File. Hr block online   See Publication 570, Tax Guide for Individuals With Income From U. Hr block online S. Hr block online Possessions, for information about filing Virgin Islands returns. Hr block online Resident of Guam. Hr block online   If you are a bona fide resident of Guam during your entire tax year, you should file a return with Guam. Hr block online    Send your return to the:     Department of Revenue and Taxation Government of Guam P. Hr block online O. Hr block online Box 23607 GMF, GU 96921   However, if you have income from sources within Guam and you are a U. Hr block online S. Hr block online citizen or resident alien, but not a bona fide resident of Guam during the entire tax year, you should file a return with the United States. Hr block online Send your return to the address listed under Where To File. Hr block online   See Publication 570 for information about filing Guam returns. Hr block online Resident of the Commonwealth of the Northern Mariana Islands. Hr block online   If you are a bona fide resident of the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you should file a return with the Northern Mariana Islands. Hr block online    Send your return to the:      Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. Hr block online O. Hr block online Box 5234, CHRB Saipan, MP 96950   However, if you have income from sources within the CNMI and you are a U. Hr block online S. Hr block online citizen or resident alien, but not a bona fide resident of the CNMI during the entire tax year, you should file a return with the United States. Hr block online Send your return to the address listed under Where To File. Hr block online   See Publication 570 for information about filing Northern Mariana Islands returns. Hr block online Nonresident Alien Spouse Treated as a Resident If, at the end of your tax year, you are married and one spouse is a U. Hr block online S. Hr block online citizen or a resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U. Hr block online S. Hr block online resident. Hr block online This includes situations in which one of you is a nonresident alien at the beginning of the tax year and a resident alien at the end of the year and the other is a nonresident alien at the end of the year. Hr block online If you make this choice, the following two rules apply. Hr block online You and your spouse are treated, for income tax purposes, as residents for all tax years that the choice is in effect. Hr block online You must file a joint income tax return for the year you make the choice. Hr block online This means that neither of you can claim under any tax treaty not to be a U. Hr block online S. Hr block online resident for a tax year for which the choice is in effect. Hr block online You can file joint or separate returns in years after the year in which you make the choice. Hr block online Example 1. Hr block online Pat Smith, a U. Hr block online S. Hr block online citizen, is married to Norman, a nonresident alien. Hr block online Pat and Norman make the choice to treat Norman as a resident alien by attaching a statement to their joint return. Hr block online Pat and Norman must report their worldwide income for the year they make the choice and for all later years unless the choice is ended or suspended. Hr block online Although Pat and Norman must file a joint return for the year they make the choice, they can file either joint or separate returns for later years. Hr block online Example 2. Hr block online When Bob and Sharon Williams got married, both were nonresident aliens. Hr block online In June of last year, Bob became a resident alien and remained a resident for the rest of the year. Hr block online Bob and Sharon both choose to be treated as resident aliens by attaching a statement to their joint return for last year. Hr block online Bob and Sharon must report their worldwide income for last year and all later years unless the choice is ended or suspended. Hr block online Bob and Sharon must file a joint return for last year, but they can file either joint or separate returns for later years. Hr block online If you do not choose to treat your nonresident alien spouse as a U. Hr block online S. Hr block online resident, you may be able to use head of household filing status. Hr block online To use this status, you must pay more than half the cost of maintaining a household for certain dependents or relatives other than your nonresident alien spouse. Hr block online For more information, see Publication 501. Hr block online Social Security Number (SSN) If you choose to treat your nonresident alien spouse as a U. Hr block online S. Hr block online resident, your spouse must have either an SSN or an individual taxpayer identification number (ITIN). Hr block online To get an SSN for a nonresident alien spouse, apply at an office of the U. Hr block online S. Hr block online Social Security Administration (SSA) or U. Hr block online S. Hr block online consulate. Hr block online You must complete Form SS-5, Application for a Social Security Card, available at www. Hr block online socialsecurity. Hr block online gov or by calling 1-800-772-1213. Hr block online You must also provide original or certified copies of documents to verify that spouse's age, identity, and citizenship. Hr block online If the nonresident alien spouse is not eligible to get an SSN, he or she can file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS to apply for an ITIN. Hr block online How To Make the Choice Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. Hr block online It should contain the following: A declaration that one spouse was a nonresident alien and the other spouse a U. Hr block online S. Hr block online citizen or resident alien on the last day of your tax year and that you choose to be treated as U. Hr block online S. Hr block online residents for the entire tax year, and The name, address, and social security number (or individual taxpayer identification number) of each spouse. Hr block online (If one spouse died, include the name and address of the person making the choice for the deceased spouse. Hr block online ) You generally make this choice when you file your joint return. Hr block online However, you also can make the choice by filing a joint amended return on Form 1040X. Hr block online Attach Form 1040, 1040A, or 1040EZ and print “Amended” across the top of the amended return. Hr block online If you make the choice with an amended return, you and your spouse also must amend any returns that you may have filed after the year for which you made the choice. Hr block online You generally must file the amended joint return within 3 years from the date you filed your original U. Hr block online S. Hr block online income tax return or 2 years from the date you paid your income tax for that year, whichever is later. Hr block online Table 1–1. Hr block online Ending the Choice To Treat Nonresident Alien Spouse as a Resident Revocation   Either spouse can revoke the choice for any tax year. Hr block online   • The revocation must be made by the due date for filing the tax return for that tax year. Hr block online   • The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. Hr block online The statement revoking the choice must include the following:     • The name, address, and social security number (or taxpayer identification number) of each spouse. Hr block online     • The name and address of any person who is revoking the choice for a deceased spouse. Hr block online     • A list of any states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income. Hr block online   • If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the Internal Revenue Service Center where the last joint return was filed. Hr block online Death   The death of either spouse ends the choice, beginning with the first tax year following the year in which the spouse died. Hr block online   • If the surviving spouse is a U. Hr block online S. Hr block online citizen or resident alien and is entitled to the joint tax rates as a surviving spouse, the choice will not end until the close of the last year for which these joint rates may be used. Hr block online   • If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died. Hr block online Divorce or  Legal separation   A divorce or legal separation ends the choice as of the beginning of the tax year in which the legal separation occurs. Hr block online Inadequate records   The Internal Revenue Service can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other information necessary to determine the correct income tax liability, or to provide adequate access to those records. Hr block online Suspending the Choice The choice to be treated as a resident alien does not apply to any later tax year if neither of you is a U. Hr block online S. Hr block online citizen or resident alien at any time during the later tax year. Hr block online Example. Hr block online Dick Brown was a resident alien on December 31, 2010, and married to Judy, a nonresident alien. Hr block online They chose to treat Judy as a resident alien and filed a joint 2010 income tax return. Hr block online On January 10, 2012, Dick became a nonresident alien. Hr block online Judy had remained a nonresident alien. Hr block online Because Dick was a resident alien during part of 2012, Dick and Judy can file joint or separate returns for that year. Hr block online Neither Dick nor Judy was a resident alien at any time during 2013 and their choice is suspended for that year. Hr block online For 2013, both are treated as nonresident aliens. Hr block online If Dick becomes a resident alien again in 2014, their choice is no longer suspended and both are treated as resident aliens. Hr block online Ending the Choice Once made, the choice to be treated as a resident applies to all later years unless suspended (as explained earlier) or ended in one of the ways shown in Table 1-1. Hr block online If the choice is ended for any of the reasons listed in Table 1-1, neither spouse can make a choice in any later tax year. Hr block online Estimated Tax The requirements for determining who must pay estimated tax are the same for a U. Hr block online S. Hr block online citizen or resident abroad as for a taxpayer in the United States. Hr block online For current instructions on making estimated tax payments, see Form 1040-ES. Hr block online If you had a tax liability for 2013, you may have to pay estimated tax for 2014. Hr block online Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax for 2014 after subtracting your withholding and credits and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return. Hr block online (The return must cover all 12 months. Hr block online ) If less than two-thirds of your gross income for 2013 and 2014 is from farming or fishing and your adjusted gross income for 2013 is more than $150,000 ($75,000 if you are married and file separately), substitute 110% for 100% in (2). Hr block online See Publication 505 for more information. Hr block online The first installment of estimated tax is due on April 15, 2014. Hr block online Foreign earned income exclusion. Hr block online   When figuring your estimated gross income, subtract amounts you expect to exclude under the foreign earned income exclusion and the foreign housing exclusion. Hr block online In addition, you can reduce your income by your estimated foreign housing deduction. Hr block online However, you must estimate tax on your nonexcluded income using the tax rates that will apply had you not excluded the income. Hr block online If the actual amount of the exclusion or deduction is less than you estimate, you may have to pay a penalty for underpayment of estimated tax. Hr block online   For more information about figuring your estimated tax, see Publication 505. Hr block online Other Forms You May Have To File FinCEN Form 114 (replaces Form TD F 90-22. Hr block online 1). Hr block online   Beginning October 1, 2013, Form 114, Report of Foreign Bank and Financial Accounts (FBAR), must be filed instead of Form TD F 90-22. Hr block online 1. Hr block online Form 114 is filed electronically with the Financial Crimes Enforcement Network (FinCEN). Hr block online See the filing instructions at www. Hr block online bsaefiling. Hr block online fincen. Hr block online treas. Hr block online gov/main. Hr block online html. Hr block online   You must file Form 114 if you had any financial interest in, or signature or other authority over a bank, securities, or other financial account in a foreign country. Hr block online You do not need to file the report if the assets are with a U. Hr block online S. Hr block online military banking facility operated by a financial institution or if the combined assets in the account(s) are $10,000 or less during the entire year. Hr block online   More information about the filing of Form 114 can be found in the instructions for the form. Hr block online FinCEN Form 105. Hr block online   You must file Form 105, Report of International Transportation of Currency or Monetary Instruments, if you physically transport, mail, ship, or cause to be physically transported, mailed, or shipped into or out of the United States, currency or other monetary instruments totaling more than $10,000 at one time. Hr block online Certain recipients of currency or monetary instruments also must file Form 105. Hr block online   More information about the filing of Form 105 can be found in the instructions on the back of the form. Hr block online Form 8938. Hr block online   You must file Form 8938 to report the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount (the “reporting threshold ”). Hr block online The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. Hr block online Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U. Hr block online S. Hr block online person. Hr block online   You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset. Hr block online   More information about the filing of Form 8938 can be found in the separate instructions for Form 8938. Hr block online Prev  Up  Next   Home   More Online Publications
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Letter 2318C Frequently Asked Questions (FAQs)

What is the letter telling me?

This letter is a result of your oral or written request to pay your tax liability through Payroll Deductions. It also explains the necessary fees charged for paying monthly.

What do I have to do?

Provide us with your employer's signature which agrees to deducting a specific amount from your pay check and sending that amount to the IRS.

How much time do I have?

The letter provides you a specific time frame to respond.

What happens if I don't take any action?

If you fail to make the payments, enforced collection action may be taken to collect the amount you owe, including the filing of a Notice of Federal Tax Lien, or garnishment of your wages and/or bank accounts.

Who should I contact?

The letter will provide you a toll free number. The person who answers the phone will assist you.

What if I don't agree or have already taken corrective action?

You should contact us immediately. You can also contact us to verify that your payroll deduction has been established.

Page Last Reviewed or Updated: 30-Jan-2014

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Hr block online 2. Hr block online   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. Hr block online 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. Hr block online They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). Hr block online 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. Hr block online What is the tax benefit of the American opportunity credit. Hr block online   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. Hr block online   A tax credit reduces the amount of income tax you may have to pay. Hr block online Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Hr block online Forty percent of the American opportunity credit may be refundable. Hr block online This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. Hr block online   Your allowable American opportunity credit may be limited by the amount of your income. Hr block online Also, the nonrefundable part of the credit may be limited by the amount of your tax. Hr block online Overview of the American opportunity credit. Hr block online   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. Hr block online The details are discussed in this chapter. Hr block online Can you claim more than one education credit this year. Hr block online   For each student, you can elect for any year only one of the credits. Hr block online 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. Hr block online   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. Hr block online 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. Hr block online 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. Hr block online Differences between the American opportunity and lifetime learning credits. Hr block online   There are several differences between these two credits. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. Hr block online Table 2-1. Hr block online 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. Hr block online Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. Hr block online You pay qualified education expenses of higher education. Hr block online You pay the education expenses for an eligible student. Hr block online The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Hr block online Student qualifications. Hr block online   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. Hr block online 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. Hr block online For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Hr block online However, the standard may not be lower than any of those established by the U. Hr block online S. Hr block online Department of Education under the Higher Education Act of 1965. Hr block online 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. Hr block online See Prepaid expenses, later. Hr block online 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. Hr block online Example 1. Hr block online Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. Hr block online 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. Hr block online Sharon claimed the American opportunity credit on her 2012 tax return. Hr block online The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. Hr block online Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. Hr block online 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. Hr block online Example 2. Hr block online Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. Hr block online His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. Hr block online No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. Hr block online The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. Hr block online Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. Hr block online If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. Hr block online If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. Hr block online Example 3. Hr block online Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. Hr block online Glenda pays her tuition for the 2014 Spring semester in December 2013. Hr block online 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. Hr block online If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. Hr block online You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Hr block online Note. Hr block online 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. Hr block online “Qualified education expenses” are defined later under Qualified Education Expenses . Hr block online “Eligible students” are defined later under Who Is an Eligible Student . Hr block online A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Hr block online 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. Hr block online This image is too large to be displayed in the current screen. Hr block online Please click the link to view the image. Hr block online 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. Hr block online Your filing status is married filing separately. Hr block online You are listed as a dependent on another person's tax return (such as your parents'). Hr block online See Who Can Claim a Dependent's Expenses , later. Hr block online Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). Hr block online MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Hr block online 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. Hr block online More information on nonresident aliens can be found in Publication 519, U. Hr block online S. Hr block online Tax Guide for Aliens. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online Academic period. Hr block online   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. Hr block online 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. Hr block online Paid with borrowed funds. Hr block online   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Hr block online 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. Hr block online Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Hr block online Student withdraws from class(es). Hr block online   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. Hr block online 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. Hr block online Eligible educational institution. Hr block online   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. Hr block online S. Hr block online Department of Education. Hr block online It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Hr block online The educational institution should be able to tell you if it is an eligible educational institution. Hr block online   Certain educational institutions located outside the United States also participate in the U. Hr block online S. Hr block online Department of Education's Federal Student Aid (FSA) programs. Hr block online Related expenses. Hr block online   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. Hr block online   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. Hr block online Prepaid expenses. Hr block online   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. Hr block online See Academic period, earlier. Hr block online 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). Hr block online    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). Hr block online   In the following examples, assume that each student is an eligible student at an eligible educational institution. Hr block online Example 1. Hr block online Jefferson is a sophomore in University V's degree program in dentistry. Hr block online 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. Hr block online Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. Hr block online Example 2. Hr block online 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. Hr block online 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. Hr block online William bought his books from a friend; Grace bought hers at College W's bookstore. Hr block online Both are qualified education expenses for the American opportunity credit. Hr block online Example 3. Hr block online When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Hr block online 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. Hr block online No portion of the fee covers personal expenses. Hr block online 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. Hr block online No Double Benefit Allowed You cannot do any of the following. Hr block online 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. Hr block online Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. Hr block online Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online See Adjustments to Qualified Education Expenses, next. Hr block online 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. Hr block online The result is the amount of adjusted qualified education expenses for each student. Hr block online Tax-free educational assistance. Hr block online   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. Hr block online See Academic period, earlier. Hr block online   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Hr block online 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). Hr block online   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. Hr block online 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. Hr block online   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). Hr block online 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. Hr block online Generally, any scholarship or fellowship is treated as tax free. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online For examples, see Coordination with Pell grants and other scholarships, later. Hr block online Refunds. Hr block online   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. Hr block online Some tax-free educational assistance received after 2013 may be treated as a refund. Hr block online See Tax-free educational assistance, earlier. Hr block online Refunds received in 2013. Hr block online   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. Hr block online Refunds received after 2013 but before your income tax return is filed. Hr block online   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. Hr block online Refunds received after 2013 and after your income tax return is filed. Hr block online   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. Hr block online See Credit recapture, next. Hr block online Credit recapture. Hr block online    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. Hr block online 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. Hr block online 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). Hr block online Include that amount as an additional tax for the year the refund or tax-free assistance was received. Hr block online Example. Hr block online   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. Hr block online You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. Hr block online After you filed your return, you received a refund of $4,000. Hr block online You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. Hr block online The refigured credit is $2,250. Hr block online The increase to your tax liability is also $250. Hr block online Include the difference of $250 as additional tax on your 2014 tax return. Hr block online See the instructions for your 2014 income tax return to determine where to include this tax. Hr block online 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. Hr block online Amounts that do not reduce qualified education expenses. Hr block online   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. Hr block online   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. Hr block online 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. Hr block online The use of the money is not restricted. Hr block online Example 1. Hr block online Joan paid $3,000 for tuition and $5,000 for room and board at University X. Hr block online The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. Hr block online To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. Hr block online The terms of the scholarship state that it can be used to pay any of Joan's college expenses. Hr block online 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. Hr block online Joan does not report any portion of the scholarship as income on her tax return. Hr block online 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. Hr block online 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. Hr block online Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). Hr block online Example 2. Hr block online The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. Hr block online Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Hr block online Joan is treated as having paid $3,000 in qualified education expenses. Hr block online Coordination with Pell grants and other scholarships. Hr block online   In some cases, you may be able to reduce your tax liability by including scholarships in income. Hr block online 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. Hr block online The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Hr block online Example 1—No scholarship. Hr block online 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. Hr block online This was his first year of postsecondary education. Hr block online During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. Hr block online He and the college meet all the requirements for the American opportunity credit. Hr block online Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. Hr block online Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. Hr block online His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. Hr block online 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. Hr block online Example 2—Scholarship excluded from income. Hr block online The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. Hr block online Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. Hr block online 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. Hr block online His adjusted qualified education expenses will be zero and he will not have an education credit. Hr block online Therefore, Bill's tax after credits would be $2,599. Hr block online Example 3—Scholarship partially included in income. Hr block online The facts are the same as in Example 2—Scholarship excluded from income. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Hr block online Sports, games, hobbies, and noncredit courses. Hr block online   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. Hr block online However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Hr block online Comprehensive or bundled fees. Hr block online   Some eligible educational institutions combine all of their fees for an academic period into one amount. Hr block online 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. Hr block online 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. Hr block online See Figuring the Credit , later, for more information about Form 1098-T. Hr block online 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. Hr block online This is a student who meets all of the following requirements. Hr block online The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. Hr block online This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. Hr block online The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. Hr block online 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. Hr block online 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. Hr block online These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. Hr block online Completion of first 4 years. Hr block online   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. Hr block online This student generally would not be an eligible student for purposes of the American opportunity credit. Hr block online Exception. Hr block online   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. Hr block online Enrolled at least half-time. Hr block online   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. Hr block online   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Hr block online However, the standard may not be lower than any of those established by the U. Hr block online S. Hr block online Department of Education under the Higher Education Act of 1965. Hr block online Please click here for the text description of the image. Hr block online Figure 2-2 Example 1. Hr block online Mack graduated from high school in June 2012. Hr block online 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. Hr block online For the 2013 fall semester, Mack was enrolled less than half-time. Hr block online 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). Hr block online Example 2. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online Example 3. Hr block online During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. Hr block online 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. Hr block online Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. Hr block online Example 4. Hr block online The facts are the same as in Example 3. Hr block online During the 2013 spring semester, Larry again attended College X but not as part of a degree program. Hr block online Larry graduated from high school in June 2013. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online Example 5. Hr block online Dee graduated from high school in June 2012. Hr block online 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. Hr block online Dee completed the program in December 2013, and was awarded a certificate. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. Hr block online You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Hr block online IF you. Hr block online . Hr block online . Hr block online THEN only. Hr block online . Hr block online . Hr block online 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. Hr block online The dependent cannot claim the credit. Hr block online 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. Hr block online You cannot claim the credit based on this dependent's expenses. Hr block online Expenses paid by dependent. Hr block online   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. Hr block online Include these expenses when figuring the amount of your American opportunity credit. Hr block online    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. Hr block online Expenses paid by you. Hr block online   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. Hr block online 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. Hr block online Expenses paid by others. Hr block online   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. Hr block online In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Hr block online If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Hr block online Example. Hr block online In 2013, Ms. Hr block online Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Hr block online 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. Hr block online 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. Hr block online 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. Hr block online If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. Hr block online Tuition reduction. Hr block online    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. Hr block online 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. Hr block online For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Hr block online 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. Hr block online The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. Hr block online You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. Hr block online However, the credit may be reduced based on your MAGI. Hr block online See Effect of the Amount of Your Income on the Amount of Your Credit , later. Hr block online Example. Hr block online Jack and Kay Ford are married and file a joint tax return. Hr block online For 2013, they claim an exemption for their dependent daughter on their tax return. Hr block online Their MAGI is $70,000. Hr block online Their daughter is in her junior (third) year of studies at the local university. Hr block online Jack and Kay paid qualified education expenses of $4,300 in 2013. Hr block online Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. Hr block online Jack and Kay can claim a $2,500 American opportunity credit in 2013. Hr block online This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. Hr block online Form 1098-T. Hr block online   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. Hr block online 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. Hr block online An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Hr block online However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. Hr block online When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Hr block online   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. Hr block online    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. Hr block online 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). Hr block online 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). Hr block online Modified adjusted gross income (MAGI). Hr block online   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Hr block online MAGI when using Form 1040A. Hr block online   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Hr block online MAGI when using Form 1040. Hr block online   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. Hr block online You can use Worksheet 2-1, next, to figure your MAGI. Hr block online    Worksheet 2-1. Hr block online MAGI for the American Opportunity Credit 1. Hr block online Enter your adjusted gross income  (Form 1040, line 38)   1. Hr block online   2. Hr block online Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Hr block online       3. Hr block online Enter your foreign housing deduction (Form 2555, line 50)   3. Hr block online       4. Hr block online Enter the amount of income from Puerto Rico you are excluding   4. Hr block online       5. Hr block online Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Hr block online       6. Hr block online Add the amounts on lines 2, 3, 4, and 5   6. Hr block online   7. Hr block online Add the amounts on lines 1 and 6. Hr block online  This is your modified adjusted  gross income. Hr block online Enter here and  on Form 8863, line 3   7. Hr block online   Phaseout. Hr block online   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. Hr block online The same method is shown in the following example. Hr block online Example. Hr block online You are filing a joint return and your MAGI is $165,000. Hr block online In 2013, you paid $5,000 of qualified education expenses. Hr block online 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). Hr block online 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. Hr block online The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. Hr block online The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). Hr block online The result is the amount of your phased out (reduced) American opportunity credit ($1,875). Hr block online      $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. Hr block online 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. Hr block online Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. Hr block online You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. Hr block online 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). Hr block online At least one of your parents was alive at the end of 2013. Hr block online You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. Hr block online Earned income. Hr block online   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Hr block online 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. Hr block online 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. Hr block online   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). Hr block online However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. Hr block online Support. Hr block online   Your support includes food, shelter, clothing, medical and dental care, education, and the like. Hr block online Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. Hr block online 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. Hr block online However, a scholarship received by you is not considered support if you are a full-time student. Hr block online See Publication 501 for details. Hr block online Full-time student. Hr block online   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. Hr block online Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Hr block online Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. Hr block online Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. Hr block online A filled-in Form 8863 is shown at the end of this publication. Hr block online Note. Hr block online In Appendix A. Hr block online 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. Hr block online Prev  Up  Next   Home   More Online Publications