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Irs Filing Deadline

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Irs Filing Deadline

Irs filing deadline 3. Irs filing deadline   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). Irs filing deadline There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. Irs filing deadline There are also the limitations which may need to be applied if you have a net loss on Schedule E. Irs filing deadline There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. Irs filing deadline You may also have a gain or loss related to your rental property from a casualty or theft. Irs filing deadline This is considered separately from the income and expense information you report on Schedule E. Irs filing deadline Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Irs filing deadline However, do not use that schedule to report a not-for-profit activity. Irs filing deadline See Not Rented for Profit , in chapter 4. Irs filing deadline There are also other rental situations in which forms other than Schedule E would be used. Irs filing deadline Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Irs filing deadline , you normally report your rental income and expenses on Schedule E, Part I. Irs filing deadline List your total income, expenses, and depreciation for each rental property. Irs filing deadline Be sure to enter the number of fair rental and personal use days on line 2. Irs filing deadline If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Irs filing deadline Complete lines 1 and 2 for each property. Irs filing deadline However, fill in lines 23a through 26 on only one Schedule E. Irs filing deadline On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Irs filing deadline To find out if you need to attach Form 4562, see Form 4562 , later. Irs filing deadline If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Irs filing deadline Form 6198, At-Risk Limitations. Irs filing deadline See At-Risk Rules , later. Irs filing deadline Also see Publication 925. Irs filing deadline Form 8582, Passive Activity Loss Limitations. Irs filing deadline See Passive Activity Limits , later. Irs filing deadline Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Irs filing deadline If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Irs filing deadline Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Irs filing deadline Form 4562. Irs filing deadline   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. Irs filing deadline Otherwise, figure your depreciation on your own worksheet. Irs filing deadline You do not have to attach these computations to your return, but you should keep them in your records for future reference. Irs filing deadline   See Publication 946 for information on preparing Form 4562. Irs filing deadline Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. Irs filing deadline Providing substantial services. Irs filing deadline   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Irs filing deadline Use Form 1065, U. Irs filing deadline S. Irs filing deadline Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Irs filing deadline Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Irs filing deadline For information, see Publication 334, Tax Guide for Small Business. Irs filing deadline Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Irs filing deadline For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. Irs filing deadline Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Irs filing deadline This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Irs filing deadline If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). Irs filing deadline You will not be required to file Form 1065 for any year the election is in effect. Irs filing deadline Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. Irs filing deadline If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. Irs filing deadline For more information on qualified joint ventures, go to IRS. Irs filing deadline gov and enter “qualified joint venture” in the search box. Irs filing deadline Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Irs filing deadline You must consider these rules in the order shown below. Irs filing deadline Both are discussed in this section. Irs filing deadline At-risk rules. Irs filing deadline These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Irs filing deadline This applies only if the real property was placed in service after 1986. Irs filing deadline Passive activity limits. Irs filing deadline Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Irs filing deadline However, there are exceptions. Irs filing deadline At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Irs filing deadline Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Irs filing deadline In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Irs filing deadline You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Irs filing deadline Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. Irs filing deadline See Publication 925 for a discussion of the at-risk rules. Irs filing deadline Form 6198. Irs filing deadline   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. Irs filing deadline Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Irs filing deadline For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Irs filing deadline For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. Irs filing deadline Deductions or losses from passive activities are limited. Irs filing deadline You generally cannot offset income, other than passive income, with losses from passive activities. Irs filing deadline Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Irs filing deadline Any excess loss or credit is carried forward to the next tax year. Irs filing deadline Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. Irs filing deadline For a detailed discussion of these rules, see Publication 925. Irs filing deadline Real estate professionals. Irs filing deadline   If you are a real estate professional, complete line 43 of Schedule E. Irs filing deadline      You qualify as a real estate professional for the tax year if you meet both of the following requirements. Irs filing deadline More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. Irs filing deadline You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. Irs filing deadline If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Irs filing deadline For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Irs filing deadline   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. Irs filing deadline You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Irs filing deadline   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. Irs filing deadline However, you can count your spouse's participation in an activity in determining if you materially participated. Irs filing deadline Real property trades or businesses. Irs filing deadline   A real property trade or business is a trade or business that does any of the following with real property. Irs filing deadline Develops or redevelops it. Irs filing deadline Constructs or reconstructs it. Irs filing deadline Acquires it. Irs filing deadline Converts it. Irs filing deadline Rents or leases it. Irs filing deadline Operates or manages it. Irs filing deadline Brokers it. Irs filing deadline Choice to treat all interests as one activity. Irs filing deadline   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. Irs filing deadline You can make this choice for any year that you qualify as a real estate professional. Irs filing deadline If you forgo making the choice for one year, you can still make it for a later year. Irs filing deadline   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. Irs filing deadline This is true even if you are not a real estate professional in any intervening year. Irs filing deadline (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. Irs filing deadline )   See the Instructions for Schedule E for information about making this choice. Irs filing deadline Material participation. Irs filing deadline   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Irs filing deadline For details, see Publication 925 or the Instructions for Schedule C. Irs filing deadline Participating spouse. Irs filing deadline   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. Irs filing deadline Do this even if your spouse owns no interest in the activity or files a separate return for the year. Irs filing deadline Form 8582. Irs filing deadline    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Irs filing deadline See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. Irs filing deadline   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. Irs filing deadline Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Irs filing deadline Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Irs filing deadline Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Irs filing deadline This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Irs filing deadline Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Irs filing deadline Example. Irs filing deadline Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. Irs filing deadline $2,000 of Jane's $3,500 loss offsets her passive income. Irs filing deadline The remaining $1,500 loss can be deducted from her $40,000 wages. Irs filing deadline The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. Irs filing deadline Active participation. Irs filing deadline   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Irs filing deadline Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. Irs filing deadline Example. Irs filing deadline Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. Irs filing deadline Mike had advertised and rented the house to the current tenant himself. Irs filing deadline He also collected the rents, which usually came by mail. Irs filing deadline All repairs were either made or contracted out by Mike. Irs filing deadline Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. Irs filing deadline Maximum special allowance. Irs filing deadline   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Irs filing deadline   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Irs filing deadline If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Irs filing deadline   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Irs filing deadline Modified adjusted gross income (MAGI). Irs filing deadline   This is your adjusted gross income from Form 1040, U. Irs filing deadline S. Irs filing deadline Individual Income Tax Return, line 38, or Form 1040NR, U. Irs filing deadline S. Irs filing deadline Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. Irs filing deadline S. Irs filing deadline savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). Irs filing deadline Form 8582 not required. Irs filing deadline   Do not complete Form 8582 if you meet all of the following conditions. Irs filing deadline Your only passive activities were rental real estate activities in which you actively participated. Irs filing deadline Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). Irs filing deadline If married filing separately, you lived apart from your spouse all year. Irs filing deadline You have no prior year unallowed losses from these (or any other passive) activities. Irs filing deadline You have no current or prior year unallowed credits from passive activities. Irs filing deadline Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). Irs filing deadline You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. Irs filing deadline   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. Irs filing deadline On lines 23a through 23e of your Schedule E, enter the applicable amounts. Irs filing deadline Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. Irs filing deadline You may be able to deduct the loss on your income tax return. Irs filing deadline Casualty. Irs filing deadline   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Irs filing deadline Such events include a storm, fire, or earthquake. Irs filing deadline Theft. Irs filing deadline   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. Irs filing deadline Gain from casualty or theft. Irs filing deadline   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. Irs filing deadline Generally, you must report this gain. Irs filing deadline However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. Irs filing deadline To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. Irs filing deadline In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. Irs filing deadline The cost of the replacement property must be equal to or more than the net insurance or other payment you received. Irs filing deadline More information. Irs filing deadline   For information on business and nonbusiness casualty and theft losses, see Publication 547. Irs filing deadline How to report. Irs filing deadline    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Irs filing deadline Follow the Instructions for Form 4684 for where to carry your net gain or loss. Irs filing deadline Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. Irs filing deadline In 2013, she rented it all 12 months for a monthly rental fee of $1,125. Irs filing deadline In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. Irs filing deadline Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. Irs filing deadline This means using the straight line method over a recovery period of 27. Irs filing deadline 5 years. Irs filing deadline She uses Table 2-2d to find her depreciation percentage. Irs filing deadline Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. Irs filing deadline For year 6, the rate is 3. Irs filing deadline 636%. Irs filing deadline Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. Irs filing deadline 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. Irs filing deadline Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. Irs filing deadline Marie also meets all of the requirements for not having to file Form 8582. Irs filing deadline She uses Schedule E, Part I, to report her rental income and expenses. Irs filing deadline She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. Irs filing deadline Form 4562 is not required. Irs filing deadline Prev  Up  Next   Home   More Online Publications
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Irs filing deadline 8. Irs filing deadline   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. Irs filing deadline Half-time student. Irs filing deadline How Much Can You Contribute Are Distributions TaxableFiguring the Taxable Portion of a Distribution Additional Tax on Taxable Distributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Introduction Qualified tuition programs (QTPs) are also called “529 plans. Irs filing deadline ” States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. Irs filing deadline Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. Irs filing deadline If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. Irs filing deadline You cannot deduct either payments or contributions to a QTP. Irs filing deadline For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. Irs filing deadline What is the tax benefit of a QTP. Irs filing deadline   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. Irs filing deadline See Are Distributions Taxable , later, for more information. Irs filing deadline    Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American opportunity credit or the lifetime learning credit. Irs filing deadline See Coordination With American Opportunity and Lifetime Learning Credits, later. Irs filing deadline What Is a Qualified Tuition Program A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. Irs filing deadline QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. Irs filing deadline The program must meet certain requirements. Irs filing deadline Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. Irs filing deadline Qualified education expenses. Irs filing deadline   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). Irs filing deadline As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. Irs filing deadline See Half-time student , later. Irs filing deadline The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. Irs filing deadline Tuition and fees. Irs filing deadline Books, supplies, and equipment. Irs filing deadline Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution. Irs filing deadline Expenses for room and board must be incurred by students who are enrolled at least half-time. Irs filing deadline The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Irs filing deadline The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Irs filing deadline The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Irs filing deadline You will need to contact the eligible educational institution for qualified room and board costs. Irs filing deadline    For tax years after 2010, the purchase of computer technology or equipment is only a qualified education expense if the computer technology or equipment is required for enrollment or attendance at an eligible institution. Irs filing deadline Designated beneficiary. Irs filing deadline   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. Irs filing deadline The designated beneficiary can be changed after participation in the QTP begins. Irs filing deadline If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship. Irs filing deadline Half-time student. Irs filing deadline   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Irs filing deadline Eligible educational institution. Irs filing deadline   For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Irs filing deadline S. Irs filing deadline Department of Education. Irs filing deadline It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Irs filing deadline The educational institution should be able to tell you if it is an eligible educational institution. Irs filing deadline   Certain educational institutions located outside the United States also participate in the U. Irs filing deadline S. Irs filing deadline Department of Education's Federal Student Aid (FSA) programs. Irs filing deadline   How Much Can You Contribute Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary. Irs filing deadline There are no income restrictions on the individual contributors. Irs filing deadline You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. Irs filing deadline   Are Distributions Taxable The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. Irs filing deadline This is a return of the investment in the plan. Irs filing deadline The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution , later). Irs filing deadline Earnings and return of investment. Irs filing deadline    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. Irs filing deadline The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment (box 3). Irs filing deadline Form 1099-Q should be sent to you by January 31, 2014. Irs filing deadline Figuring the Taxable Portion of a Distribution To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses. Irs filing deadline Adjusted qualified education expenses. Irs filing deadline   This amount is the total qualified education expenses reduced by any tax-free educational assistance. Irs filing deadline Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs filing deadline Taxable earnings. Irs filing deadline   Use the following steps to figure the taxable part. Irs filing deadline Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. Irs filing deadline The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. Irs filing deadline Subtract the amount figured in (1) from the total distributed earnings. Irs filing deadline The result is the amount the beneficiary must include in income. Irs filing deadline Report it on Form 1040 or Form 1040NR, line 21. Irs filing deadline Example 1. Irs filing deadline In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. Irs filing deadline Over the years they contributed $18,000 to the account. Irs filing deadline The total balance in the account was $27,000 on the date the distribution was made. Irs filing deadline In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. Irs filing deadline She paid her college expenses from the following sources. Irs filing deadline   Gift from parents $1,600     Partial tuition scholarship (tax-free) 3,100     QTP distribution 5,300           Before Sara can determine the taxable part of her QTP distribution, she must reduce her total qualified education expenses by any tax-free educational assistance. Irs filing deadline   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Equals: Adjusted qualified  education expenses (AQEE) $5,200   Since the remaining expenses ($5,200) are less than the QTP distribution, part of the earnings will be taxable. Irs filing deadline Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. Irs filing deadline Sara figures the taxable part of the distributed earnings as follows. Irs filing deadline   1. Irs filing deadline $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. Irs filing deadline $950 (earnings)−$932 (tax-free earnings)     =$18 (taxable earnings)  Sara must include $18 in income (Form 1040, line 21) as distributed QTP earnings not used for adjusted qualified education expenses. Irs filing deadline Coordination With American Opportunity and Lifetime Learning Credits An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Irs filing deadline This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit. Irs filing deadline Example 2. Irs filing deadline Assume the same facts as in Example 1 , except that Sara's parents claimed an American opportunity credit of $2,500 (based on $4,000 expenses). Irs filing deadline   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Minus: Expenses taken into account  in figuring American opportunity credit −4,000     Equals: Adjusted qualified  education expenses (AQEE) $1,200           The taxable part of the distribution is figured as follows. Irs filing deadline   1. Irs filing deadline $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. Irs filing deadline $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). Irs filing deadline This represents distributed earnings not used for adjusted qualified education expenses. Irs filing deadline Coordination With Coverdell ESA Distributions If a designated beneficiary receives distributions from both a QTP and a Coverdell ESA in the same year, and the total of these distributions is more than the beneficiary's adjusted qualified higher education expenses, the expenses must be allocated between the distributions. Irs filing deadline For purposes of this allocation, disregard any qualified elementary and secondary education expenses. Irs filing deadline Example 3. Irs filing deadline Assume the same facts as in Example 2 , except that instead of receiving a $5,300 distribution from her QTP, Sara received $4,600 from that account and $700 from her Coverdell ESA. Irs filing deadline In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. Irs filing deadline   $1,200 AQHEE × $700 ESA distribution  $5,300 total distribution = $158 AQHEE (ESA)     $1,200 AQHEE × $4,600 QTP distribution  $5,300 total distribution = $1,042 AQHEE (QTP)   Sara then figures the taxable portion of her Coverdell ESA distribution based on qualified higher education expenses of $158, and the taxable portion of her QTP distribution based on the other $1,042. Irs filing deadline Note. Irs filing deadline If you are required to allocate your expenses between Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary education expenses, see the examples in chapter 7, Coverdell Education Savings Account under Coordination With Qualified Tuition Program (QTP) Distributions . Irs filing deadline Coordination With Tuition and Fees Deduction. Irs filing deadline   A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Irs filing deadline Losses on QTP Investments If you have a loss on your investment in a QTP account, you may be able to take the loss on your income tax return. Irs filing deadline You can take the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Irs filing deadline Your basis is the total amount of contributions to that QTP account. Irs filing deadline You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Irs filing deadline If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. Irs filing deadline ) from all such accounts in order to determine your taxable earnings for the year. Irs filing deadline By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. Irs filing deadline Example 1. Irs filing deadline In 2013, Taylor received a final distribution of $1,000 from QTP #1. Irs filing deadline His unrecovered basis in that account before the distribution was $3,000. Irs filing deadline If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). Irs filing deadline Example 2. Irs filing deadline Assume the same facts as in Example 1 , except that Taylor also had a distribution of $9,000 from QTP #2, giving him total distributions for 2013 of $10,000. Irs filing deadline His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). Irs filing deadline Taylor's adjusted qualified education expenses for 2013 totaled $6,000. Irs filing deadline In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. Irs filing deadline   1. Irs filing deadline $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. Irs filing deadline $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. Irs filing deadline $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. Irs filing deadline Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). Irs filing deadline Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. Irs filing deadline Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Irs filing deadline Exceptions. Irs filing deadline   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Irs filing deadline Made because the designated beneficiary is disabled. Irs filing deadline A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Irs filing deadline A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Irs filing deadline Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs filing deadline Made on account of the attendance of the designated beneficiary at a U. Irs filing deadline S. Irs filing deadline military academy (such as the USNA at Annapolis). Irs filing deadline This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Irs filing deadline S. Irs filing deadline Code) attributable to such attendance. Irs filing deadline Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier. Irs filing deadline ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Irs filing deadline Figuring the additional tax. Irs filing deadline    Use Part II of Form 5329, to figure any additional tax. Irs filing deadline Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Irs filing deadline Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. Irs filing deadline In addition, the designated beneficiary can be changed without transferring accounts. Irs filing deadline Rollovers Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). Irs filing deadline An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. Irs filing deadline Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Irs filing deadline These are not taxable distributions. Irs filing deadline Members of the beneficiary's family. Irs filing deadline   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Irs filing deadline Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Irs filing deadline Brother, sister, stepbrother, or stepsister. Irs filing deadline Father or mother or ancestor of either. Irs filing deadline Stepfather or stepmother. Irs filing deadline Son or daughter of a brother or sister. Irs filing deadline Brother or sister of father or mother. Irs filing deadline Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Irs filing deadline The spouse of any individual listed above. Irs filing deadline First cousin. Irs filing deadline Example. Irs filing deadline When Aaron graduated from college last year he had $5,000 left in his QTP. Irs filing deadline He wanted to give this money to his younger brother, who was in junior high school. Irs filing deadline In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his brother's QTP within 60 days of the distribution. Irs filing deadline If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. Irs filing deadline Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. Irs filing deadline See Members of the beneficiary's family , earlier. Irs filing deadline Example. Irs filing deadline Assume the same situation as in the last example. Irs filing deadline Instead of closing his QTP and paying the distribution into his brother's QTP, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his brother. Irs filing deadline Prev  Up  Next   Home   More Online Publications