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Pa 1040ez

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Pa 1040ez

Pa 1040ez Index A Accrual period, Accrual period. Pa 1040ez Acquisition premium, Acquisition premium. Pa 1040ez Adjusted issue price, Adjusted issue price. Pa 1040ez Assistance (see Tax help) B Backup withholding, Backup Withholding Bearer bonds and coupons, Bearer Bonds and Coupons Brokers (see Information for brokers and other middlemen) C Certificates of deposit, Certificates of Deposit Comments and suggestions, Comments and suggestions. Pa 1040ez Contingent payment debt instruments, Contingent Payment Debt Instruments D Debt instrument, Debt instrument. Pa 1040ez Debt instruments Long-term, Long-Term Debt Instruments Short-term, Short-Term Obligations Redeemed at Maturity Debt instruments and coupons purchased after 1984, Debt Instruments and Coupons Purchased After 1984 Debt instruments and coupons purchased after July 1, 1982, and before 1985, Debt Instruments and Coupons Purchased After July 1, 1982, and Before 1985 Debt instruments issued after 1954, corporate, Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 Debt instruments issued after 1984, Debt Instruments Issued After 1984 Debt instruments issued after July 1, 1982, Debt Instruments Issued After July 1, 1982, and Before 1985 Debt instruments issued after May 27, 1969, corporate, Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 Debt instruments not on the OID list, Debt Instruments Not on the OID List Debt Instruments on the OID list, Debt Instruments on the OID List Definitions, Definitions Accrual period, Accrual period. Pa 1040ez Acquisition premium, Acquisition premium. Pa 1040ez Adjusted issue price, Adjusted issue price. Pa 1040ez Debt instrument, Debt instrument. Pa 1040ez Issue price, Issue price. Pa 1040ez Market discount, Market discount. Pa 1040ez Original issue discount (OID), Original issue discount (OID). Pa 1040ez Premium, Premium. Pa 1040ez Qualified stated interest, Qualified stated interest. Pa 1040ez Stated redemption price at maturity, Stated redemption price at maturity. Pa 1040ez Yield to maturity, Yield to maturity (YTM). Pa 1040ez E Electronic payee statements, Electronic payee statements. Pa 1040ez F Form 1099-OID, Form 1099-OID. Pa 1040ez Free tax services, Free help with your tax return. Pa 1040ez H Help (see Tax help) I Inflation-indexed debt instruments, Inflation-Indexed Debt Instruments Information for brokers and other middlemen, Information for Brokers and Other Middlemen Information for owners of OID debt instruments, Information for Owners of OID Debt Instruments Issue price, Issue price. Pa 1040ez Issuers of OID debt instruments, Instructions for, Instructions for issuers of OID debt instruments. Pa 1040ez L Long-term debt instruments, Long-Term Debt Instruments M Market discount, Market discount. Pa 1040ez O OID list, Debt Instruments on, Debt Instruments on the OID List OID on long-term debt instruments, figuring, Figuring OID on Long-Term Debt Instruments OID on stripped bonds and coupons, figuring, Figuring OID on Stripped Bonds and Coupons OID, figuring, Figuring OID. Pa 1040ez Using section I, Using Section I. Pa 1040ez Using the income tax regulations, Using the income tax regulations. Pa 1040ez Original issue discount (OID), Original issue discount (OID). Pa 1040ez Owners of OID debt instruments, information for, Information for Owners of OID Debt Instruments P Premium, Premium. Pa 1040ez Publications (see Tax help) Q Qualified stated interest, Qualified stated interest. Pa 1040ez R REMIC and CDO information reporting requirements, REMIC and CDO information reporting requirements. Pa 1040ez S Section I, Section I. Pa 1040ez Section II, Section II. Pa 1040ez Section III, Section III. Pa 1040ez Short-term obligations redeemed at maturity, Short-Term Obligations Redeemed at Maturity Stated redemption price at maturity, Stated redemption price at maturity. Pa 1040ez Stripped bonds and coupons, figuring OID, Figuring OID on Stripped Bonds and Coupons Suggestions, Comments and, Comments and suggestions. Pa 1040ez T Tax help, How To Get Tax Help Y Yield to maturity, Yield to maturity (YTM). Pa 1040ez , Yield to maturity (YTM). Pa 1040ez Prev  Up     Home   More Online Publications
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The Pa 1040ez

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