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1040ez Amended Form

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1040ez Amended Form

1040ez amended form 23. 1040ez amended form   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. 1040ez amended form Mortgage proceeds used for business or investment. 1040ez amended form Introduction This chapter discusses what interest expenses you can deduct. 1040ez amended form Interest is the amount you pay for the use of borrowed money. 1040ez amended form The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). 1040ez amended form Home mortgage interest, including certain points and mortgage insurance premiums. 1040ez amended form Investment interest. 1040ez amended form This chapter explains these deductions. 1040ez amended form It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. 1040ez amended form Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. 1040ez amended form Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). 1040ez amended form The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. 1040ez amended form You can deduct home mortgage interest if all the following conditions are met. 1040ez amended form You file Form 1040 and itemize deductions on Schedule A (Form 1040). 1040ez amended form The mortgage is a secured debt on a qualified home in which you have an ownership interest. 1040ez amended form (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. 1040ez amended form The term “qualified home” means your main home or second home. 1040ez amended form For details, see Publication 936. 1040ez amended form )  Both you and the lender must intend that the loan be repaid. 1040ez amended form Amount Deductible In most cases, you can deduct all of your home mortgage interest. 1040ez amended form How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. 1040ez amended form Fully deductible interest. 1040ez amended form   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. 1040ez amended form (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. 1040ez amended form )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). 1040ez amended form Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). 1040ez amended form Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). 1040ez amended form The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. 1040ez amended form   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. 1040ez amended form    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. 1040ez amended form Figure 23-A. 1040ez amended form Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. 1040ez amended form Figure 23-A. 1040ez amended form Is My Interest Fully Deductible? Limits on deduction. 1040ez amended form   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. 1040ez amended form If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. 1040ez amended form Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. 1040ez amended form It also describes certain special situations that may affect your deduction. 1040ez amended form Late payment charge on mortgage payment. 1040ez amended form   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. 1040ez amended form Mortgage prepayment penalty. 1040ez amended form   If you pay off your home mortgage early, you may have to pay a penalty. 1040ez amended form You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. 1040ez amended form Sale of home. 1040ez amended form   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. 1040ez amended form Example. 1040ez amended form John and Peggy Harris sold their home on May 7. 1040ez amended form Through April 30, they made home mortgage interest payments of $1,220. 1040ez amended form The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. 1040ez amended form Their mortgage interest deduction is $1,270 ($1,220 + $50). 1040ez amended form Prepaid interest. 1040ez amended form   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. 1040ez amended form You can deduct in each year only the interest that qualifies as home mortgage interest for that year. 1040ez amended form However, there is an exception that applies to points, discussed later. 1040ez amended form Mortgage interest credit. 1040ez amended form   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. 1040ez amended form Figure the credit on Form 8396, Mortgage Interest Credit. 1040ez amended form If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. 1040ez amended form   For more information on the credit, see chapter 37. 1040ez amended form Ministers' and military housing allowance. 1040ez amended form   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. 1040ez amended form Hardest Hit Fund and Emergency Homeowners' Loan Programs. 1040ez amended form   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. 1040ez amended form You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. 1040ez amended form You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. 1040ez amended form If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). 1040ez amended form However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. 1040ez amended form Mortgage assistance payments under section 235 of the National Housing Act. 1040ez amended form   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. 1040ez amended form You cannot deduct the interest that is paid for you. 1040ez amended form No other effect on taxes. 1040ez amended form   Do not include these mortgage assistance payments in your income. 1040ez amended form Also, do not use these payments to reduce other deductions, such as real estate taxes. 1040ez amended form Divorced or separated individuals. 1040ez amended form   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. 1040ez amended form See the discussion of Payments for jointly-owned home in chapter 18. 1040ez amended form Redeemable ground rents. 1040ez amended form   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. 1040ez amended form   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. 1040ez amended form For more information, see Publication 936. 1040ez amended form Nonredeemable ground rents. 1040ez amended form   Payments on a nonredeemable ground rent are not mortgage interest. 1040ez amended form You can deduct them as rent if they are a business expense or if they are for rental property. 1040ez amended form Reverse mortgages. 1040ez amended form   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. 1040ez amended form With a reverse mortgage, you retain title to your home. 1040ez amended form Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. 1040ez amended form Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. 1040ez amended form Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. 1040ez amended form Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. 1040ez amended form Rental payments. 1040ez amended form   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. 1040ez amended form This is true even if the settlement papers call them interest. 1040ez amended form You cannot deduct these payments as home mortgage interest. 1040ez amended form Mortgage proceeds invested in tax-exempt securities. 1040ez amended form   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. 1040ez amended form “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. 1040ez amended form Refunds of interest. 1040ez amended form   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. 1040ez amended form If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. 1040ez amended form However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. 1040ez amended form This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. 1040ez amended form    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. 1040ez amended form For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. 1040ez amended form   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. 1040ez amended form Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. 1040ez amended form Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. 1040ez amended form A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. 1040ez amended form See Points paid by the seller , later. 1040ez amended form General Rule You generally cannot deduct the full amount of points in the year paid. 1040ez amended form Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. 1040ez amended form See Deduction Allowed Ratably , next. 1040ez amended form For exceptions to the general rule, see Deduction Allowed in Year Paid , later. 1040ez amended form Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. 1040ez amended form You use the cash method of accounting. 1040ez amended form This means you report income in the year you receive it and deduct expenses in the year you pay them. 1040ez amended form Most individuals use this method. 1040ez amended form Your loan is secured by a home. 1040ez amended form (The home does not need to be your main home. 1040ez amended form ) Your loan period is not more than 30 years. 1040ez amended form If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. 1040ez amended form Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. 1040ez amended form Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. 1040ez amended form (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. 1040ez amended form ) Your loan is secured by your main home. 1040ez amended form (Your main home is the one you ordinarily live in most of the time. 1040ez amended form ) Paying points is an established business practice in the area where the loan was made. 1040ez amended form The points paid were not more than the points generally charged in that area. 1040ez amended form You use the cash method of accounting. 1040ez amended form This means you report income in the year you receive it and deduct expenses in the year you pay them. 1040ez amended form (If you want more information about this method, see Accounting Methods in chapter 1. 1040ez amended form ) The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. 1040ez amended form The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. 1040ez amended form The funds you provided are not required to have been applied to the points. 1040ez amended form They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. 1040ez amended form You cannot have borrowed these funds from your lender or mortgage broker. 1040ez amended form You use your loan to buy or build your main home. 1040ez amended form The points were computed as a percentage of the principal amount of the mortgage. 1040ez amended form The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. 1040ez amended form The points may be shown as paid from either your funds or the seller's. 1040ez amended form Figure 23-B. 1040ez amended form Are My Points Fully Deductible This Year? Please click here for the text description of the image. 1040ez amended form Figure 23-B. 1040ez amended form Are My Points Fully Deductible This Year? Note. 1040ez amended form If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. 1040ez amended form Home improvement loan. 1040ez amended form   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. 1040ez amended form Second home. 1040ez amended form You cannot fully deduct in the year paid points you pay on loans secured by your second home. 1040ez amended form You can deduct these points only over the life of the loan. 1040ez amended form Refinancing. 1040ez amended form   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. 1040ez amended form This is true even if the new mortgage is secured by your main home. 1040ez amended form   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. 1040ez amended form You can deduct the rest of the points over the life of the loan. 1040ez amended form Example 1. 1040ez amended form In 1998, Bill Fields got a mortgage to buy a home. 1040ez amended form In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. 1040ez amended form The mortgage is secured by his home. 1040ez amended form To get the new loan, he had to pay three points ($3,000). 1040ez amended form Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. 1040ez amended form Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. 1040ez amended form The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. 1040ez amended form Bill's first payment on the new loan was due July 1. 1040ez amended form He made six payments on the loan in 2013 and is a cash basis taxpayer. 1040ez amended form Bill used the funds from the new mortgage to repay his existing mortgage. 1040ez amended form Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. 1040ez amended form He cannot deduct all of the points in 2013. 1040ez amended form He can deduct two points ($2,000) ratably over the life of the loan. 1040ez amended form He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. 1040ez amended form The other point ($1,000) was a fee for services and is not deductible. 1040ez amended form Example 2. 1040ez amended form The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. 1040ez amended form Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. 1040ez amended form His deduction is $500 ($2,000 × 25%). 1040ez amended form Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. 1040ez amended form This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. 1040ez amended form The total amount Bill deducts in 2013 is $550 ($500 + $50). 1040ez amended form Special Situations This section describes certain special situations that may affect your deduction of points. 1040ez amended form Original issue discount. 1040ez amended form   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. 1040ez amended form This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. 1040ez amended form Amounts charged for services. 1040ez amended form   Amounts charged by the lender for specific services connected to the loan are not interest. 1040ez amended form Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. 1040ez amended form You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. 1040ez amended form Points paid by the seller. 1040ez amended form   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. 1040ez amended form Treatment by seller. 1040ez amended form   The seller cannot deduct these fees as interest. 1040ez amended form But they are a selling expense that reduces the amount realized by the seller. 1040ez amended form See chapter 15 for information on selling your home. 1040ez amended form Treatment by buyer. 1040ez amended form    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. 1040ez amended form If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. 1040ez amended form If any of those tests are not met, the buyer deducts the points over the life of the loan. 1040ez amended form   For information about basis, see chapter 13. 1040ez amended form Funds provided are less than points. 1040ez amended form   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. 1040ez amended form In addition, you can deduct any points paid by the seller. 1040ez amended form Example 1. 1040ez amended form When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). 1040ez amended form You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. 1040ez amended form Of the $1,000 charged for points, you can deduct $750 in the year paid. 1040ez amended form You spread the remaining $250 over the life of the mortgage. 1040ez amended form Example 2. 1040ez amended form The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. 1040ez amended form In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). 1040ez amended form You spread the remaining $250 over the life of the mortgage. 1040ez amended form You must reduce the basis of your home by the $1,000 paid by the seller. 1040ez amended form Excess points. 1040ez amended form   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. 1040ez amended form You must spread any additional points over the life of the mortgage. 1040ez amended form Mortgage ending early. 1040ez amended form   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. 1040ez amended form However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. 1040ez amended form Instead, deduct the remaining balance over the term of the new loan. 1040ez amended form    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. 1040ez amended form Example. 1040ez amended form Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. 1040ez amended form He deducts $200 points per year. 1040ez amended form Through 2012, Dan has deducted $2,200 of the points. 1040ez amended form Dan prepaid his mortgage in full in 2013. 1040ez amended form He can deduct the remaining $800 of points in 2013. 1040ez amended form Limits on deduction. 1040ez amended form   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . 1040ez amended form See Publication 936 for details. 1040ez amended form Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. 1040ez amended form The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. 1040ez amended form Qualified mortgage insurance. 1040ez amended form   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). 1040ez amended form   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. 1040ez amended form If provided by the Rural Housing Service, it is commonly known as a guarantee fee. 1040ez amended form These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. 1040ez amended form Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. 1040ez amended form Special rules for prepaid mortgage insurance. 1040ez amended form   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. 1040ez amended form You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. 1040ez amended form No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. 1040ez amended form This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. 1040ez amended form See the Example below. 1040ez amended form Example. 1040ez amended form Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. 1040ez amended form Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. 1040ez amended form Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. 1040ez amended form Ryan's adjusted gross income (AGI) for 2012 is $76,000. 1040ez amended form Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. 1040ez amended form For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. 1040ez amended form In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). 1040ez amended form Limit on deduction. 1040ez amended form   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. 1040ez amended form See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. 1040ez amended form If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. 1040ez amended form Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. 1040ez amended form You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. 1040ez amended form A governmental unit is a person for purposes of furnishing the statement. 1040ez amended form The statement for each year should be sent to you by January 31 of the following year. 1040ez amended form A copy of this form will also be sent to the IRS. 1040ez amended form The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. 1040ez amended form However, it should not show any interest that was paid for you by a government agency. 1040ez amended form As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. 1040ez amended form However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. 1040ez amended form See Points , earlier, to determine whether you can deduct points not shown on Form 1098. 1040ez amended form Prepaid interest on Form 1098. 1040ez amended form   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. 1040ez amended form However, you cannot deduct the prepaid amount for January 2014 in 2013. 1040ez amended form (See Prepaid interest , earlier. 1040ez amended form ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. 1040ez amended form You will include the interest for January 2014 with the other interest you pay for 2014. 1040ez amended form See How To Report , later. 1040ez amended form Refunded interest. 1040ez amended form   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. 1040ez amended form See Refunds of interest , earlier. 1040ez amended form Mortgage insurance premiums. 1040ez amended form   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. 1040ez amended form See Mortgage Insurance Premiums, earlier. 1040ez amended form Investment Interest This section discusses interest expenses you may be able to deduct as an investor. 1040ez amended form If you borrow money to buy property you hold for investment, the interest you pay is investment interest. 1040ez amended form You can deduct investment interest subject to the limit discussed later. 1040ez amended form However, you cannot deduct interest you incurred to produce tax-exempt income. 1040ez amended form Nor can you deduct interest expenses on straddles. 1040ez amended form Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. 1040ez amended form Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. 1040ez amended form It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). 1040ez amended form Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). 1040ez amended form Partners, shareholders, and beneficiaries. 1040ez amended form   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. 1040ez amended form Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. 1040ez amended form Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. 1040ez amended form The allocation is not affected by the use of property that secures the debt. 1040ez amended form Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. 1040ez amended form You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. 1040ez amended form The interest carried over is treated as investment interest paid or accrued in that next year. 1040ez amended form You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. 1040ez amended form Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. 1040ez amended form Investment income. 1040ez amended form    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). 1040ez amended form Investment income does not include Alaska Permanent Fund dividends. 1040ez amended form It also does not include qualified dividends or net capital gain unless you choose to include them. 1040ez amended form Choosing to include qualified dividends. 1040ez amended form   Investment income generally does not include qualified dividends, discussed in chapter 8. 1040ez amended form However, you can choose to include all or part of your qualified dividends in investment income. 1040ez amended form   You make this choice by completing Form 4952, line 4g, according to its instructions. 1040ez amended form   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. 1040ez amended form Choosing to include net capital gain. 1040ez amended form   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). 1040ez amended form However, you can choose to include all or part of your net capital gain in investment income. 1040ez amended form    You make this choice by completing Form 4952, line 4g, according to its instructions. 1040ez amended form   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. 1040ez amended form    Before making either choice, consider the overall effect on your tax liability. 1040ez amended form Compare your tax if you make one or both of these choices with your tax if you do not. 1040ez amended form Investment income of child reported on parent's return. 1040ez amended form    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. 1040ez amended form If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. 1040ez amended form Child's qualified dividends. 1040ez amended form   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. 1040ez amended form However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. 1040ez amended form   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). 1040ez amended form Child's Alaska Permanent Fund dividends. 1040ez amended form   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. 1040ez amended form To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. 1040ez amended form Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. 1040ez amended form Subtract the result from the amount on Form 8814, line 12. 1040ez amended form Child's capital gain distributions. 1040ez amended form    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. 1040ez amended form However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. 1040ez amended form   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). 1040ez amended form Investment expenses. 1040ez amended form   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. 1040ez amended form Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. 1040ez amended form Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. 1040ez amended form Losses from passive activities. 1040ez amended form   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). 1040ez amended form See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. 1040ez amended form Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. 1040ez amended form Exception to use of Form 4952. 1040ez amended form   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. 1040ez amended form Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. 1040ez amended form You do not have any other deductible investment expenses. 1040ez amended form You have no carryover of investment interest expense from 2012. 1040ez amended form If you meet all of these tests, you can deduct all of your investment interest. 1040ez amended form More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. 1040ez amended form Items You Cannot Deduct Some interest payments are not deductible. 1040ez amended form Certain expenses similar to interest also are not deductible. 1040ez amended form Nondeductible expenses include the following items. 1040ez amended form Personal interest (discussed later). 1040ez amended form Service charges (however, see Other Expenses (Line 23) in chapter 28). 1040ez amended form Annual fees for credit cards. 1040ez amended form Loan fees. 1040ez amended form Credit investigation fees. 1040ez amended form Interest to purchase or carry tax-exempt securities. 1040ez amended form Penalties. 1040ez amended form   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. 1040ez amended form Personal Interest Personal interest is not deductible. 1040ez amended form Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. 1040ez amended form It includes the following items. 1040ez amended form Interest on car loans (unless you use the car for business). 1040ez amended form Interest on federal, state, or local income tax. 1040ez amended form Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. 1040ez amended form Late payment charges by a public utility. 1040ez amended form You may be able to deduct interest you pay on a qualified student loan. 1040ez amended form For details, see Publication 970, Tax Benefits for Education. 1040ez amended form Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. 1040ez amended form However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. 1040ez amended form You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. 1040ez amended form You do this by tracing disbursements of the debt proceeds to specific uses. 1040ez amended form For details on how to do this, see chapter 4 of Publication 535. 1040ez amended form How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. 1040ez amended form Where you deduct your interest expense generally depends on how you use the loan proceeds. 1040ez amended form See Table 23-1 for a summary of where to deduct your interest expense. 1040ez amended form Home mortgage interest and points. 1040ez amended form   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. 1040ez amended form If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. 1040ez amended form Attach a statement explaining the difference and print “See attached” next to line 10. 1040ez amended form    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. 1040ez amended form If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. 1040ez amended form The seller must give you this number and you must give the seller your TIN. 1040ez amended form A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. 1040ez amended form Failure to meet any of these requirements may result in a $50 penalty for each failure. 1040ez amended form The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. 1040ez amended form See Social Security Number (SSN) in chapter 1 for more information about TINs. 1040ez amended form    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. 1040ez amended form   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. 1040ez amended form More than one borrower. 1040ez amended form   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. 1040ez amended form Show how much of the interest each of you paid, and give the name and address of the person who received the form. 1040ez amended form Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. 1040ez amended form Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. 1040ez amended form   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. 1040ez amended form You should let each of the other borrowers know what his or her share is. 1040ez amended form Mortgage proceeds used for business or investment. 1040ez amended form    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. 1040ez amended form It shows where to deduct the part of your excess interest that is for those activities. 1040ez amended form Investment interest. 1040ez amended form    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. 1040ez amended form Amortization of bond premium. 1040ez amended form   There are various ways to treat the premium you pay to buy taxable bonds. 1040ez amended form See Bond Premium Amortization in Publication 550. 1040ez amended form Income-producing rental or royalty interest. 1040ez amended form   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). 1040ez amended form Example. 1040ez amended form You rent out part of your home and borrow money to make repairs. 1040ez amended form You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). 1040ez amended form Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. 1040ez amended form Table 23-1. 1040ez amended form Where To Deduct Your Interest Expense IF you have . 1040ez amended form . 1040ez amended form . 1040ez amended form THEN deduct it on . 1040ez amended form . 1040ez amended form . 1040ez amended form AND for more information go to . 1040ez amended form . 1040ez amended form . 1040ez amended form deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. 1040ez amended form deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. 1040ez amended form deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. 1040ez amended form deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. 1040ez amended form deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. 1040ez amended form deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. 1040ez amended form deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. 1040ez amended form deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. 1040ez amended form deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. 1040ez amended form personal interest not deductible. 1040ez amended form Prev  Up  Next   Home   More Online Publications
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The 1040ez Amended Form

1040ez amended form 35. 1040ez amended form   Education Credits Table of Contents Introduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses Introduction For 2013, there are two tax credits available to persons who pay expenses for higher (postsecondary) education. 1040ez amended form They are: The American opportunity credit, and The lifetime learning credit. 1040ez amended form The chapter will present an overview of these education credits. 1040ez amended form To get the detailed information you will need to claim either of the credits, and for examples illustrating that information, see chapters 2 and 3 of Publication 970. 1040ez amended form Can you claim more than one education credit this year?   For each student, you can choose for any year only one of the credits. 1040ez amended form For example, if you choose to take the American opportunity credit for a child on your 2013 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2013. 1040ez amended form   If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both. 1040ez amended form   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity and the lifetime learning credits on a per-student, per-year basis. 1040ez amended form This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. 1040ez amended form Table 35-1. 1040ez amended form Comparison of Education Credits Caution. 1040ez amended form You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student. 1040ez amended form   American Opportunity Credit Lifetime Learning Credit Maximum credit Up to $2,500 credit per eligible student Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly;  $90,000 if single, head of household, or qualifying widow(er) $127,000 if married filing jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable Credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) the Hope credit was claimed) Available for an unlimited number of years Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period beginning during the tax year Available for one or more courses Felony drug conviction At the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Felony drug convictions do not make the student ineligible Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Differences between the American opportunity and lifetime learning credits. 1040ez amended form   There are several differences between these two credits. 1040ez amended form These differences are summarized in Table 35-1, later. 1040ez amended form Useful Items - You may want to see: Publication 970 Tax Benefits for Education Form (and Instructions) 8863 Education Credits (American Opportunity and Lifetime Learning Credits) Who Can Claim an Education Credit You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. 1040ez amended form The credits are based on the amount of qualified education expenses paid for the student in 2013 for academic periods beginning in 2013 and in the first 3 months of 2014. 1040ez amended form For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 education credit(s). 1040ez amended form Academic period. 1040ez amended form   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. 1040ez amended form In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. 1040ez amended form Eligible educational institution. 1040ez amended form   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 1040ez amended form S. 1040ez amended form Department of Education. 1040ez amended form It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 1040ez amended form The educational institution should be able to tell you if it is an eligible educational institution. 1040ez amended form   Certain educational institutions located outside the United States also participate in the U. 1040ez amended form S. 1040ez amended form Department of Education's Federal Student Aid (FSA) programs. 1040ez amended form Who can claim a dependent's expenses. 1040ez amended form   If an exemption is allowed as a deduction for any person who claims the student as a dependent, all qualified education expenses of the student are treated as having been paid by that person. 1040ez amended form Therefore, only that person can claim an education credit for the student. 1040ez amended form If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. 1040ez amended form Expenses paid by a third party. 1040ez amended form   Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. 1040ez amended form However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. 1040ez amended form Therefore, you are treated as having paid expenses that were paid by the third party. 1040ez amended form For more information and an example see Who Can Claim a Dependent's Expenses in Pub. 1040ez amended form 970, chapter 2 or 3. 1040ez amended form Who cannot claim a credit. 1040ez amended form   You cannot take an education credit if any of the following apply. 1040ez amended form You are claimed as a dependent on another person's tax return, such as your parent's return. 1040ez amended form Your filing status is married filing separately. 1040ez amended form You (or your spouse) were a nonresident alien for any part of 2013 and did not elect to be treated as a resident alien for tax purposes. 1040ez amended form Your MAGI is one of the following. 1040ez amended form American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er). 1040ez amended form Lifetime learning credit: $127,000 or more if married filing jointly, or $63,000 or more if single, head of household, or qualifying widow(er) . 1040ez amended form   Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. 1040ez amended form However, if you are filing Form 2555, Form 2555–EZ, or Form 4563, or are excluding income from Puerto RIco, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. 1040ez amended form For details, see Pub. 1040ez amended form 970. 1040ez amended form    Figure 35-A may be helpful in determining if you can claim an education credit on your tax return. 1040ez amended form The American opportunity credit will always be greater than or equal to the lifetime learning credit for any student who is eligible for both credits. 1040ez amended form However, if any of the conditions for the American opportunity credit, listed in Table 35-1 earlier, are not met for any student, you cannot take the American opportunity credit for that student. 1040ez amended form You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. 1040ez amended form See Pub. 1040ez amended form 970 for information on other education benefits. 1040ez amended form Qualified Education Expenses Generally, qualified education expenses are amounts paid in 2013 for tuition and fees required for the student's enrollment or attendance at an eligible educational institution. 1040ez amended form It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds. 1040ez amended form For course-related books, supplies, and equipment, only certain expenses qualify. 1040ez amended form American opportunity credit: Qualified education expenses include amounts spent on books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. 1040ez amended form Lifetime learning credit: Qualified education expenses include amounts for books, supplies, and equipment only if required to be paid to the institution as a condition of enrollment or attendance. 1040ez amended form Qualified education expenses include nonacademic fees, such as student activity fees, athletic fees, or other expenses unrelated to the academic course of instruction, only if the fee must be paid to the institution as a condition of enrollment or attendance. 1040ez amended form However, fees for personal expenses (described below) are never qualified education expenses. 1040ez amended form Qualified education expenses for either credit do not include amounts paid for: Personal expenses. 1040ez amended form This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. 1040ez amended form Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student's degree program or (for the lifetime learning credit only) helps the student acquire or improve job skills. 1040ez amended form You should receive Form 1098–T, Tuition Statement, from the institution reporting either payments received in 2013 (box 1) or amounts billed in 2013 (box 2). 1040ez amended form However, the amount in box 1 or 2 of Form 1098–T may be different from the amount you paid (or are treated as having paid). 1040ez amended form In completing Form 8863, use only the amounts you actually paid (plus any amounts you are treated as having paid) in 2013, reduced as necessary, as described in Adjustments to Qualified Education Expenses , later. 1040ez amended form Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. 1040ez amended form Qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. 1040ez amended form If you or the student takes a deduction for higher education expenses, such as on Schedule A or C (Form 1040), you cannot use those expenses in your qualified education expenses when figuring your education credits. 1040ez amended form Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. 1040ez amended form See Adjustments to Qualified Education Expenses, later. 1040ez amended form Prepaid Expenses. 1040ez amended form   Qualified education expenses paid in 2013 for an academic period that begins in the first 3 months of 2014 can be used in figuring an education credit for 2013 only. 1040ez amended form See Academic period , earlier. 1040ez amended form For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). 1040ez amended form    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). 1040ez amended form Paid with borrowed funds. 1040ez amended form   You can claim an education credit for qualified education expenses paid with the proceeds of a loan. 1040ez amended form Use the expenses to figure the credit for the year in which the expenses are paid, not the year in which the loan is repaid. 1040ez amended form Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. 1040ez amended form Student withdraws from class(es). 1040ez amended form   You can claim an education credit for qualified education expenses not refunded when a student withdraws. 1040ez amended form No Double Benefit Allowed You cannot do any of the following. 1040ez amended form Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an education credit based on those same expenses. 1040ez amended form Claim more than one education credit based on the same qualified education expenses. 1040ez amended form Claim an education credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). 1040ez amended form Claim an education credit based on qualified education expenses paid with educational assistance, such as a tax-free scholarship, grant, or employer-provided educational assistance. 1040ez amended form See Adjustments to Qualified Education Expenses, next. 1040ez amended form Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid in 2013 by or on behalf of that student under the following rules. 1040ez amended form The result is the amount of adjusted qualified education expenses for each student. 1040ez amended form Tax-free educational assistance. 1040ez amended form   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. 1040ez amended form See Academic period , earlier. 1040ez amended form      Tax-free educational assistance includes:    Tax-free parts of scholarships and fellowships (see chapter 12 of this publication and chapter 1 of Pub. 1040ez amended form 970), The tax-free part of Pell grants (see chapter 1 of Pub. 1040ez amended form 970), The tax-free part of employer-provided educational assistance (see Pub. 1040ez amended form 970), Veterans' educational assistance (see chapter 1 of Pub. 1040ez amended form 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 1040ez amended form Generally, any scholarship or fellowship is treated as tax-free educational assistance. 1040ez amended form However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent the student includes it in gross income (if the student is required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 1040ez amended form 970, chapter 1; or The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 1040ez amended form 970, chapter 1. 1040ez amended form You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year received. 1040ez amended form For details, see Adjustments of Qualified Education Expenses, in chapters 2 and 3 of Pub. 1040ez amended form 970. 1040ez amended form Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. 1040ez amended form This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). 1040ez amended form If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. 1040ez amended form If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. 1040ez amended form Refunds. 1040ez amended form   A refund of qualified education expenses may reduce qualified education expenses for the tax year or may require you to repay (recapture) the credit that you claimed in an earlier year. 1040ez amended form Some tax-free educational assistance received after 2013 may be treated as a refund. 1040ez amended form See Tax-free educational assistance, earlier. 1040ez amended form Refunds received in 2013. 1040ez amended form   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. 1040ez amended form Refunds received after 2013 but before your income tax return is filed. 1040ez amended form   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. 1040ez amended form Refunds received after 2013 and after your income tax return is filed. 1040ez amended form   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received after you file your 2013 income tax return, you may need to repay some or all of the credit that you claimed. 1040ez amended form See Credit recapture, next. 1040ez amended form Credit recapture. 1040ez amended form    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. 1040ez amended form You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. 1040ez amended form You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). 1040ez amended form Include that amount as an additional tax for the year the refund or tax-free assistance was received. 1040ez amended form Example. 1040ez amended form    You paid $8,000 tuition and fees in December 2013 for your child's Spring semester beginning in January 2014. 1040ez amended form You filed your 2013 tax return on February 3, 2014, and claimed a lifetime learning credit of $1,600 ($8,000 qualified education expense paid x . 1040ez amended form 20). 1040ez amended form You claimed no other tax credits. 1040ez amended form After you filed your return, your child withdrew from two courses and you received a refund of $1,400. 1040ez amended form You must refigure your 2013 lifetime learning credit using $6,600 ($8,000 qualified education expenses − $1,400 refund). 1040ez amended form The refigured credit is $1,320 and your tax liability increased by $280. 1040ez amended form You must include the difference of $280 ($1,600 credit originally claimed − $1,320 refigured credit) as additional tax on your 2014 income tax return. 1040ez amended form See the instructions for your 2014 income tax return to determine where to include this tax. 1040ez amended form If you also pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. 1040ez amended form Amounts that do not reduce qualified education expenses. 1040ez amended form   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 1040ez amended form   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. 1040ez amended form The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses, as defined in Chapter 1 of Pub. 1040ez amended form 970. 1040ez amended form The use of the money is not restricted. 1040ez amended form   For examples, see chapter 2 in Pub. 1040ez amended form 970. 1040ez amended form Figure 35-A. 1040ez amended form Can You Claim an Education Credit for 2013? This image is too large to be displayed in the current screen. 1040ez amended form Please click the link to view the image. 1040ez amended form Figure 35-A. 1040ez amended form Can You Claim an Education Credit for 2013? Prev  Up  Next   Home   More Online Publications