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2010 Form 1040

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2010 Form 1040

2010 form 1040 Publication 504 - Main Content Table of Contents Filing StatusUnmarried persons. 2010 form 1040 Married persons. 2010 form 1040 Same-sex marriage. 2010 form 1040 Exception. 2010 form 1040 Married Filing Jointly Married Filing Separately Head of Household ExemptionsPersonal Exemptions Exemptions for Dependents Phaseout of Exemptions AlimonyInvalid decree. 2010 form 1040 Amended instrument. 2010 form 1040 General Rules Instruments Executed After 1984 Instruments Executed Before 1985 Qualified Domestic Relations OrderRollovers. 2010 form 1040 Individual Retirement Arrangements Property SettlementsTransfer Between Spouses Gift Tax on Property Settlements Sale of Jointly-Owned Property Costs of Getting a Divorce Tax Withholding and Estimated Tax Community PropertyCommunity Income Alimony (Community Income) How To Get Tax Help Filing Status Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. 2010 form 1040 It may also be used in determining whether you can claim certain other deductions and credits. 2010 form 1040 The filing status you can choose depends partly on your marital status on the last day of your tax year. 2010 form 1040 Marital status. 2010 form 1040   If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying widow(er). 2010 form 1040 If you are married, your filing status is either married filing a joint return or married filing a separate return. 2010 form 1040 For information about the single and qualifying widow(er) filing statuses, see Publication 501. 2010 form 1040 Unmarried persons. 2010 form 1040   You are unmarried for the whole year if either of the following applies. 2010 form 1040 You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. 2010 form 1040 You must follow your state law to determine if you are divorced or legally separated. 2010 form 1040 Exception. 2010 form 1040 If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals. 2010 form 1040 You have obtained a decree of annulment, which holds that no valid marriage ever existed. 2010 form 1040 You must file amended returns (Form 1040X, Amended U. 2010 form 1040 S. 2010 form 1040 Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. 2010 form 1040 The statute of limitations generally does not end until 3 years (including extensions) after the date you file your original return or within 2 years after the date you pay the tax. 2010 form 1040 On the amended return you will change your filing status to single or, if you meet certain requirements, head of household. 2010 form 1040 Married persons. 2010 form 1040   You are married for the whole year if you are separated but you have not obtained a final decree of divorce or separate maintenance by the last day of your tax year. 2010 form 1040 An interlocutory decree is not a final decree. 2010 form 1040 Same-sex marriage. 2010 form 1040   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. 2010 form 1040 The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. 2010 form 1040 However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state (or foreign) law are not considered married for federal tax purposes. 2010 form 1040 For more details, see Publication 501. 2010 form 1040 Exception. 2010 form 1040   If you live apart from your spouse, under certain circumstances, you may be considered unmarried and can file as head of household. 2010 form 1040 See Head of Household , later. 2010 form 1040 Married Filing Jointly If you are married, you and your spouse can choose to file a joint return. 2010 form 1040 If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. 2010 form 1040 You can file a joint return even if one of you had no income or deductions. 2010 form 1040 If both you and your spouse have income, you should usually figure your tax on both a joint return and separate returns (using the filing status of married filing separately) to see which gives the two of you the lower combined tax. 2010 form 1040 Nonresident alien. 2010 form 1040   To file a joint return, at least one of you must be a U. 2010 form 1040 S. 2010 form 1040 citizen or resident alien at the end of the tax year. 2010 form 1040 If either of you was a nonresident alien at any time during the tax year, you can file a joint return only if you agree to treat the nonresident spouse as a resident of the United States. 2010 form 1040 This means that your combined worldwide incomes are subject to U. 2010 form 1040 S. 2010 form 1040 income tax. 2010 form 1040 These rules are explained in Publication 519, U. 2010 form 1040 S. 2010 form 1040 Tax Guide for Aliens. 2010 form 1040 Signing a joint return. 2010 form 1040   Both you and your spouse generally must sign the return, or it will not be considered a joint return. 2010 form 1040 Joint and individual liability. 2010 form 1040   Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. 2010 form 1040 This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse. 2010 form 1040 Divorced taxpayers. 2010 form 1040   If you are divorced, you are jointly and individually responsible for any tax, interest, and penalties due on a joint return for a tax year ending before your divorce. 2010 form 1040 This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. 2010 form 1040 Relief from joint liability. 2010 form 1040   In some cases, a spouse may be relieved of the tax, interest, and penalties on a joint return. 2010 form 1040 You can ask for relief no matter how small the liability. 2010 form 1040   There are three types of relief available. 2010 form 1040 Innocent spouse relief. 2010 form 1040 Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date election of this relief is filed. 2010 form 1040 Equitable relief. 2010 form 1040   Married persons who live in community property states, but who did not file joint returns, may also qualify for relief from liability arising from community property law or for equitable relief. 2010 form 1040 See Relief from liability arising from community property law , later, under Community Property. 2010 form 1040    Each kind of relief has different requirements. 2010 form 1040 You must file Form 8857 to request relief under any of these categories. 2010 form 1040 Publication 971 explains these kinds of relief and who may qualify for them. 2010 form 1040 You can also find information on our website at IRS. 2010 form 1040 gov. 2010 form 1040 Tax refund applied to spouse's debts. 2010 form 1040   The overpayment shown on your joint return may be used to pay the past-due amount of your spouse's debts. 2010 form 1040 This includes your spouse's federal tax, state income tax, child or spousal support payments, or a federal nontax debt, such as a student loan. 2010 form 1040 You can get a refund of your share of the overpayment if you qualify as an injured spouse. 2010 form 1040 Injured spouse. 2010 form 1040   You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts. 2010 form 1040 An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount. 2010 form 1040   To be considered an injured spouse, you must: Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and Not be legally obligated to pay the past-due amount. 2010 form 1040 Note. 2010 form 1040 If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (2). 2010 form 1040 For more information, see Publication 555. 2010 form 1040    Refunds that involve community property states must be divided according to local law. 2010 form 1040 If you live in a community property state in which all community property is subject to the debts of either spouse, your entire refund is generally used to pay those debts. 2010 form 1040   If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. 2010 form 1040 Follow the instructions for the form. 2010 form 1040   If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. 2010 form 1040 You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. 2010 form 1040   If you filed your joint return and your joint refund was offset, file Form 8379 by itself. 2010 form 1040 When filed after offset, it can take up to 8 weeks to receive your refund. 2010 form 1040 Do not attach the previously filed tax return, but do include copies of all Forms W-2, Wage and Tax Statement, and W-2G, Certain Gambling Winnings, for both spouses and any Forms 1099 that show income tax withheld. 2010 form 1040    An injured spouse claim is different from an innocent spouse relief request. 2010 form 1040 An injured spouse uses Form 8379 to request an allocation of the tax overpayment attributed to each spouse. 2010 form 1040 An innocent spouse uses Form 8857 to request relief from joint liability for tax, interest, and penalties on a joint return for items of the other spouse (or former spouse) that were incorrectly reported on or omitted from the joint return. 2010 form 1040 For information on innocent spouses, see Relief from joint liability, earlier. 2010 form 1040 Married Filing Separately If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. 2010 form 1040 You can file a separate return even if only one of you had income. 2010 form 1040 For information on exemptions you can claim on your separate return, see Exemptions , later. 2010 form 1040 Community or separate income. 2010 form 1040   If you live in a community property state and file a separate return, your income may be separate income or community income for income tax purposes. 2010 form 1040 For more information, see Community Income under Community Property, later. 2010 form 1040 Separate liability. 2010 form 1040   If you and your spouse file separately, you each are responsible only for the tax due on your own return. 2010 form 1040 Itemized deductions. 2010 form 1040   If you and your spouse file separate returns and one of you itemizes deductions, the other spouse cannot use the standard deduction and should also itemize deductions. 2010 form 1040 Table 1. 2010 form 1040 Itemized Deductions on Separate Returns This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. 2010 form 1040  Caution: If you live in a community property state, these rules do not apply. 2010 form 1040 See Community Property. 2010 form 1040 IF you paid . 2010 form 1040 . 2010 form 1040 . 2010 form 1040 AND you . 2010 form 1040 . 2010 form 1040 . 2010 form 1040 THEN you can deduct on your separate federal return. 2010 form 1040 . 2010 form 1040 . 2010 form 1040   medical expenses   paid with funds deposited in a joint checking account in which you and your spouse have an equal interest     half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses. 2010 form 1040     state income tax   file a separate state income tax return     the state income tax you alone paid during the year. 2010 form 1040         file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax     the state income tax you alone paid during the year. 2010 form 1040         file a joint state income tax return and you  are liable for only your own share of state  income tax     the smaller of: the state income tax you alone paid during the year, or the total state income tax you and your spouse paid during the year multiplied by the following fraction. 2010 form 1040 The numerator is your gross income and the denominator  is your combined gross income. 2010 form 1040     property tax   paid the tax on property held as tenants by the entirety     the property tax you alone paid. 2010 form 1040     mortgage interest   paid the interest on a qualified home1 held  as tenants by the entirety     the mortgage interest you alone paid. 2010 form 1040     casualty loss   have a casualty loss on a home you own  as tenants by the entirety     half of the loss, subject to the deduction limits. 2010 form 1040 Neither spouse may report the total casualty loss. 2010 form 1040 1 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. 2010 form 1040 Dividing itemized deductions. 2010 form 1040   You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. 2010 form 1040 See Table 1, later. 2010 form 1040 Separate returns may give you a higher tax. 2010 form 1040   Some married couples file separate returns because each wants to be responsible only for his or her own tax. 2010 form 1040 There is no joint liability. 2010 form 1040 But in almost all instances, if you file separate returns, you will pay more combined federal tax than you would with a joint return. 2010 form 1040 This is because the following special rules apply if you file a separate return. 2010 form 1040 Your tax rate generally will be higher than it would be on a joint return. 2010 form 1040 Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer. 2010 form 1040 You cannot take the credit for child and dependent care expenses in most cases. 2010 form 1040 You cannot take the earned income credit. 2010 form 1040 You cannot take the exclusion or credit for adoption expenses in most cases. 2010 form 1040 You cannot take the credit for higher education expenses (American opportunity and lifetime learning credits), the deduction for student loan interest, or the tuition and fees deduction. 2010 form 1040 You cannot exclude the interest from qualified savings bonds that you used for higher education expenses. 2010 form 1040 If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received. 2010 form 1040 Your income limits that reduce the child tax credit, the retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are half of the limits for a joint return filer. 2010 form 1040 Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). 2010 form 1040 Your basic standard deduction, if allowable, is half of that allowed a joint return filer. 2010 form 1040 See Itemized deductions , earlier. 2010 form 1040 Joint return after separate returns. 2010 form 1040   If either you or your spouse (or both of you) file a separate return, you generally can change to a joint return within 3 years from the due date (not including extensions) of the separate return or returns. 2010 form 1040 This applies to a return either of you filed claiming married filing separately, single, or head of household filing status. 2010 form 1040 Use Form 1040X to change your filing status. 2010 form 1040 Separate returns after joint return. 2010 form 1040   After the due date of your return, you and your spouse cannot file separate returns if you previously filed a joint return. 2010 form 1040 Exception. 2010 form 1040   A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. 2010 form 1040 The personal representative has 1 year from the due date (including extensions) of the joint return to make the change. 2010 form 1040 Head of Household Filing as head of household has the following advantages. 2010 form 1040 You can claim the standard deduction even if your spouse files a separate return and itemizes deductions. 2010 form 1040 Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately. 2010 form 1040 Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately. 2010 form 1040 You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately. 2010 form 1040 Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are higher than the income limits if you claim a filing status of married filing separately. 2010 form 1040 Requirements. 2010 form 1040   You may be able to file as head of household if you meet all the following requirements. 2010 form 1040 You are unmarried or “considered unmarried” on the last day of the year. 2010 form 1040 You paid more than half the cost of keeping up a home for the year. 2010 form 1040 A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). 2010 form 1040 However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. 2010 form 1040 See Special rule for parent , later, under Qualifying person. 2010 form 1040 Considered unmarried. 2010 form 1040   You are considered unmarried on the last day of the tax year if you meet all the following tests. 2010 form 1040 You file a separate return. 2010 form 1040 A separate return includes a return claiming married filing separately, single, or head of household filing status. 2010 form 1040 You paid more than half the cost of keeping up your home for the tax year. 2010 form 1040 Your spouse did not live in your home during the last 6 months of the tax year. 2010 form 1040 Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. 2010 form 1040 See Temporary absences , later. 2010 form 1040 Your home was the main home of your child, stepchild, or foster child for more than half the year. 2010 form 1040 (See Qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year. 2010 form 1040 ) You must be able to claim an exemption for the child. 2010 form 1040 However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rule described later in Special rule for divorced or separated parents (or parents who live apart) under Exemptions for Dependents. 2010 form 1040 The general rules for claiming an exemption for a dependent are shown later in Table 3. 2010 form 1040    If you were considered married for part of the year and lived in a community property state (one of the states listed later under Community Property), special rules may apply in determining your income and expenses. 2010 form 1040 See Publication 555 for more information. 2010 form 1040 Nonresident alien spouse. 2010 form 1040   If your spouse was a nonresident alien at any time during the tax year, and you have not chosen to treat your spouse as a resident alien, you are considered unmarried for head of household purposes. 2010 form 1040 However, your spouse is not a qualifying person for head of household purposes. 2010 form 1040 You must have another qualifying person and meet the other requirements to file as head of household. 2010 form 1040 Keeping up a home. 2010 form 1040   You are keeping up a home only if you pay more than half the cost of its upkeep for the year. 2010 form 1040 This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. 2010 form 1040 This does not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household. 2010 form 1040 Qualifying person. 2010 form 1040    Table 2, later, shows who can be a qualifying person. 2010 form 1040 Any person not described in Table 2 is not a qualifying person. 2010 form 1040   Generally, the qualifying person must live with you for more than half of the year. 2010 form 1040 Table 2. 2010 form 1040 Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Caution. 2010 form 1040 See the text of this publication for the other requirements you must meet to claim head of household filing status. 2010 form 1040 IF the person is your . 2010 form 1040 . 2010 form 1040 . 2010 form 1040 AND . 2010 form 1040 . 2010 form 1040 . 2010 form 1040 THEN that person is . 2010 form 1040 . 2010 form 1040 . 2010 form 1040   qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2 he or she is single a qualifying person, whether or not you can claim an exemption for the person. 2010 form 1040     he or she is married and you can claim an exemption for him or her a qualifying person. 2010 form 1040     he or she is married and you cannot claim an exemption for him or her not a qualifying person. 2010 form 1040 3     qualifying relative4 who is your father or mother you can claim an exemption for him or her5 a qualifying person. 2010 form 1040 6     you cannot claim an exemption for him or her not a qualifying person. 2010 form 1040     qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and you can claim an exemption for him or her5 a qualifying person. 2010 form 1040     he or she did not live with you more than half the year not a qualifying person. 2010 form 1040     he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and is your qualifying relative only because he or she lived with you all year as a member of your household not a qualifying person. 2010 form 1040     you cannot claim an exemption for him or her not a qualifying person. 2010 form 1040   1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. 2010 form 1040 2 See Table 3, later, for the tests that must be met to be a qualifying child. 2010 form 1040 Note. 2010 form 1040 If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents (or Parents Who Live Apart) under Exemptions for Dependents, later. 2010 form 1040 If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. 2010 form 1040 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. 2010 form 1040 4 See Table 3, later, for the tests that must be met to be a qualifying relative. 2010 form 1040 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. 2010 form 1040 See Multiple Support Agreement in Publication 501. 2010 form 1040 6 See Special rule for parent . 2010 form 1040 Special rule for parent. 2010 form 1040   If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. 2010 form 1040 However, you must be able to claim an exemption for your father or mother. 2010 form 1040 Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. 2010 form 1040 You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. 2010 form 1040 Death or birth. 2010 form 1040   If the person for whom you kept up a home was born or died in 2013, you still may be able to file as head of household. 2010 form 1040 If the person is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. 2010 form 1040 If the person is anyone else, see Publication 501. 2010 form 1040 Temporary absences. 2010 form 1040   You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. 2010 form 1040 It must be reasonable to assume that the absent person will return to the home after the temporary absence. 2010 form 1040 You must continue to keep up the home during the absence. 2010 form 1040 Kidnapped child. 2010 form 1040   You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. 2010 form 1040 You can claim head of household filing status if all the following statements are true. 2010 form 1040 The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. 2010 form 1040 In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. 2010 form 1040 You would have qualified for head of household filing status if the child had not been kidnapped. 2010 form 1040   This treatment applies for all years until the earlier of: The year the child is returned, The year there is a determination that the child is dead, or The year the child would have reached age 18. 2010 form 1040 More information. 2010 form 1040   For more information on filing as head of household, see Publication 501. 2010 form 1040 Exemptions You can deduct $3,900 for each exemption you claim in 2013. 2010 form 1040 However, if your adjusted gross income is more than $150,000, see Phaseout of Exemptions , later. 2010 form 1040 There are two types of exemptions: personal exemptions and exemptions for dependents. 2010 form 1040 If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return. 2010 form 1040 Personal Exemptions You can claim your own exemption unless someone else can claim it. 2010 form 1040 If you are married, you may be able to take an exemption for your spouse. 2010 form 1040 These are called personal exemptions. 2010 form 1040 Exemption for Your Spouse Your spouse is never considered your dependent. 2010 form 1040 Joint return. 2010 form 1040   On a joint return, you can claim one exemption for yourself and one for your spouse. 2010 form 1040   If your spouse had any gross income, you can claim his or her exemption only if you file a joint return. 2010 form 1040 Separate return. 2010 form 1040   If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. 2010 form 1040 If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption. 2010 form 1040 Alimony paid. 2010 form 1040   If you paid alimony to your spouse, you cannot take an exemption for your spouse. 2010 form 1040 This is because alimony is gross income to the spouse who received it. 2010 form 1040 Divorced or separated spouse. 2010 form 1040   If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. 2010 form 1040 This rule applies even if you provided all of your former spouse's support. 2010 form 1040 Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. 2010 form 1040 You can claim an exemption for a dependent even if your dependent files a return. 2010 form 1040 The term “dependent” means: A qualifying child, or A qualifying relative. 2010 form 1040 Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. 2010 form 1040 For detailed information, see Publication 501. 2010 form 1040   Dependent not allowed a personal exemption. 2010 form 1040 If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. 2010 form 1040 This is true even if you do not claim the dependent's exemption on your return. 2010 form 1040 It is also true if the decedent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. 2010 form 1040 Table 3. 2010 form 1040 Overview of the Rules for Claiming an Exemption for a Dependent Caution. 2010 form 1040 This table is only an overview of the rules. 2010 form 1040 For details, see Publication 501. 2010 form 1040 • You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. 2010 form 1040 • You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. 2010 form 1040 • You cannot claim a person as a dependent unless that person is a U. 2010 form 1040 S. 2010 form 1040 citizen, U. 2010 form 1040 S. 2010 form 1040 resident alien, U. 2010 form 1040 S. 2010 form 1040 national, or a resident of Canada or Mexico. 2010 form 1040 1 • You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. 2010 form 1040   Tests To Be a Qualifying Child   Tests To Be a Qualifying Relative 1. 2010 form 1040     2. 2010 form 1040       3. 2010 form 1040    4. 2010 form 1040    5. 2010 form 1040    The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. 2010 form 1040   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled. 2010 form 1040   The child must have lived with you for more than half of the year. 2010 form 1040 2   The child must not have provided more than half of his or her own support for the year. 2010 form 1040   The child is not filing a joint return for the year (unless that joint return is filed only as a claim for refund of withheld income tax or estimated tax paid). 2010 form 1040   1. 2010 form 1040    2. 2010 form 1040       3. 2010 form 1040    4. 2010 form 1040 The person cannot be your qualifying child or the qualifying child of anyone else. 2010 form 1040   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 or (b) must live with you all year as a member of your household 2 (and your relationship must not violate local law). 2010 form 1040   The person's gross income for the year must be less than $3,900. 2010 form 1040 3   You must provide more than half of the person's total support for the year. 2010 form 1040 4 If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. 2010 form 1040 See Special Rule for Qualifying Child of More Than One Person , later, to find out which person is the person entitled to claim the child as a qualifying child. 2010 form 1040     1 Exception exists for certain adopted children. 2010 form 1040 2 Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. 2010 form 1040 3 Exception exists for persons who are disabled and have income from a sheltered workshop. 2010 form 1040 4 Exceptions exist for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. 2010 form 1040 See Publication 501. 2010 form 1040 You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. 2010 form 1040 For more information, see the instructions for your tax return if you file Form 1040A or 1040. 2010 form 1040 Children of Divorced or Separated Parents (or Parents Who Live Apart) In most cases, because of the residency test (see item 3 under Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents is the qualifying child of the custodial parent. 2010 form 1040 However, the child will be treated as the qualifying child of the noncustodial parent if the special rule (discussed next) applies. 2010 form 1040 Special rule for divorced or separated parents (or parents who live apart). 2010 form 1040   A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true. 2010 form 1040 The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of the year, whether or not they are or were married. 2010 form 1040 The child received over half of his or her support for the year from the parents. 2010 form 1040 The child is in the custody of one or both parents for more than half of the year. 2010 form 1040 Either of the following applies. 2010 form 1040 The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. 2010 form 1040 (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement that went into effect after 1984 and before 2009 , later. 2010 form 1040 A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2013. 2010 form 1040 See Child support under pre-1985 agreement , later. 2010 form 1040 Custodial parent and noncustodial parent. 2010 form 1040   The custodial parent is the parent with whom the child lived for the greater number of nights during the year. 2010 form 1040 The other parent is the noncustodial parent. 2010 form 1040   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year. 2010 form 1040   A child is treated as living with a parent for a night if the child sleeps: At that parent's home, whether or not the parent is present, or In the company of the parent, when the child does not sleep at a parent's home (for example, the parent and child are on vacation together). 2010 form 1040 Equal number of nights. 2010 form 1040   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income. 2010 form 1040 December 31. 2010 form 1040   The night of December 31 is treated as part of the year in which it begins. 2010 form 1040 For example, December 31, 2013, is treated as part of 2013. 2010 form 1040 Emancipated child. 2010 form 1040   If a child is emancipated under state law, the child is treated as not living with either parent. 2010 form 1040 See Examples 5 and 6 . 2010 form 1040 Absences. 2010 form 1040    If a child was not with either parent on a particular night (because, for example, the child was staying at a friend's house), the child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. 2010 form 1040 But if it cannot be determined with which parent the child normally would have lived or if the child would not have lived with either parent that night, the child is treated as not living with either parent that night. 2010 form 1040 Parent works at night. 2010 form 1040   If, due to a parent's nighttime work schedule, a child lives for a greater number of days but not nights with the parent who works at night, that parent is treated as the custodial parent. 2010 form 1040 On a school day, the child is treated as living at the primary residence registered with the school. 2010 form 1040 Example 1 – child lived with one parent greater number of nights. 2010 form 1040 You and your child’s other parent are divorced. 2010 form 1040 In 2013, your child lived with you 210 nights and with the other parent 156 nights. 2010 form 1040 You are the custodial parent. 2010 form 1040 Example 2 – child is away at camp. 2010 form 1040 In 2013, your daughter lives with each parent for alternate weeks. 2010 form 1040 In the summer, she spends 6 weeks at summer camp. 2010 form 1040 During the time she is at camp, she is treated as living with you for 3 weeks and with her other parent, your ex-spouse, for 3 weeks because this is how long she would have lived with each parent if she had not attended summer camp. 2010 form 1040 Example 3 – child lived same number of days with each parent. 2010 form 1040 Your son lived with you 180 nights during the year and lived the same number of nights with his other parent, your ex-spouse. 2010 form 1040 Your adjusted gross income is $40,000. 2010 form 1040 Your ex-spouse's adjusted gross income is $25,000. 2010 form 1040 You are treated as your son's custodial parent because you have the higher adjusted gross income. 2010 form 1040 Example 4 – child is at parent’s home but with other parent. 2010 form 1040 Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. 2010 form 1040 You become ill and are hospitalized. 2010 form 1040 The other parent lives in your home with your son for 10 consecutive days while you are in the hospital. 2010 form 1040 Your son is treated as living with you during this 10-day period because he was living in your home. 2010 form 1040 Example 5 – child emancipated in May. 2010 form 1040 When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. 2010 form 1040 As a result, he is not considered in the custody of his parents for more than half of the year. 2010 form 1040 The special rule for children of divorced or separated parents (or parents who live apart) does not apply. 2010 form 1040 Example 6 – child emancipated in August. 2010 form 1040 Your daughter lives with you from January 1, 2013, until May 31, 2013, and lives with her other parent, your ex-spouse, from June 1, 2013, through the end of the year. 2010 form 1040 She turns 18 and is emancipated under state law on August 1, 2013. 2010 form 1040 Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2013. 2010 form 1040 You are the custodial parent. 2010 form 1040 Written declaration. 2010 form 1040    The custodial parent must use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. 2010 form 1040 The noncustodial parent must attach a copy of the form or statement to his or her tax return. 2010 form 1040   The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. 2010 form 1040 Divorce decree or separation agreement that went into effect after 1984 and before 2009. 2010 form 1040   If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. 2010 form 1040 To be able to do this, the decree or agreement must state all three of the following. 2010 form 1040 The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. 2010 form 1040 The custodial parent will not claim the child as a dependent for the year. 2010 form 1040 The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. 2010 form 1040   The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return. 2010 form 1040 The cover page (write the other parent's social security number on this page). 2010 form 1040 The pages that include all of the information identified in items (1) through (3) above. 2010 form 1040 The signature page with the other parent's signature and the date of the agreement. 2010 form 1040 Post-2008 divorce decree or separation agreement. 2010 form 1040   If the decree or agreement went into effect after 2008, a noncustodial parent claiming an exemption for a child cannot attach pages from a divorce decree or separation agreement instead of Form 8332. 2010 form 1040 The custodial parent must sign either a Form 8332 or a similar statement. 2010 form 1040 The only purpose of this statement must be to release the custodial parent's claim to the child's exemption. 2010 form 1040 The noncustodial parent must attach a copy to his or her return. 2010 form 1040 The form or statement must release the custodial parent's claim to the child without any conditions. 2010 form 1040 For example, the release must not depend on the noncustodial parent paying support. 2010 form 1040    The noncustodial parent must attach the required information even if it was filed with a return in an earlier year. 2010 form 1040 Revocation of release of claim to an exemption. 2010 form 1040   The custodial parent can revoke a release of claim to exemption that he or she previously released to the noncustodial parent on Form 8332 or a similar statement. 2010 form 1040 In order for the revocation to be effective for 2013, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2012 or earlier. 2010 form 1040 The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. 2010 form 1040 Remarried parent. 2010 form 1040   If you remarry, the support provided by your new spouse is treated as provided by you. 2010 form 1040 Child support under pre-1985 agreement. 2010 form 1040   All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child, even if such amounts are not actually spent for child support. 2010 form 1040 Example. 2010 form 1040 Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. 2010 form 1040 This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support. 2010 form 1040 Parents who never married. 2010 form 1040   The special rule for divorced or separated parents also applies to parents who never married and lived apart at all times during the last 6 months of the year. 2010 form 1040 Alimony. 2010 form 1040   Payments to your spouse that are includible in his or her gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent. 2010 form 1040 Special Rule for Qualifying Child of More Than One Person If your qualifying child is not a qualifying child of anyone else, this special rule does not apply to you and you do not need to read about it. 2010 form 1040 This is also true if your qualifying child is not a qualifying child of anyone else except your spouse with whom you file a joint return. 2010 form 1040 If a child is treated as the qualifying child of the noncustodial parent under the Special rule for divorced or separated parents (or parents who live apart), earlier, see Applying this special rule to divorced or separated parents (or parents who live apart), later. 2010 form 1040 Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. 2010 form 1040 (For a description of these tests, see list items 1 through 5 under Tests To Be a Qualifying Child in Table 3). 2010 form 1040 Although the child meets the conditions to be a qualifying child of each of these persons, only one person can actually use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). 2010 form 1040 The exemption for the child. 2010 form 1040 The child tax credit. 2010 form 1040 Head of household filing status. 2010 form 1040 The credit for child and dependent care expenses. 2010 form 1040 The exclusion from income for dependent care benefits. 2010 form 1040 The earned income credit. 2010 form 1040 The other person cannot take any of these benefits based on this qualifying child. 2010 form 1040 In other words, you and the other person cannot agree to divide these tax benefits between you. 2010 form 1040 The other person cannot take any of these tax benefits unless he or she has a different qualifying child. 2010 form 1040 Tiebreaker rules. 2010 form 1040   To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply. 2010 form 1040 If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. 2010 form 1040 If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. 2010 form 1040 If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. 2010 form 1040 If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. 2010 form 1040 If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. 2010 form 1040 If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' total AGI evenly between them; see Publication 501 for details. 2010 form 1040   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. 2010 form 1040 Example 1—separated parents. 2010 form 1040 You, your husband, and your 10-year-old son lived together until August 1, 2013, when your husband moved out of the household. 2010 form 1040 In August and September, your son lived with you. 2010 form 1040 For the rest of the year, your son lived with your husband, the boy's father. 2010 form 1040 Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. 2010 form 1040 At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. 2010 form 1040 You and your husband will file separate returns. 2010 form 1040 Your husband agrees to let you treat your son as a qualifying child. 2010 form 1040 This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. 2010 form 1040 However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. 2010 form 1040 And, as a result of your filing status being married filing separately, you cannot claim the earned income credit or the credit for child and dependent care expenses. 2010 form 1040 Example 2—separated parents claim same child. 2010 form 1040 The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. 2010 form 1040 In this case, only your husband will be allowed to treat your son as a qualifying child. 2010 form 1040 This is because, during 2013, the boy lived with him longer than with you. 2010 form 1040 If you claimed an exemption, the child tax credit, or the exclusion for dependent care benefits for your son, the IRS will disallow your claim to all these tax benefits, unless you have another qualifying child. 2010 form 1040 In addition, because you and your husband did not live apart the last 6 months of the year, your husband cannot claim head of household filing status. 2010 form 1040 And, as a result of his filing status being married filing separately, he cannot claim the earned income credit or the credit for child and dependent care expenses. 2010 form 1040 Applying this special rule to divorced or separated parents (or parents who live apart). 2010 form 1040   If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents (or parents who live apart) described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. 2010 form 1040 However, the noncustodial parent cannot claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. 2010 form 1040 Only the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for those four tax benefits. 2010 form 1040 If the child is the qualifying child of more than one person for those tax benefits, the tiebreaker rules determine which person can treat the child as a qualifying child. 2010 form 1040 Example 1. 2010 form 1040 You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. 2010 form 1040 Your AGI is $10,000. 2010 form 1040 Your mother's AGI is $25,000. 2010 form 1040 Your son's father does not live with you or your son. 2010 form 1040 Under the rules for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child if he meets all the requirements to do so. 2010 form 1040 Because of this, you cannot claim an exemption or the child tax credit for your son. 2010 form 1040 However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. 2010 form 1040 You and your mother did not have any child care expenses or dependent care benefits, but the boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. 2010 form 1040 (Note: The support test does not apply for the earned income credit. 2010 form 1040 ) However, you agree to let your mother claim your son. 2010 form 1040 This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit. 2010 form 1040 (You cannot claim head of household filing status because your mother paid the entire cost of keeping up the home. 2010 form 1040 ) Example 2. 2010 form 1040 The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. 2010 form 1040 Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. 2010 form 1040 Example 3. 2010 form 1040 The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the earned income credit. 2010 form 1040 Your mother also claims him as a qualifying child for head of household filing status. 2010 form 1040 You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. 2010 form 1040 The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. 2010 form 1040 Phaseout of Exemptions The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. 2010 form 1040 These levels are as follows:    Filing Status AGI Level That Reduces Exemption Amount Married filing separately $150,000 Single 250,000 Head of household 275,000 Married filing jointly 300,000 Qualifying widow(er) 300,000 You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. 2010 form 1040 If your AGI exceeds the amount shown above by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero. 2010 form 1040 If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet found in the instructions for Form 1040 or Form 1040NR to figure the amount of your deduction for exemptions. 2010 form 1040 Alimony Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. 2010 form 1040 It does not include voluntary payments that are not made under a divorce or separation instrument. 2010 form 1040 Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. 2010 form 1040 Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. 2010 form 1040 To be alimony, a payment must meet certain requirements. 2010 form 1040 There are some differences between the requirements that apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. 2010 form 1040 The general requirements that apply to payments regardless of when the divorce or separation instrument was executed and the specific requirements that apply to post-1984 instruments (and, in certain cases, some pre-1985 instruments) are discussed in this publication. 2010 form 1040 See, Instruments Executed Before 1985 , later, if you are looking for information on where to find the specific requirements that apply to pre-1985 instruments. 2010 form 1040 Spouse or former spouse. 2010 form 1040   Unless otherwise stated, the term “spouse” includes former spouse. 2010 form 1040 Divorce or separation instrument. 2010 form 1040   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. 2010 form 1040 This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). 2010 form 1040 Invalid decree. 2010 form 1040   Payments under a divorce decree can be alimony even if the decree's validity is in question. 2010 form 1040 A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid. 2010 form 1040 Amended instrument. 2010 form 1040   An amendment to a divorce decree may change the nature of your payments. 2010 form 1040 Amendments are not ordinarily retroactive for federal tax purposes. 2010 form 1040 However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes. 2010 form 1040 Example 1. 2010 form 1040 A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. 2010 form 1040 This change also is effective retroactively for federal tax purposes. 2010 form 1040 Example 2. 2010 form 1040 Your original divorce decree did not fix any part of the payment as child support. 2010 form 1040 To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. 2010 form 1040 The amended order is effective retroactively for federal tax purposes. 2010 form 1040 Deducting alimony paid. 2010 form 1040   You can deduct alimony you paid, whether or not you itemize deductions on your return. 2010 form 1040 You must file Form 1040. 2010 form 1040 You cannot use Form 1040A, 1040EZ, or 1040NR. 2010 form 1040 Enter the amount of alimony you paid on Form 1040, line 31a. 2010 form 1040 In the space provided on line 31b, enter your spouse's social security number (SSN) or IRS individual taxpayer identification number (ITIN). 2010 form 1040 If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. 2010 form 1040 Show the SSN or ITIN and amount paid to each other recipient on an attached statement. 2010 form 1040 Enter your total payments on line 31a. 2010 form 1040 If you do not provide your spouse's SSN or ITIN, you may have to pay a $50 penalty and your deduction may be disallowed. 2010 form 1040 Reporting alimony received. 2010 form 1040   Report alimony you received as income on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. 2010 form 1040 You cannot use Form 1040A, 1040EZ, or 1040NR-EZ. 2010 form 1040    You must give the person who paid the alimony your SSN or ITIN. 2010 form 1040 If you do not, you may have to pay a $50 penalty. 2010 form 1040 Withholding on nonresident aliens. 2010 form 1040   If you are a U. 2010 form 1040 S. 2010 form 1040 citizen or resident alien and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% on each payment. 2010 form 1040 However, many tax treaties provide for an exemption from withholding for alimony payments. 2010 form 1040 For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. 2010 form 1040 General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. 2010 form 1040 Payments not alimony. 2010 form 1040   Not all payments under a divorce or separation instrument are alimony. 2010 form 1040 Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained later under Community Property , Payments to keep up the payer's property, or Use of the payer's property. 2010 form 1040 Example. 2010 form 1040 Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. 2010 form 1040 Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. 2010 form 1040 Neither is the value of your spouse's use of the home. 2010 form 1040 If they otherwise qualify, you can deduct the payments for utilities as alimony. 2010 form 1040 Your spouse must report them as income. 2010 form 1040 If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. 2010 form 1040 However, if your spouse owned the home, see Example 2 under Payments to a third party, later. 2010 form 1040 If you owned the home jointly with your spouse, see Table 4. 2010 form 1040 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. 2010 form 1040 Child support. 2010 form 1040   To determine whether a payment is child support, see the discussion under Instruments Executed After 1984 , later. 2010 form 1040 If your divorce or separation agreement was executed before 1985, see the 2004 revision of Publication 504 available at www. 2010 form 1040 irs. 2010 form 1040 gov/formspubs. 2010 form 1040 Underpayment. 2010 form 1040   If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony. 2010 form 1040 Example. 2010 form 1040 Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. 2010 form 1040 If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony and your former spouse must report $1,800 as alimony received. 2010 form 1040 If you pay only $3,600 during the year, $2,400 is child support. 2010 form 1040 You can deduct only $1,200 ($3,600 – $2,400) as alimony and your former spouse must report $1,200 as alimony received. 2010 form 1040 Payments to a third party. 2010 form 1040   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. 2010 form 1040 These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. 2010 form 1040 ), taxes, tuition, etc. 2010 form 1040 The payments are treated as received by your spouse and then paid to the third party. 2010 form 1040 Example 1. 2010 form 1040 Under your divorce decree, you must pay your former spouse's medical and dental expenses. 2010 form 1040 If the payments otherwise qualify, you can deduct them as alimony on your return. 2010 form 1040 Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses. 2010 form 1040 Example 2. 2010 form 1040 Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. 2010 form 1040 If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. 2010 form 1040 If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. 2010 form 1040 However, if you owned the home, see the example under Payments not alimony , earlier. 2010 form 1040 If you owned the home jointly with your spouse, see Table 4. 2010 form 1040 Life insurance premiums. 2010 form 1040   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. 2010 form 1040 Payments for jointly-owned home. 2010 form 1040   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony. 2010 form 1040 See Table 4. 2010 form 1040   However, if your spouse owned the home, see Example 2 under Payments to a third party, earlier. 2010 form 1040 If you owned the home, see the example under Payments not alimony , earlier. 2010 form 1040 Table 4. 2010 form 1040 Expenses for a Jointly-Owned Home Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction. 2010 form 1040 IF you must pay all of the . 2010 form 1040 . 2010 form 1040 . 2010 form 1040 AND your home is . 2010 form 1040 . 2010 form 1040 . 2010 form 1040 THEN you can deduct and your spouse (or former spouse) must include as alimony . 2010 form 1040 . 2010 form 1040 . 2010 form 1040 AND you can claim as an itemized deduction . 2010 form 1040 . 2010 form 1040 . 2010 form 1040   mortgage payments (principal and interest) jointly owned half of the total payments half of the interest as interest expense (if the home is a qualified home). 2010 form 1040 1   real estate taxes and home insurance held as tenants in common half of the total payments half of the real estate taxes2 and none of the home insurance. 2010 form 1040     held as tenants by the entirety or in joint tenancy none of the payments all of the real estate taxes and none of the home insurance. 2010 form 1040 1 Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home. 2010 form 1040  2 Your spouse (or former spouse) can deduct the other half of the real estate taxes. 2010 form 1040 Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. 2010 form 1040 Exception for instruments executed before 1985. 2010 form 1040   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. 2010 form 1040 A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. 2010 form 1040 A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. 2010 form 1040   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, see the 2004 revision of Publication 504 available at www. 2010 form 1040 irs. 2010 form 1040 gov/formspubs. 2010 form 1040 Example 1. 2010 form 1040 In November 1984, you and your former spouse executed a written separation agreement. 2010 form 1040 In February 1985, a decree of divorce was substituted for the written separation agreement. 2010 form 1040 The decree of divorce did not change the terms for the alimony you pay your former spouse. 2010 form 1040 The decree of divorce is treated as executed before 1985. 2010 form 1040 Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. 2010 form 1040 Example 2. 2010 form 1040 The facts are the same as in Example 1 except that the decree of divorce changed the amount of the alimony. 2010 form 1040 In this example, the decree of divorce is not treated as executed before 1985. 2010 form 1040 The alimony payments are subject to the rules for payments under instruments executed after 1984. 2010 form 1040 Alimony Requirements A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. 2010 form 1040 The payment is in cash. 2010 form 1040 The instrument does not designate the payment as not alimony. 2010 form 1040 The spouses are not members of the same household at the time the payments are made. 2010 form 1040 This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance. 2010 form 1040 There is no liability to make any payment (in cash or property) after the death of the recipient spouse. 2010 form 1040 The payment is not treated as child support. 2010 form 1040 Each of these requirements is discussed next. 2010 form 1040 Cash payment requirement. 2010 form 1040   Only cash payments, including checks and money orders, qualify as alimony. 2010 form 1040 The following do not qualify as alimony. 2010 form 1040 Transfers of services or property (including a debt instrument of a third party or an annuity contract). 2010 form 1040 Execution of a debt instrument by the payer. 2010 form 1040 The use of the payer's property. 2010 form 1040 Payments to a third party. 2010 form 1040   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. 2010 form 1040 See Payments to a third party under General Rules, earlier. 2010 form 1040   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. 2010 form 1040 The payments are in lieu of payments of alimony directly to your spouse. 2010 form 1040 The written request states that both spouses intend the payments to be treated as alimony. 2010 form 1040 You receive the written request from your spouse before you file your return for the year you made the payments. 2010 form 1040 Payments designated as not alimony. 2010 form 1040   You and your spouse can designate that otherwise qualifying payments are not alimony. 2010 form 1040 You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. 2010 form 1040 For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). 2010 form 1040 If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. 2010 form 1040   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. 2010 form 1040 The copy must be attached each year the designation applies. 2010 form 1040 Spouses cannot be members of the same household. 2010 form 1040   Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. 2010 form 1040 A home you formerly shared is considered one household, even if you physically separate yourselves in the home. 2010 form 1040   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. 2010 form 1040 Exception. 2010 form 1040   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. 2010 form 1040 Liability for payments after death of recipient spouse. 2010 form 1040   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony whether made before or after the death. 2010 form 1040 If all of the payments would continue, then none of the payments made before or after the death are alimony. 2010 form 1040   The divorce or separation instrument does not have to expressly state that the payments cease upon the
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Understanding your CP503 Notice

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Page Last Reviewed or Updated: 05-Mar-2014

The 2010 Form 1040

2010 form 1040 4. 2010 form 1040   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. 2010 form 1040 However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. 2010 form 1040 For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. 2010 form 1040 This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. 2010 form 1040 The student loan interest deduction is taken as an adjustment to income. 2010 form 1040 This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). 2010 form 1040 This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. 2010 form 1040 Table 4-1. 2010 form 1040 Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. 2010 form 1040 Do not rely on this table alone. 2010 form 1040 Refer to the text for complete details. 2010 form 1040 Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. 2010 form 1040 Loan qualifications   Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. 2010 form 1040 Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. 2010 form 1040 Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. 2010 form 1040 Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). 2010 form 1040 Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. 2010 form 1040 It includes both required and voluntary interest payments. 2010 form 1040 Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. 2010 form 1040 Loans from the following sources are not qualified student loans. 2010 form 1040 A related person. 2010 form 1040 A qualified employer plan. 2010 form 1040 Your dependent. 2010 form 1040   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. 2010 form 1040 You can find more information about dependents in Publication 501. 2010 form 1040 Exceptions. 2010 form 1040   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. 2010 form 1040 An individual can be your dependent even if you are the dependent of another taxpayer. 2010 form 1040 An individual can be your dependent even if the individual files a joint return with a spouse. 2010 form 1040 An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). 2010 form 1040 Reasonable period of time. 2010 form 1040   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. 2010 form 1040   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. 2010 form 1040 The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. 2010 form 1040   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. 2010 form 1040 Academic period. 2010 form 1040   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. 2010 form 1040 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. 2010 form 1040 Eligible student. 2010 form 1040   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. 2010 form 1040 Enrolled at least half-time. 2010 form 1040   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. 2010 form 1040   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 2010 form 1040 However, the standard may not be lower than any of those established by the U. 2010 form 1040 S. 2010 form 1040 Department of Education under the Higher Education Act of 1965. 2010 form 1040 Related person. 2010 form 1040   You cannot deduct interest on a loan you get from a related person. 2010 form 1040 Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. 2010 form 1040 ), Your lineal descendants (children, grandchildren, etc. 2010 form 1040 ), and Certain corporations, partnerships, trusts, and exempt organizations. 2010 form 1040 Qualified employer plan. 2010 form 1040   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. 2010 form 1040 Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. 2010 form 1040 They include amounts paid for the following items. 2010 form 1040 Tuition and fees. 2010 form 1040 Room and board. 2010 form 1040 Books, supplies, and equipment. 2010 form 1040 Other necessary expenses (such as transportation). 2010 form 1040 The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 2010 form 1040 Eligible educational institution. 2010 form 1040   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. 2010 form 1040 S. 2010 form 1040 Department of Education. 2010 form 1040 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2010 form 1040   Certain educational institutions located outside the United States also participate in the U. 2010 form 1040 S. 2010 form 1040 Department of Education's Federal Student Aid (FSA) programs. 2010 form 1040   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. 2010 form 1040   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. 2010 form 1040 The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. 2010 form 1040    The educational institution should be able to tell you if it is an eligible educational institution. 2010 form 1040 Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. 2010 form 1040 Employer-provided educational assistance. 2010 form 1040 See chapter 11, Employer-Provided Educational Assistance . 2010 form 1040 Tax-free distribution of earnings from a Coverdell education savings account (ESA). 2010 form 1040 See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. 2010 form 1040 Tax-free distribution of earnings from a qualified tuition program (QTP). 2010 form 1040 See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. 2010 form 1040 U. 2010 form 1040 S. 2010 form 1040 savings bond interest that you exclude from income because it is used to pay qualified education expenses. 2010 form 1040 See chapter 10, Education Savings Bond Program . 2010 form 1040 The tax-free part of scholarships and fellowships. 2010 form 1040 See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2010 form 1040 Veterans' educational assistance. 2010 form 1040 See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2010 form 1040 Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2010 form 1040 Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. 2010 form 1040 Loan origination fee. 2010 form 1040   In general, this is a one-time fee charged by the lender when a loan is made. 2010 form 1040 To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. 2010 form 1040 A loan origination fee treated as interest accrues over the term of the loan. 2010 form 1040   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. 2010 form 1040 If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. 2010 form 1040 The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. 2010 form 1040 A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. 2010 form 1040 Example. 2010 form 1040 In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. 2010 form 1040 The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. 2010 form 1040 Bill began making payments on his student loan in 2013. 2010 form 1040 Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. 2010 form 1040 Bill's loan is payable in 120 equal monthly payments. 2010 form 1040 He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). 2010 form 1040 Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. 2010 form 1040 To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. 2010 form 1040 Capitalized interest. 2010 form 1040   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. 2010 form 1040 Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. 2010 form 1040 No deduction for capitalized interest is allowed in a year in which no loan payments were made. 2010 form 1040 Interest on revolving lines of credit. 2010 form 1040   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. 2010 form 1040 See Qualified Education Expenses , earlier. 2010 form 1040 Interest on refinanced student loans. 2010 form 1040   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. 2010 form 1040    If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. 2010 form 1040 Voluntary interest payments. 2010 form 1040   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. 2010 form 1040 Example. 2010 form 1040 The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. 2010 form 1040 He began making payments as required. 2010 form 1040 In September 2013, Roger enrolled in graduate school on a full-time basis. 2010 form 1040 He applied for and was granted deferment of his loan payments while in graduate school. 2010 form 1040 Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. 2010 form 1040 Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. 2010 form 1040 Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. 2010 form 1040 To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. 2010 form 1040 Example. 2010 form 1040 In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. 2010 form 1040 The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. 2010 form 1040 The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. 2010 form 1040 At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. 2010 form 1040 The loan is payable over 60 months, with a payment of $200. 2010 form 1040 51 due on the first of each month, beginning November 2013. 2010 form 1040 Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. 2010 form 1040 However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). 2010 form 1040 Payment Date   Payment   Stated Interest   Principal November 2013   $200. 2010 form 1040 51   $44. 2010 form 1040 27   $156. 2010 form 1040 24 December 2013   $200. 2010 form 1040 51   $43. 2010 form 1040 62   $156. 2010 form 1040 89 Totals   $401. 2010 form 1040 02   $87. 2010 form 1040 89   $313. 2010 form 1040 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. 2010 form 1040 89. 2010 form 1040 Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). 2010 form 1040 A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. 2010 form 1040 Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. 2010 form 1040 Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. 2010 form 1040 02 ($87. 2010 form 1040 89 + $10 + $303. 2010 form 1040 13). 2010 form 1040 For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. 2010 form 1040 She also will apply the remaining amount of capitalized interest ($625 − $303. 2010 form 1040 13 = $321. 2010 form 1040 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. 2010 form 1040 Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. 2010 form 1040 Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. 2010 form 1040 Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. 2010 form 1040 Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. 2010 form 1040 For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. 2010 form 1040 When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. 2010 form 1040 Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. 2010 form 1040 Your filing status is any filing status except married filing separately. 2010 form 1040 No one else is claiming an exemption for you on his or her tax return. 2010 form 1040 You are legally obligated to pay interest on a qualified student loan. 2010 form 1040 You paid interest on a qualified student loan. 2010 form 1040 Claiming an exemption for you. 2010 form 1040   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. 2010 form 1040 Example 1. 2010 form 1040 During 2013, Josh paid $600 interest on his qualified student loan. 2010 form 1040 Only he is legally obligated to make the payments. 2010 form 1040 No one claimed an exemption for Josh for 2013. 2010 form 1040 Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. 2010 form 1040 Example 2. 2010 form 1040 During 2013, Jo paid $1,100 interest on her qualified student loan. 2010 form 1040 Only she is legally obligated to make the payments. 2010 form 1040 Jo's parents claimed an exemption for her on their 2013 tax return. 2010 form 1040 In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. 2010 form 1040 Interest paid by others. 2010 form 1040   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. 2010 form 1040 Example 1. 2010 form 1040 Darla obtained a qualified student loan to attend college. 2010 form 1040 After Darla's graduation from college, she worked as an intern for a nonprofit organization. 2010 form 1040 As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. 2010 form 1040 This payment was treated as additional compensation and reported in box 1 of her Form W-2. 2010 form 1040 Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. 2010 form 1040 Example 2. 2010 form 1040 Ethan obtained a qualified student loan to attend college. 2010 form 1040 After graduating from college, the first monthly payment on his loan was due in December. 2010 form 1040 As a gift, Ethan's mother made this payment for him. 2010 form 1040 No one is claiming a dependency exemption for Ethan on his or her tax return. 2010 form 1040 Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. 2010 form 1040 No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). 2010 form 1040 Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. 2010 form 1040 However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. 2010 form 1040 You can use Worksheet 4-1. 2010 form 1040 Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. 2010 form 1040 Form 1098-E. 2010 form 1040   To help you figure your student loan interest deduction, you should receive Form 1098-E. 2010 form 1040 Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. 2010 form 1040   For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. 2010 form 1040 Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. 2010 form 1040 However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. 2010 form 1040 See Allocating Payments Between Interest and Principal , earlier. 2010 form 1040    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. 2010 form 1040 The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. 2010 form 1040 Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). 2010 form 1040 You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). 2010 form 1040 Modified adjusted gross income (MAGI). 2010 form 1040   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. 2010 form 1040 However, as discussed below, there may be other modifications. 2010 form 1040 Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. 2010 form 1040 Table 4-2. 2010 form 1040 Effect of MAGI on Student Loan Interest Deduction IF your filing status is. 2010 form 1040 . 2010 form 1040 . 2010 form 1040 AND your MAGI is. 2010 form 1040 . 2010 form 1040 . 2010 form 1040 THEN your student loan interest deduction is. 2010 form 1040 . 2010 form 1040 . 2010 form 1040 single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. 2010 form 1040 more than $60,000  but less than $75,000 reduced because of the phaseout. 2010 form 1040 $75,000 or more eliminated by the phaseout. 2010 form 1040 married filing joint return not more than $125,000 not affected by the phaseout. 2010 form 1040 more than $125,000 but less than $155,000 reduced because of the phaseout. 2010 form 1040 $155,000 or more eliminated by the phaseout. 2010 form 1040 MAGI when using Form 1040A. 2010 form 1040   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). 2010 form 1040 MAGI when using Form 1040. 2010 form 1040   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and 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. 2010 form 1040 MAGI when using Form 1040NR. 2010 form 1040   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). 2010 form 1040 MAGI when using Form 1040NR-EZ. 2010 form 1040   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). 2010 form 1040 Phaseout. 2010 form 1040   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. 2010 form 1040 To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. 2010 form 1040 The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). 2010 form 1040 The denominator is $15,000 ($30,000 in the case of a joint return). 2010 form 1040 Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. 2010 form 1040 Example 1. 2010 form 1040 During 2013 you paid $800 interest on a qualified student loan. 2010 form 1040 Your 2013 MAGI is $145,000 and you are filing a joint return. 2010 form 1040 You must reduce your deduction by $533, figured as follows. 2010 form 1040   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). 2010 form 1040 Example 2. 2010 form 1040 The facts are the same as in Example 1 except that you paid $2,750 interest. 2010 form 1040 Your maximum deduction for 2013 is $2,500. 2010 form 1040 You must reduce your maximum deduction by $1,667, figured as follows. 2010 form 1040   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). 2010 form 1040 Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. 2010 form 1040 However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. 2010 form 1040 Student Loan Interest Deduction Worksheet at the end of this chapter. 2010 form 1040 Claiming the Deduction The student loan interest deduction is an adjustment to income. 2010 form 1040 To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). 2010 form 1040 Worksheet 4-1. 2010 form 1040 Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. 2010 form 1040 Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. 2010 form 1040 1. 2010 form 1040 Enter the total interest you paid in 2013 on qualified student loans. 2010 form 1040 Do not enter  more than $2,500 1. 2010 form 1040   2. 2010 form 1040 Enter the amount from Form 1040, line 22 2. 2010 form 1040       3. 2010 form 1040 Enter the total of the amounts from Form 1040,  lines 23 through 32 3. 2010 form 1040           4. 2010 form 1040 Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. 2010 form 1040           5. 2010 form 1040 Add lines 3 and 4 5. 2010 form 1040       6. 2010 form 1040 Subtract line 5 from line 2 6. 2010 form 1040       7. 2010 form 1040 Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. 2010 form 1040       8. 2010 form 1040 Enter any foreign housing deduction (Form 2555, line 50) 8. 2010 form 1040       9. 2010 form 1040 Enter the amount of income from Puerto Rico you are excluding 9. 2010 form 1040       10. 2010 form 1040 Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. 2010 form 1040       11. 2010 form 1040 Add lines 6 through 10. 2010 form 1040 This is your modified adjusted gross income 11. 2010 form 1040   12. 2010 form 1040 Enter the amount shown below for your filing status 12. 2010 form 1040     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. 2010 form 1040 Is the amount on line 11 more than the amount on line 12?       □ No. 2010 form 1040 Skip lines 13 and 14, enter -0- on line 15, and go to line 16. 2010 form 1040       □ Yes. 2010 form 1040 Subtract line 12 from line 11 13. 2010 form 1040   14. 2010 form 1040 Divide line 13 by $15,000 ($30,000 if married filing jointly). 2010 form 1040 Enter the result as a decimal  (rounded to at least three places). 2010 form 1040 If the result is 1. 2010 form 1040 000 or more, enter 1. 2010 form 1040 000 14. 2010 form 1040 . 2010 form 1040 15. 2010 form 1040 Multiply line 1 by line 14 15. 2010 form 1040   16. 2010 form 1040 Student loan interest deduction. 2010 form 1040 Subtract line 15 from line 1. 2010 form 1040 Enter the result here  and on Form 1040, line 33. 2010 form 1040 Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. 2010 form 1040 ) 16. 2010 form 1040   Prev  Up  Next   Home   More Online Publications