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2012 Tax Software Free

2012 tax software free Publication 929 - Main Content Table of Contents Part 1. 2012 tax software free Rules for All Dependents Filing RequirementsEarned Income Only Unearned Income Only Both Earned and Unearned Income Other Filing Requirements Should a Return Be Filed Even If Not Required? Responsibility for Child's ReturnThird party designee. 2012 tax software free Designated as representative. 2012 tax software free IRS notice. 2012 tax software free Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. 2012 tax software free Part 2. 2012 tax software free Tax on Unearned Income of Certain ChildrenWhich Parent's Return To Use Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, Lines A–C) Step 1. 2012 tax software free Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. 2012 tax software free Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. 2012 tax software free Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. 2012 tax software free Rules for All Dependents This part of the publication discusses the filing requirements for dependents, who is responsible for a child's return, how to figure a dependent's standard deduction and exemption (if any), and whether a dependent can claim exemption from federal income tax withholding. 2012 tax software free Filing Requirements Whether a dependent has to file a return generally depends on the amount of the dependent's earned and unearned income and whether the dependent is married, is age 65 or older, or is blind. 2012 tax software free A dependent may have to file a return even if his or her income is less than the amount that would normally require a return. 2012 tax software free See Other Filing Requirements, later. 2012 tax software free The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. 2012 tax software free  To find out whether a dependent must file, read the section that applies, or use Table 1. 2012 tax software free Earned Income Only A dependent whose gross income is only earned income must file a return if the gross income is more than the amount listed in the following table. 2012 tax software free Marital Status Amount Single   Under 65 and not blind $6,100 Either 65 or older or blind $7,600 65 or older and blind $9,100 Married*   Under 65 and not blind $6,100 Either 65 or older or blind $7,300 65 or older and blind $8,500 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). 2012 tax software free Example. 2012 tax software free William is 16. 2012 tax software free His mother claims an exemption for him on her income tax return. 2012 tax software free He worked part time on weekends during the school year and full time during the summer. 2012 tax software free He earned $7,000 in wages. 2012 tax software free He did not have any unearned income. 2012 tax software free He must file a tax return because he has earned income only and his gross income is more than $6,100. 2012 tax software free If he is blind, he does not have to file a return because his gross income is not more than $7,600. 2012 tax software free Unearned Income Only A dependent whose gross income is only unearned income must file a return if the gross income is more than the amount listed in the following table. 2012 tax software free Marital Status Amount Single   Under 65 and not blind $1,000 Either 65 or older or blind $2,500 65 or older and blind $4,000 Married*   Under 65 and not blind $1,000 Either 65 or older or blind $2,200 65 or older and blind $3,400 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). 2012 tax software free Example. 2012 tax software free Sarah is 18 and single. 2012 tax software free Her parents can claim an exemption for her on their income tax return. 2012 tax software free She received $1,970 of taxable interest and dividend income. 2012 tax software free She did not work during the year. 2012 tax software free She must file a tax return because she has unearned income only and her gross income is more than $1,000. 2012 tax software free If she is blind, she does not have to file a return because she has unearned income only and her gross income is not more than $2,500. 2012 tax software free Election to report child's unearned income on parent's return. 2012 tax software free   A parent of a child under age 19 (or under age 24 if a full-time student) may be able to elect to include the child's interest and dividend income on the parent's return. 2012 tax software free See Parent's Election To Report Child's Interest and Dividends in Part 2. 2012 tax software free If the parent makes this election, the child does not have to file a return. 2012 tax software free Both Earned and Unearned Income A dependent who has both earned and unearned income generally must file a return if the dependent's gross income is more than line 5 of the following worksheet. 2012 tax software free Filing Requirement Worksheet for Most Dependents 1. 2012 tax software free Enter dependent's earned income plus $350     2. 2012 tax software free Minimum amount   $1,000 3. 2012 tax software free Compare lines 1 and 2. 2012 tax software free Enter the larger amount     4. 2012 tax software free Maximum amount   6,100 5. 2012 tax software free Compare lines 3 and 4. 2012 tax software free Enter the smaller amount     6. 2012 tax software free Enter the dependent's gross income. 2012 tax software free If line 6 is more than line 5, the dependent must file an income tax return. 2012 tax software free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. 2012 tax software free       Table 1. 2012 tax software free 2013 Filing Requirements for Dependents If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. 2012 tax software free   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. 2012 tax software free   Single dependents—Were you either age 65 or older or blind?     No. 2012 tax software free You must file a return if any of the following apply. 2012 tax software free       Your unearned income was over $1,000. 2012 tax software free Your earned income was over $6,100. 2012 tax software free Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. 2012 tax software free         Yes. 2012 tax software free You must file a return if any of the following apply. 2012 tax software free     Your unearned income was over $2,500 ($4,000 if 65 or older and blind), Your earned income was over $7,600 ($9,100 if 65 or older and blind), Your gross income was more than the larger of—       $2,500 ($4,000 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,850 ($3,350 if 65 or older and blind). 2012 tax software free       Married dependents—Were you either age 65 or older or blind?     No. 2012 tax software free You must file a return if any of the following apply. 2012 tax software free       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. 2012 tax software free Your unearned income was over $1,000. 2012 tax software free Your earned income was over $6,100. 2012 tax software free Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. 2012 tax software free       Yes. 2012 tax software free You must file a return if any of the following apply. 2012 tax software free       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. 2012 tax software free Your unearned income was over $2,200 ($3,400 if 65 or older and blind), Your earned income was over $7,300 ($8,500 if 65 or older and blind), Your gross income was more than the larger of—       $2,200 ($3,400 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,550 ($2,750 if 65 or older and blind). 2012 tax software free       Example 1. 2012 tax software free Joe is 20, single, not blind, and a full-time college student. 2012 tax software free He does not provide more than half of his own support, and his parents claim an exemption for him on their income tax return. 2012 tax software free He received $200 taxable interest income and earned $2,750 from a part-time job. 2012 tax software free He does not have to file a tax return because his gross income of $2,950 ($200 interest plus $2,750 in wages) is not more than $3,100, the amount on line 5 of his filled-in Filing Requirement Worksheet for Most Dependents (shown next). 2012 tax software free Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. 2012 tax software free Enter dependent's earned income plus $350   $ 3,100 2. 2012 tax software free Minimum amount   1,000 3. 2012 tax software free Compare lines 1 and 2. 2012 tax software free Enter the larger amount   3,100 4. 2012 tax software free Maximum amount   6,100 5. 2012 tax software free Compare lines 3 and 4. 2012 tax software free Enter the smaller amount   3,100 6. 2012 tax software free Enter the dependent's gross income. 2012 tax software free If line 6 is more than line 5, the dependent must file an income tax return. 2012 tax software free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. 2012 tax software free   $ 2,950   Example 2. 2012 tax software free The facts are the same as in Example 1 except that Joe had $600 taxable interest income. 2012 tax software free He must file a tax return because his gross income of $3,350 ($600 interest plus $2,750 wages) is more than $3,100, the amount on line 5 of his filled-in worksheet (shown next). 2012 tax software free Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. 2012 tax software free Enter dependent's earned income plus $350   $ 3,100 2. 2012 tax software free Minimum amount   1,000 3. 2012 tax software free Compare lines 1 and 2. 2012 tax software free Enter the larger amount   3,100 4. 2012 tax software free Maximum amount   6,100 5. 2012 tax software free Compare lines 3 and 4. 2012 tax software free Enter the smaller amount   3,100 6. 2012 tax software free Enter the dependent's gross income. 2012 tax software free If line 6 is more than line 5, the dependent must file an income tax return. 2012 tax software free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. 2012 tax software free   $ 3,350   Age 65 or older or blind. 2012 tax software free A dependent who is age 65 or older or blind must file a return if his or her gross income is more than line 7 of the following worksheet. 2012 tax software free Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. 2012 tax software free Enter dependent's earned income plus $350     2. 2012 tax software free Minimum amount   $1,000 3. 2012 tax software free Compare lines 1 and 2. 2012 tax software free Enter the larger amount     4. 2012 tax software free Maximum amount   6,100 5. 2012 tax software free Compare lines 3 and 4. 2012 tax software free Enter the smaller amount     6. 2012 tax software free Enter the amount from the following table that applies to the dependent       Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. 2012 tax software free Add lines 5 and 6. 2012 tax software free Enter the total     8. 2012 tax software free Enter the dependent's gross income. 2012 tax software free If line 8 is more than line 7, the dependent must file an income tax return. 2012 tax software free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more     Example 3. 2012 tax software free The facts are the same as in Example 2 except that Joe is also blind. 2012 tax software free He does not have to file a return because his gross income of $3,350 is not more than $4,600, the amount on line 7 of his filled-in Filing Requirement Worksheet for Dependents Who Are Age 65 or Older or Blind (shown next). 2012 tax software free   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. 2012 tax software free Enter dependent's earned income plus $350   $3,100 2. 2012 tax software free Minimum amount   1,000 3. 2012 tax software free Compare lines 1 and 2. 2012 tax software free Enter the larger amount   3,100 4. 2012 tax software free Maximum amount   6,100 5. 2012 tax software free Compare lines 3 and 4. 2012 tax software free Enter the smaller amount   3,100 6. 2012 tax software free Enter the amount from the following table that applies to the dependent   1,500   Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. 2012 tax software free Add lines 5 and 6. 2012 tax software free Enter the total   4,600 8. 2012 tax software free Enter the dependent's gross income. 2012 tax software free If line 8 is more than line 7, the dependent must file an income tax return. 2012 tax software free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more   $3,350 Other Filing Requirements Some dependents may have to file a tax return even if their income is less than the amount that would normally require them to file a return. 2012 tax software free A dependent must file a tax return if he or she owes any other taxes, such as: Social security and Medicare taxes on tips not reported to his or her employer or on wages received from an employer who did not withhold these taxes, Uncollected social security and Medicare or railroad retirement taxes on tips reported to his or her employer or on group-term life insurance, Alternative minimum tax, Additional tax on a health savings account from Form 8889, Part III, Recapture taxes, such as the tax from recapture of an education credit, or Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. 2012 tax software free But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. 2012 tax software free A dependent must also file a tax return if he or she: Had wages of $108. 2012 tax software free 28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. 2012 tax software free Spouse itemizes. 2012 tax software free   A dependent must file a return if the dependent's spouse itemizes deductions on a separate return and the dependent has $5 or more of gross income (earned and/or unearned). 2012 tax software free Should a Return Be Filed Even If Not Required? Even if a dependent does not meet any of the filing requirements discussed earlier, he or she should file a tax return if either of the following applies. 2012 tax software free Income tax was withheld from his or her income. 2012 tax software free He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. 2012 tax software free See the tax return instructions to find out who qualifies for these credits. 2012 tax software free  By filing a return, the dependent can get a refund. 2012 tax software free Responsibility for Child's Return Generally, a child is responsible for filing his or her own tax return and for paying any tax, penalties, or interest on that return. 2012 tax software free If a child cannot file his or her own return for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child. 2012 tax software free Signing the child's return. 2012 tax software free   If the child cannot sign his or her return, a parent or guardian must sign the child's name followed by the words “By (signature), parent (or guardian) for minor child. 2012 tax software free ” Authority of parent or guardian. 2012 tax software free   A parent or guardian who signs a return on a child's behalf can deal with the IRS on all matters connected with the return. 2012 tax software free   In general, a parent or guardian who does not sign the child's return can only provide information concerning the child's return and pay the child's tax. 2012 tax software free That parent or guardian is not entitled to receive information from the IRS or legally bind the child to a tax liability arising from the return. 2012 tax software free Third party designee. 2012 tax software free   A child's parent or guardian who does not sign the child's return may be authorized, as a third party designee, to discuss the processing of the return with the IRS as well as provide information concerning the return. 2012 tax software free The child or the person signing the return on the child's behalf must check the “Yes” box in the “Third Party Designee” area of the return and name the parent or guardian as the designee. 2012 tax software free   If designated, a parent or guardian can respond to certain IRS notices and receive information about the processing of the return and the status of a refund or payment. 2012 tax software free This designation does not authorize the parent or guardian to receive any refund check, bind the child to any tax liability, or otherwise represent the child before the IRS. 2012 tax software free See the return instructions for more information. 2012 tax software free Designated as representative. 2012 tax software free   A parent or guardian who does not sign the child's return may be designated as the child's representative by the child or the person signing the return on the child's behalf. 2012 tax software free Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. 2012 tax software free See Publication 947, Practice Before the IRS and Power of Attorney, for more information. 2012 tax software free   If designated, a parent or guardian can receive information about the child's return but cannot legally bind the child to a tax liability unless authorized to do so by the law of the state in which the child lives. 2012 tax software free IRS notice. 2012 tax software free   If you or the child receives a notice from the IRS concerning the child's return or tax liability, you should immediately inform the IRS that the notice concerns a child. 2012 tax software free The notice will show who to contact. 2012 tax software free The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. 2012 tax software free Child's earnings. 2012 tax software free   For federal income tax purposes, amounts a child earns by performing services are included in the gross income of the child and not the gross income of the parent. 2012 tax software free This is true even if, under state law, the parent has the right to the earnings and may actually have received them. 2012 tax software free If the child does not pay the tax due on this income, the parent may be liable for the tax. 2012 tax software free Child's expenses. 2012 tax software free   Deductions for payments that are made out of a child's earnings are the child's, even if the payments are made by the parent. 2012 tax software free Example. 2012 tax software free You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. 2012 tax software free You made the payments out of your child's earnings. 2012 tax software free These items can be deducted only on the child's return. 2012 tax software free Standard Deduction The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the larger of: $1,000, or The individual's earned income plus $350, but not more than the regular standard deduction (generally $6,100). 2012 tax software free However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. 2012 tax software free Certain dependents cannot claim any standard deduction. 2012 tax software free See Standard Deduction of Zero , later. 2012 tax software free Worksheet 1. 2012 tax software free   Use Worksheet 1 to figure the dependent's standard deduction. 2012 tax software free Worksheet 1. 2012 tax software free Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse, if filing jointly) as a dependent. 2012 tax software free If you were 65 or older and/or blind, check the correct number of boxes below. 2012 tax software free Put the total number of boxes checked in box c and go to line 1. 2012 tax software free a. 2012 tax software free You 65 or older   Blind   b. 2012 tax software free Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. 2012 tax software free Total boxes checked         1. 2012 tax software free Enter your earned income (defined below) plus $350. 2012 tax software free If none, enter -0-. 2012 tax software free 1. 2012 tax software free     2. 2012 tax software free Minimum amount. 2012 tax software free   2. 2012 tax software free $1,000   3. 2012 tax software free Compare lines 1 and 2. 2012 tax software free Enter the larger of the two amounts here. 2012 tax software free 3. 2012 tax software free     4. 2012 tax software free Enter on line 4 the amount shown below for your filing status. 2012 tax software free       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. 2012 tax software free     5. 2012 tax software free Standard deduction. 2012 tax software free         a. 2012 tax software free Compare lines 3 and 4. 2012 tax software free Enter the smaller amount here. 2012 tax software free If under 65 and not blind, stop here. 2012 tax software free This is your standard deduction. 2012 tax software free Otherwise, go on to line 5b. 2012 tax software free 5a. 2012 tax software free     b. 2012 tax software free If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. 2012 tax software free Enter the result here. 2012 tax software free 5b. 2012 tax software free     c. 2012 tax software free Add lines 5a and 5b. 2012 tax software free This is your standard deduction for 2013. 2012 tax software free 5c. 2012 tax software free     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. 2012 tax software free It also includes any amount received as a scholarship that you must include in income. 2012 tax software free   Example 1. 2012 tax software free Michael is single, age 15, and not blind. 2012 tax software free His parents can claim him as a dependent on their tax return. 2012 tax software free He has taxable interest income of $800 and wages of $150. 2012 tax software free He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. 2012 tax software free On line 3, he enters $1,000, the larger of $500 or $1,000. 2012 tax software free Michael enters $6,100 on line 4. 2012 tax software free On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. 2012 tax software free His standard deduction is $1,000. 2012 tax software free Example 2. 2012 tax software free Judy, a full-time student, is single, age 22, and not blind. 2012 tax software free Her parents can claim her as a dependent on their tax return. 2012 tax software free She has dividend income of $275 and wages of $2,500. 2012 tax software free She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. 2012 tax software free On line 3, she enters $2,850, the larger of $2,850 or $1,000. 2012 tax software free She enters $6,100 on line 4. 2012 tax software free On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. 2012 tax software free Example 3. 2012 tax software free Amy, who is single, is claimed as a dependent on her parents' tax return. 2012 tax software free She is 18 years old and blind. 2012 tax software free She has taxable interest income of $1,000 and wages of $2,000. 2012 tax software free She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. 2012 tax software free She enters $2,350 (the larger of $2,350 or $1,000) on line 3, $6,100 on line 4, and $2,350 (the smaller of $2,350 or $6,100) on line 5a. 2012 tax software free Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. 2012 tax software free She enters $1,500 (the number in box c times $1,500) on line 5b. 2012 tax software free Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). 2012 tax software free Standard Deduction of Zero The standard deduction for the following dependents is zero. 2012 tax software free A married dependent filing a separate return whose spouse itemizes deductions. 2012 tax software free A dependent who files a return for a period of less than 12 months due to a change in his or her annual accounting period. 2012 tax software free A nonresident or dual-status alien dependent, unless the dependent is married to a U. 2012 tax software free S. 2012 tax software free citizen or resident alien at the end of the year and chooses to be treated as a U. 2012 tax software free S. 2012 tax software free resident for the year. 2012 tax software free See Publication 519, U. 2012 tax software free S. 2012 tax software free Tax Guide for Aliens, for information on making this choice. 2012 tax software free Example. 2012 tax software free Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. 2012 tax software free However, her husband elects to file a separate return and itemize his deductions. 2012 tax software free Because he itemizes, Jennifer's standard deduction on her return is zero. 2012 tax software free She can, however, itemize any of her allowable deductions. 2012 tax software free Dependent's Own Exemption A person who can be claimed as a dependent on another taxpayer's return cannot claim his or her own exemption. 2012 tax software free This is true even if the other taxpayer does not actually claim the exemption. 2012 tax software free Example. 2012 tax software free James and Barbara can claim their child, Ben, as a dependent on their return. 2012 tax software free Ben is a college student who works during the summer and must file a tax return. 2012 tax software free Ben cannot claim his own exemption on his return. 2012 tax software free This is true even if James and Barbara do not claim him as a dependent on their return. 2012 tax software free Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. 2012 tax software free If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. 2012 tax software free The exemption from withholding does not apply to social security and Medicare taxes. 2012 tax software free Conditions for exemption from withholding. 2012 tax software free   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. 2012 tax software free For 2013, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability. 2012 tax software free For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. 2012 tax software free Dependents. 2012 tax software free   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. 2012 tax software free The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. 2012 tax software free The employee's unearned income will be more than $350. 2012 tax software free Exceptions. 2012 tax software free   An employee may be able to claim exemption from withholding even if the employee is a dependent, if the employee: Is age 65 or older, Is blind, or Will claim on his or her 2014 tax return: Adjustments to income, Tax credits, or Itemized deductions. 2012 tax software free The above exceptions do not apply to supplemental wages greater than $1,000,000. 2012 tax software free For more information, see Exemption From Withholding in chapter 1 of Publication 505. 2012 tax software free Example. 2012 tax software free Guy is 17 and a student. 2012 tax software free During the summer he works part time at a grocery store. 2012 tax software free He expects to earn about $1,200 this year. 2012 tax software free He also worked at the store last summer and received a refund of all his withheld income tax because he did not have a tax liability. 2012 tax software free The only other income he expects during the year is $375 interest on a savings account. 2012 tax software free He expects that his parents will be able to claim him as a dependent on their tax return. 2012 tax software free He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. 2012 tax software free Guy cannot claim exemption from withholding when he fills out Form W-4 because his parents will be able to claim him as a dependent, his gross income will be more than $1,000 (the minimum standard deduction amount) and his unearned income will be more than $350. 2012 tax software free Claiming exemption from withholding. 2012 tax software free    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. 2012 tax software free The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. 2012 tax software free Renewing an exemption from withholding. 2012 tax software free   An exemption from withholding is good for only one year. 2012 tax software free An employee must file a new Form W-4 by February 15 each year to continue the exemption. 2012 tax software free Part 2. 2012 tax software free Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. 2012 tax software free If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. 2012 tax software free (See Parent's Election To Report Child's Interest and Dividends , later. 2012 tax software free ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. 2012 tax software free (See Tax for Certain Children Who Have Unearned Income , later. 2012 tax software free ) For these rules, the term “child” includes a legally adopted child and a stepchild. 2012 tax software free These rules apply whether or not the child is a dependent. 2012 tax software free These rules do not apply if neither of the child's parents were living at the end of the year. 2012 tax software free Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. 2012 tax software free The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . 2012 tax software free Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. 2012 tax software free Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . 2012 tax software free Parents are married. 2012 tax software free   If the child's parents file separate returns, use the return of the parent with the greater taxable income. 2012 tax software free Parents not living together. 2012 tax software free   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. 2012 tax software free If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. 2012 tax software free   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in Publication 501. 2012 tax software free Parents are divorced. 2012 tax software free   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. 2012 tax software free Custodial parent remarried. 2012 tax software free   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. 2012 tax software free Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. 2012 tax software free Do not use the return of the noncustodial parent. 2012 tax software free   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. 2012 tax software free If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. 2012 tax software free Parents never married. 2012 tax software free   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. 2012 tax software free If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. 2012 tax software free Widowed parent remarried. 2012 tax software free   If a widow or widower remarries, the new spouse is treated as the child's other parent. 2012 tax software free The rules explained earlier under Custodial parent remarried apply. 2012 tax software free Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. 2012 tax software free If you do, your child will not have to file a return. 2012 tax software free You can make this election only if all the following conditions are met. 2012 tax software free Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. 2012 tax software free Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). 2012 tax software free The child's gross income was less than $10,000. 2012 tax software free The child is required to file a return unless you make this election. 2012 tax software free The child does not file a joint return for the year. 2012 tax software free No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. 2012 tax software free No federal income tax was withheld from your child's income under the backup withholding rules. 2012 tax software free You are the parent whose return must be used when applying the special tax rules for children. 2012 tax software free (See Which Parent's Return To Use , earlier. 2012 tax software free ) These conditions are also shown in Figure 1. 2012 tax software free Certain January 1 birthdays. 2012 tax software free   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. 2012 tax software free You cannot make this election for such a child unless the child was a full-time student. 2012 tax software free   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. 2012 tax software free You cannot make this election for such a child. 2012 tax software free How to make the election. 2012 tax software free    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. 2012 tax software free (If you make this election, you cannot file Form 1040A or Form 1040EZ. 2012 tax software free ) Attach a separate Form 8814 for each child for whom you make the election. 2012 tax software free You can make the election for one or more children and not for others. 2012 tax software free Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. 2012 tax software free Rate may be higher. 2012 tax software free   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. 2012 tax software free This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. 2012 tax software free However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. 2012 tax software free Deductions you cannot take. 2012 tax software free   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. 2012 tax software free The additional standard deduction if the child is blind. 2012 tax software free The deduction for a penalty on an early withdrawal of your child's savings. 2012 tax software free Itemized deductions (such as your child's investment expenses or charitable contributions). 2012 tax software free Figure 1. 2012 tax software free Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. 2012 tax software free Figure 1. 2012 tax software free Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. 2012 tax software free   If you use Form 8814, your child's unearned income is considered your unearned income. 2012 tax software free To figure the limit on your deductible investment interest, add the child's unearned income to yours. 2012 tax software free However, if your child received qualified dividends, capital gain distributions, or Alaska Permanent Fund dividends, see chapter 3 of Publication 550 for information about how to figure the limit. 2012 tax software free Alternative minimum tax. 2012 tax software free    If your child received tax-exempt interest (or exempt-interest dividends paid by a regulated investment company) from certain private activity bonds, you must determine if that interest is a tax preference item for alternative minimum tax (AMT) purposes. 2012 tax software free If it is, you must include it with your own tax preference items when figuring your AMT. 2012 tax software free See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. 2012 tax software free Reduced deductions or credits. 2012 tax software free   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. 2012 tax software free Deduction for contributions to a traditional individual retirement arrangement (IRA). 2012 tax software free Deduction for student loan interest. 2012 tax software free Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. 2012 tax software free Credit for child and dependent care expenses. 2012 tax software free Child tax credit. 2012 tax software free Education tax credits. 2012 tax software free Earned income credit. 2012 tax software free Penalty for underpayment of estimated tax. 2012 tax software free   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. 2012 tax software free If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. 2012 tax software free Get Publication 505 for more information. 2012 tax software free Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. 2012 tax software free Only the amount over $2,000 is added to your income. 2012 tax software free The amount over $2,000 is shown on Form 8814, line 6. 2012 tax software free Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. 2012 tax software free Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. 2012 tax software free If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040 or Form 1040NR, line 21. 2012 tax software free On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. 2012 tax software free Note. 2012 tax software free The tax on the first $2,000 is figured on Form 8814, Part II. 2012 tax software free See Figuring Additional Tax , later. 2012 tax software free Qualified dividends. 2012 tax software free   Enter on Form 8814, line 2a, any ordinary dividends your child received. 2012 tax software free This amount may include qualified dividends. 2012 tax software free Qualified dividends are those dividends reported on Form 1040, line 9b, or Form 1040NR, line 10b, and are eligible for lower tax rates that apply to a net capital gain. 2012 tax software free For detailed information about qualified dividends, see Publication 550. 2012 tax software free   If your child received qualified dividends, the amount of these dividends that is added to your income must be reported on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. 2012 tax software free You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. 2012 tax software free   Enter the child's qualified dividends on Form 8814, line 2b. 2012 tax software free But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. 2012 tax software free Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. 2012 tax software free (The amount on Form 8814, line 9, may be less than the amount on Form 8814, line 2b, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. 2012 tax software free ) Capital gain distributions. 2012 tax software free   Enter on Form 8814, line 3, any capital gain distributions your child received. 2012 tax software free The amount of these distributions that is added to your income must be reported on Schedule D (Form 1040), line 13, or, if you are not required to file Schedule D, on Form 1040, line 13, or Form 1040NR, line 14. 2012 tax software free You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. 2012 tax software free   Include the amount from Form 8814, line 10, on Schedule D, line 13; Form 1040, line 13; or Form 1040NR, line 14, whichever applies. 2012 tax software free (The amount on Form 8814, line 10, may be less than the amount on Form 8814, line 3, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. 2012 tax software free ) Collectibles (28% rate) gain. 2012 tax software free    If any of the child's capital gain distributions are reported on Form 1099-DIV as collectibles (28% rate) gain, you must determine how much to also include on line 4 of the 28% Rate Gain Worksheet, in the instructions for Schedule D, line 18. 2012 tax software free Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. 2012 tax software free The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. 2012 tax software free The denominator is the child's total capital gain distribution. 2012 tax software free Enter the result on line 4 of the 28% Rate Gain Worksheet. 2012 tax software free Unrecaptured section 1250 gain. 2012 tax software free   If any of the child's capital gain distributions are reported on Form 1099-DIV as unrecaptured section 1250 gain, you must determine how much to include on line 11 of the Unrecaptured Section 1250 Gain Worksheet in the instructions for Schedule D, line 19. 2012 tax software free Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. 2012 tax software free The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. 2012 tax software free The denominator is the child's total capital gain distribution. 2012 tax software free Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. 2012 tax software free Section 1202 gain. 2012 tax software free   If any of the child's capital gain distributions are reported as section 1202 gain (gain on qualified small business stock) on Form 1099-DIV, part or all of that gain may be eligible for the section 1202 exclusion. 2012 tax software free (For information about the exclusion, see chapter 4 of Publication 550. 2012 tax software free ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. 2012 tax software free The numerator is the part of the child's total capital gain distribution that is section 1202 gain. 2012 tax software free The denominator is the child's total capital gain distribution. 2012 tax software free Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. 2012 tax software free In some cases, the exclusion is more than 50%. 2012 tax software free See the instructions for Schedule D for details and information on how to report the exclusion amount. 2012 tax software free Example. 2012 tax software free Fred is 6 years old. 2012 tax software free In 2013, he received dividend income of $2,100, which included $1,575 of ordinary dividends and a $525 capital gain distribution from a mutual fund. 2012 tax software free (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. 2012 tax software free ) All of the ordinary dividends are qualified dividends. 2012 tax software free He has no other income and is not subject to backup withholding. 2012 tax software free No estimated tax payments were made under his name and social security number. 2012 tax software free Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. 2012 tax software free They figure the amount to report on Form 1040, lines 9a and 9b, the amount to report on their Schedule D, line 13, and the amount to report on Form 1040, line 21, as follows. 2012 tax software free They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. 2012 tax software free They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. 2012 tax software free They enter the amount of Fred's capital gain distributions, $525, on line 3. 2012 tax software free Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. 2012 tax software free They subtract the base amount on line 5, $2,000, from the amount on line 4, $2,100, and enter the result, $100, on line 6. 2012 tax software free This is the total amount from Form 8814 to be reported on their return. 2012 tax software free Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. 2012 tax software free They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. 2012 tax software free They enter the result, . 2012 tax software free 75, on line 7. 2012 tax software free They divide the amount on line 3, $525, by the amount on line 4, $2,100. 2012 tax software free They enter the result, . 2012 tax software free 25, on line 8. 2012 tax software free They multiply the amount on line 6, $100, by the decimal on line 7, . 2012 tax software free 75, and enter the result, $75, on line 9. 2012 tax software free They multiply the amount on line 6, $100, by the decimal on line 8, . 2012 tax software free 25, and enter the result, $25, on line 10. 2012 tax software free They include the amount from line 9, $75, on lines 9a and 9b of their Form 1040 and enter “Form 8814 – $75” on the dotted lines next to lines 9a and 9b. 2012 tax software free They include the amount from line 10, $25, on line 13 of their Schedule D (Form 1040) and enter “Form 8814 – $25” on the dotted line next to Schedule D, line 13. 2012 tax software free They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. 2012 tax software free Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. 2012 tax software free Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. 2012 tax software free This tax is added to the tax figured on your income. 2012 tax software free This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. 2012 tax software free Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44, or Form 1040NR, line 42. 2012 tax software free Check box a on Form 1040, line 44, or Form 1040NR, line 42. 2012 tax software free Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. 2012 tax software free If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. 2012 tax software free Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. 2012 tax software free When Form 8615 must be filed. 2012 tax software free   Form 8615 must be filed for a child if all of the following statements are true. 2012 tax software free The child's unearned income was more than $2,000. 2012 tax software free The child is required to file a return for 2013. 2012 tax software free The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. 2012 tax software free At least one of the child's parents was alive at the end of 2013. 2012 tax software free The child does not file a joint return for 2013. 2012 tax software free These conditions are also shown in Figure 2. 2012 tax software free Certain January 1 birthdays. 2012 tax software free   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. 2012 tax software free IF a child was born on. 2012 tax software free . 2012 tax software free . 2012 tax software free THEN, at the end of 2013, the child is considered to be. 2012 tax software free . 2012 tax software free . 2012 tax software free January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. 2012 tax software free The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. 2012 tax software free  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. 2012 tax software free  ***Do not use Form 8615 for this child. 2012 tax software free Figure 2. 2012 tax software free Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. 2012 tax software free Figure 2. 2012 tax software free Do You Have To Use Form 8615 To Figure Your Child's Tax? Providing Parental Information (Form 8615, Lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. 2012 tax software free (If the parents filed a joint return, enter the name and social security number listed first on the joint return. 2012 tax software free ) On line C, check the box for the parent's filing status. 2012 tax software free See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. 2012 tax software free Parent with different tax year. 2012 tax software free   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. 2012 tax software free Example. 2012 tax software free Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). 2012 tax software free Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). 2012 tax software free Kimberly must use the information on her mother's return for the tax year ending June 30, 2013, to complete her 2013 Form 8615. 2012 tax software free Parent's return information not known timely. 2012 tax software free   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. 2012 tax software free   You can use any reasonable estimate. 2012 tax software free This includes using information from last year's return. 2012 tax software free If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. 2012 tax software free   When you get the correct information, file an amended return on Form 1040X, Amended U. 2012 tax software free S. 2012 tax software free Individual Income Tax Return. 2012 tax software free Extension of time to file. 2012 tax software free   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. 2012 tax software free S. 2012 tax software free Individual Income Tax Return. 2012 tax software free See the instructions for Form 4868 for details. 2012 tax software free    An extension of time to file is not an extension of time to pay. 2012 tax software free You must make an accurate estimate of the tax for 2013. 2012 tax software free If you do not pay the full amount due by the regular due date, the child will owe interest and may also be charged penalties. 2012 tax software free See Form 4868 and its instructions. 2012 tax software free Parent's return information not available. 2012 tax software free   If a child cannot get the required information about his or her parent's tax return, the child (or the child's legal representative) can request the necessary information from the Internal Revenue Service (IRS). 2012 tax software free How to request. 2012 tax software free   After the end of the tax year, send a signed, written request for the information to the Internal Revenue Service Center where the parent's return will be filed. 2012 tax software free (The IRS cannot process a request received before the end of the tax year. 2012 tax software free )    You should also consider getting an extension of time to file the child's return, because there may be a delay in getting the requested information. 2012 tax software free   The request must contain all of the following. 2012 tax software free A statement that you are making the request to comply with section 1(g) of the Internal Revenue Code and that you have tried to get the information from the parent. 2012 tax software free Proof of the child's age (for example, a copy of the child's birth certificate). 2012 tax software free Evidence the child has more than $2,000 of unearned income (for example, a copy of the child's prior year tax return or copies of Forms 1099 for the current year). 2012 tax software free The name, address, social security number (if known), and filing status (if known) of the parent whose information is to be shown on Form 8615. 2012 tax software free    A child's legal representative making the request should include a copy of his or her Power of Attorney, such as Form 2848, or proof of legal guardianship. 2012 tax software free Step 1. 2012 tax software free Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. 2012 tax software free To do that, use Form 8615, Part I. 2012 tax software free Line 1 (Unearned Income) If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. 2012 tax software free Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. 2012 tax software free Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. 2012 tax software free If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. 2012 tax software free However, use the following worksheet if: the child has excluded any foreign earned income, deducted a loss from self-employment, or has a net operating loss from another year. 2012 tax software free Alternate Worksheet for Form 8615, Line 1 A. 2012 tax software free Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. 2012 tax software free Enter the total of any net loss  from self-employment, any net operating loss deduction, any foreign earned income exclusion, and any foreign housing exclusion from the child's Form 1040 or Form 1040NR. 2012 tax software free Enter this total as a positive number (greater than zero)   C. 2012 tax software free Add line A and line B and  enter the total   D. 2012 tax software free Enter the child's earned income plus any amount from the child's Form 1040, line 30, or the child's Form 1040NR, line 30     Generally, the child's earned income is the total of the amounts reported on Form 1040, lines 7, 12, and 18 (if line 12 or 18 is a loss, use zero) or Form 1040NR, lines 8, 13, and 19 (if line 13 or 19 is a loss, use zero)   E. 2012 tax software free Subtract line D from line C. 2012 tax software free Enter the result here and on Form 8615, line 1   Unearned income defined. 2012 tax software free   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. 2012 tax software free It includes taxable interest, dividends, capital gains (including capital gain distributions), the taxable part of social security and pension payments, certain distributions from trusts, and unemployment compensation. 2012 tax software free Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). 2012 tax software free Nontaxable income. 2012 tax software free   For this purpose, unearned income includes only amounts the child must include in gross income. 2012 tax software free Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. 2012 tax software free Capital loss. 2012 tax software free   A child's capital losses are taken into account in figuring the child's unearned income. 2012 tax software free Capital losses are first applied against capital gains. 2012 tax software free If the capital losses are more than the capital gains, the difference (up to $3,000) is subtracted from the child's interest, dividends, and other unearned income. 2012 tax software free Any difference over $3,000 is carried to the next year. 2012 tax software free Income from property received as a gift. 2012 tax software free   A child's unearned income includes all income produced by property belonging to the child. 2012 tax software free This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. 2012 tax software free   A child's unearned income includes income produced by property given as a gift to the child. 2012 tax software free This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. 2012 tax software free Example. 2012 tax software free Amanda Black, age 13, received the following income. 2012 tax software free Dividends—$800 Wages—$2,100 Taxable interest—$1,200 Tax-exempt interest—$100 Capital gains—$300 Capital losses—($200) The dividends were qualified dividends on stock given to her by her grandparents. 2012 tax software free Amanda's unearned income is $2,100. 2012 tax software free This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). 2012 tax software free Her wages are earned (not unearned) income because they are received for work actually performed. 2012 tax software free Her tax-exempt interest is not included because it is nontaxable. 2012 tax software free Trust income. 2012 tax software free   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. 2012 tax software free   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. 2012 tax software free See the Form 8615 instructions for details. 2012 tax software free Adjustment to income. 2012 tax software free   In figuring the amount to enter on line 1, the child's unearned income is reduced by any penalty on the early withdrawal of savings. 2012 tax software free Line 2 (Deductions) If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $2,000 on line 2. 2012 tax software free If the child itemizes deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29 (or Schedule A (Form 1040NR), line 15), that are directly connected with the production of the unearned income entered on line 1, or $2,000. 2012 tax software free Directly connected. 2012 tax software free   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. 2012 tax software free These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. 2012 tax software free    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). 2012 tax software free Only the amount greater than 2% of the child's adjusted gross income can be deducted. 2012 tax software free See Publication 529, Miscellaneous Deductions, for more information. 2012 tax software free Example 1. 2012 tax software free Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with his unearned income. 2012 tax software free His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. 2012 tax software free Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly-connected itemized deductions of $300. 2012 tax software free Example 2. 2012 tax software free Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. 2012 tax software free She has no other income. 2012 tax software free She has itemized deductions of $1,050 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with the production of her unearned income. 2012 tax software free Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). 2012 tax software free The amount on line 2 is $2,050. 2012 tax software free This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. 2012 tax software free Line 3 Subtract line 2 from line 1 and enter the result on this line. 2012 tax software free If zero or less, do not complete the rest of the form. 2012 tax software free However, you must still attach Form 8615 to the child's tax return. 2012 tax software free Figure the tax on the child's taxable income in the normal manner. 2012 tax software free Line 4 (Child's Taxable Income) Enter on line 4 the child's taxable income from Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. 2012 tax software free Child files Form 2555 or 2555-EZ. 2012 tax software free   If the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) is used to figure the child's tax. 2012 tax software free Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the child's taxable income on Form 8615, line 4. 2012 tax software free Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. 2012 tax software free Enter on Form 8615, line 5, the smaller of line 3 or line 4. 2012 tax software free This is the child's net unearned income. 2012 tax software free If zero or less, do not complete the rest of the form. 2012 tax software free However, you must still attach Form 8615 to the child's tax return. 2012 tax software free Figure the tax on the child's taxable income in the normal manner. 2012 tax software free Step 2. 2012 tax software free Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. 2012 tax software free The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. 2012 tax software free When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. 2012 tax software free For example, do not refigure the medical expense deduction. 2012 tax software free Figure the tentative tax on Form 8615, lines 6 through 13. 2012 tax software free Line 6 (Parent's Taxable Income) Enter on line 6 the amount from the parent's Form 1040, line 43; Form 1040A, line 27; Form 1040EZ, line 6; Form 1040NR, line 41; or Form 1040NR-EZ, line 14. 2012 tax software free If the parent's taxable income is zero or less, enter zero on line 6. 2012 tax software free Parent files Form 2555 or 2555-EZ. 2012 tax software free   If the parent files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet in the Form 1040 instructions is used to figure the parent's tax. 2012 tax software free Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the parent's taxable income, on line 6 of Form 8615. 2012 tax software free Line 7 (Net Unearned Income of Other Children) If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. 2012 tax software free Do not include the amount from line 5 of the Form 8615 being completed. 2012 tax software free (The term “other child” means any other child whose Form 8615 uses the tax information of the parent identified on Lines A and B of Form 8615. 2012 tax software free ) Example. 2012 tax software free Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. 2012 tax software free The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon—$800 Jerry—$600 Mike—$1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. 2012 tax software free Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). 2012 tax software free Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). 2012 tax software free Other children's information not available. 2012 tax software free   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. 2012 tax software free Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . 2012 tax software free Line 8 (Parent's Taxable Income Plus Children's Net Unearned Income) Enter on this line the total of lines 5, 6, and 7. 2012 tax software free You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. 2012 tax software free Net capital gain. 2012 tax software free   Net capital gain is the smaller of the gain, if any, on Schedule D (Form 1040), line 15, or the gain, if any, on Schedule D, line 16. 2012 tax software free If Schedule D is not required, it is the amount on Form 1040, line 13; Form 1040A, line 10; or Form 1040NR, line 14. 2012 tax software free Qualified dividends. 2012 tax software free   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. 2012 tax software free Net capital gain and qualified dividends on line 8. 2012 tax software free   If neither the child, nor the parent, nor any other child has net capital gain, the net capital gain on line 8 is zero. 2012 tax software free   If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero. 2012 tax software free   If the child, parent, or any other child has net capital gain, figure the amount of net capital gain included on line 8 by adding together the net capital gain amounts included on lines 5, 6, and 7 of Form 8615. 2012 tax software free   If the child, parent, or any other child has qualified dividends, figure the amount of qualified dividends included on line 8 by adding together the qualified dividend amounts included on lines 5, 6, and 7. 2012 tax software free   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. 2012 tax software free See the instructions for Form 8615 for more details. 2012 tax software free Note. 2012 tax software free The amount of any net capital gain or qualified dividends is not separately reported on line 8. 2012 tax software free It is  needed, however, when figuring the tax on line 9. 2012 tax software free Line 9 (Tax on Parent's Taxable Income Plus Children's Net Unearned Income) Figure the tax on the amount on line 8 using the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet (in the Form 1040, 1040A, or 1040NR instructions), the Schedule D Tax Worksheet (in the Schedule D instructions), or Schedule J (Form 1040), as follows. 2012 tax software free If line 8 does not include any net capital gain or qualified dividends, use the Tax Table or Tax Computation Worksheet to figure this tax. 2012 tax software free But if Schedule J, Income Averaging for Farmers and Fishermen, is used to figure the tax on the parent's return, use it to figure this tax. 2012 tax software free If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet to figure this tax. 2012 tax software free For details, see the instructions for Form 8615, line 9. 2012 tax software free However, if the child, parent, or any other child has 28% rate gain or unrecaptured section 1250 gain, use the Schedule D Tax Worksheet. 2012 tax software free But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. 2012 tax software free Child files Form 2555 or 2555-EZ. 2012 tax software free   If line 8 includes any net capital gain or qualified dividends and the child, or any other child filing Form 8615, also files Form 2555 or 2555-EZ, use Using the Schedule D Tax Worksheet for line 9 tax, next, to figure the line 9 tax. 2012 tax software free Using the Schedule D Tax Worksheet for line 9 tax. 2012 tax software free    Use the Schedule D Tax Worksheet (in the Schedule D instructions) to figure the line 9 tax on Form 8615 if the child, parent, or any other child has unrecaptured section 1250 gain or 28% rate gain. 2012 tax software free If you must use the Schedule D Tax Worksheet, first complete any Schedule D and any actual Schedule D Tax Worksheet required for the child, parent, or any other child. 2012 tax software free Then figure the line 9 tax using another Schedule D Tax Worksheet. 2012 tax software free (Do not attach this Schedule D Tax Worksheet to the child's return. 2012 tax software free )   Complete this Schedule D Tax Worksheet as follows. 2012 tax software free On line 1, enter the amount from Form 8615, line 8. 2012 tax software free On line 2, enter the qualified dividends included on Form 8615, line 8. 2012 tax software free (See the earlier discussion for line 8. 2012 tax software free ) On line 3, enter the total of the amounts, if any, on line 4g of all Forms 4952 filed by the child, parent, or any other child. 2012 tax software free On line 4, enter the total of the amounts, if any, on line 4e of all Forms 4952 filed by the child, parent, or any other child. 2012 tax software free If applicable, include instead the smaller amount entered on the dotted line next to line 4e. 2012 tax software free On lines 5 and 6, follow the worksheet instructions. 2012 tax software free On line 7, enter the net capital gain included on Form 8615, line 8. 2012 tax software free (See the earlier discussion for line 8. 2012 tax software free ) On lines 8 through 10, follow the worksheet instructions. 2012 tax software free On line 11, enter zero if neither the child, nor the parent, nor any other child has unrecaptured section 1250 gain (Schedule D, line 19) or 28% rate gain (Schedule D, line 18). 2012 tax software free Otherwise, enter the amount of unrecaptured section 1250 gain and 28% rate gain included in the net capital gain on line 8 of Form 8615. 2012 tax software free Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). 2012 tax software free If the Foreign Earned Income Tax Worksheet was used to figure the parent's tax or the tax of any child, go to step 10 below. 2012 tax software free Otherwise, skip steps 10, 11, and 12 below, and go to step 13. 2012 tax software free Determine whether there is a line 8 capital gain excess as follows. 2012 tax software free Add the amounts on line 2 of all Foreign Earned Income Tax Worksheets completed by the parent or any child for whom Form 8615 is filed. 2012 tax software free (But for each child do not add more than the excess, if any, of the amount on line 5 of the child's Form 8615 over the child's taxable income on Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. 2012 tax software free ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. 2012 tax software free Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. 2012 tax software free If the result is more than zero, that amount is the line 8 capital gain excess. 2012 tax software free If the result is zero or less, there is no line 8 capital gain excess. 2012 tax software free If there is no line 8 capital gain excess, skip step 12 below and go to step 13. 2012 tax software free If there is a line 8 capital gain excess, complete a second Schedule D Tax Worksheet as instructed above and in step 13, but in its entirety and with the following additional modifications. 2012 tax software free (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. 2012 tax software free ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. 2012 tax software free Reduce the amount you would otherwise enter on line 6 (but not below zero) by any of the line 8 capital gain excess not used in (a) above. 2012 tax software free If the child, parent, or any other child has 28% rate gain, reduce the amount you would otherwise enter on line 8 of Worksheet 1 for Line 11 of the Schedule D Tax Worksheet – 28% Rate Gain (Line 9 Tax), shown later, (but not below zero) by the line 8 capital gain excess, and refigure the amount on line 11 of this Schedule D Tax Worksheet. 2012 tax software free If the child, parent, or any other child has unrecaptured section 1250 gain, reduce the amount you would otherwise enter on line 8 of Worksheet 2 for Line 11 of the Schedule D Tax Worksheet – Unrecaptured Section 1250 Gain (Line 9 Tax) (but not below zero) by the line 8 capital gain excess not used in 12(c), and refigure the amount on line 11 of this Schedule D Tax Worksheet. 2012 tax software free Complete lines 12 through 45 following the worksheet instructions. 2012 tax software free Use the parent's filing status to complete lines 15, 42, and 44. 2012 tax software free Enter the amount from line 45 of this Schedule D Tax Worksheet on Form 8615, line 9, and check the box on that line
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2012 tax software free 19. 2012 tax software free   Education- Related Adjustments Table of Contents Introduction Useful Items - You may want to see: Student Loan Interest DeductionStudent Loan Interest Defined Can You Claim the Deduction How Much Can You Deduct How Do You Figure the Deduction Tuition and Fees DeductionCan You Claim the Deduction What Expenses Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses How Much Can You Deduct Educator Expenses Introduction This chapter discusses the education-related adjustment you can deduct in figuring your adjusted gross income. 2012 tax software free This chapter covers the student loan interest deduction, tuition and fees deduction, and the deduction for educator expenses. 2012 tax software free Useful Items - You may want to see: Publication 970 Tax Benefits for Education Student Loan Interest Deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. 2012 tax software free 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. 2012 tax software free 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. 2012 tax software free This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. 2012 tax software free Table 19-1 summarizes the features of the student loan interest deduction. 2012 tax software free Table 19-1. 2012 tax software free Student Loan Interest Deduction at a Glance Do not rely on this table alone. 2012 tax software free Refer to the text for more details. 2012 tax software free Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. 2012 tax software free 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. 2012 tax software free Student qualifications The student must be: • you, your spouse, or your dependent, and   • enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. 2012 tax software free Time limit on deduction You can deduct interest paid during the remaining period of your student loan. 2012 tax software free Phaseout The amount of your deduction depends on your income level. 2012 tax software free Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. 2012 tax software free It includes both required and voluntary interest payments. 2012 tax software free 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 (defined in chapter 3) 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 when the student is an eligible student. 2012 tax software free Loans from the following sources are not qualified student loans. 2012 tax software free A related person. 2012 tax software free A qualified employer plan. 2012 tax software free Exceptions. 2012 tax software free   For purposes of the student loan interest deduction, the following are exceptions to the general rules for dependents. 2012 tax software free An individual can be your dependent even if you are the dependent of another taxpayer. 2012 tax software free An individual can be your dependent even if the individual files a joint return with a spouse. 2012 tax software free 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). 2012 tax software free    Reasonable period of time. 2012 tax software free   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. 2012 tax software free   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. 2012 tax software free The expenses relate to a specific academic period. 2012 tax software free 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. 2012 tax software free   If neither of the above situations applies, the reasonable period of time is determined based on all the relevant facts and circumstances. 2012 tax software free Academic period. 2012 tax software free   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. 2012 tax software free 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. 2012 tax software free Eligible student. 2012 tax software free   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. 2012 tax software free Enrolled at least half-time. 2012 tax software free   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. 2012 tax software free   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 2012 tax software free However, the standard may not be lower than any of those established by the U. 2012 tax software free S. 2012 tax software free Department of Education under the Higher Education Act of 1965. 2012 tax software free Related person. 2012 tax software free   You cannot deduct interest on a loan you get from a related person. 2012 tax software free Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. 2012 tax software free ), Your lineal descendants (children, grandchildren, etc. 2012 tax software free ), and Certain corporations, partnerships, trusts, and exempt organizations. 2012 tax software free Qualified employer plan. 2012 tax software free   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. 2012 tax software free 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. 2012 tax software free They include amounts paid for the following items. 2012 tax software free Tuition and fees. 2012 tax software free Room and board. 2012 tax software free Books, supplies, and equipment. 2012 tax software free Other necessary expenses (such as transportation). 2012 tax software free The cost of room and board qualifies only to the extent that it is not more than: 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 If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 2012 tax software free Eligible educational institution. 2012 tax software free   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. 2012 tax software free S. 2012 tax software free Department of Education. 2012 tax software free It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2012 tax software free   Certain educational institutions located outside the United States also participate in the U. 2012 tax software free S. 2012 tax software free Department of Education's Federal Student Aid (FSA) programs. 2012 tax software free   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. 2012 tax software free   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. 2012 tax software free The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. 2012 tax software free    The educational institution should be able to tell you if it is an eligible educational institution. 2012 tax software free Adjustments to qualified education expenses. 2012 tax software free   You must reduce your qualified education expenses by certain tax-free items (such as the tax-free part of scholarships and fellowships). 2012 tax software free See chapter 4 of Publication 970 for details. 2012 tax software free Include as Interest In addition to simple interest on the loan, certain loan origination fees, capitalized interest, interest on revolving lines of credit, and interest on refinanced student loans can be student loan interest if all other requirements are met. 2012 tax software free Loan origination fee. 2012 tax software free   In general, this is a one-time fee charged by the lender when a loan is made. 2012 tax software free To be deductible as interest, the 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. 2012 tax software free A loan origination fee treated as interest accrues over the life of the loan. 2012 tax software free Capitalized interest. 2012 tax software free    This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. 2012 tax software free Interest on revolving lines of credit. 2012 tax software free   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. 2012 tax software free See Qualified Education Expenses , earlier. 2012 tax software free Interest on refinanced student loans. 2012 tax software free   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. 2012 tax software free 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. 2012 tax software free Voluntary interest payments. 2012 tax software free   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. 2012 tax software free Do Not Include as Interest You cannot claim a student loan interest deduction for any of the following items. 2012 tax software free Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. 2012 tax software free Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. 2012 tax software free 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. 2012 tax software free For more information, see Student Loan Repayment Assistance in chapter 5 of Publication 970. 2012 tax software free Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. 2012 tax software free Your filing status is any filing status except married filing separately. 2012 tax software free No one else is claiming an exemption for you on his or her tax return. 2012 tax software free You are legally obligated to pay interest on a qualified student loan. 2012 tax software free You paid interest on a qualified student loan. 2012 tax software free Interest paid by others. 2012 tax software free   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. 2012 tax software free See chapter 4 of Publication 970 for more information. 2012 tax software free 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, home mortgage interest). 2012 tax software free How Much Can You Deduct Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. 2012 tax software free However, the amount determined above 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). 2012 tax software free 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). 2012 tax software free For details on figuring your MAGI, see chapter 4 of Publication 970. 2012 tax software free How Do You Figure the Deduction Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the Form 1040 or Form 1040A instructions. 2012 tax software free However, if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1 in chapter 4 of Publication 970. 2012 tax software free To help you figure your student loan interest deduction, you should receive Form 1098-E, Student Loan Interest Statement. 2012 tax software free 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. 2012 tax software free 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. 2012 tax software free Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. 2012 tax software free However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. 2012 tax software free For information on allocating payments between interest and principal, see chapter 4 of Publication 970. 2012 tax software free To claim the deduction, enter the allowable amount on Form 1040, line 33, or Form 1040A, line 18. 2012 tax software free Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). 2012 tax software free You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. 2012 tax software free The qualified expenses must be for higher education, as explained later under What Expenses Qualify . 2012 tax software free The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. 2012 tax software free Table 19-2 summarizes the features of the tuition and fees deduction. 2012 tax software free You may be able to take a credit for your education expenses instead of a deduction. 2012 tax software free You can choose the one that will give you the lower tax. 2012 tax software free See chapter 35, Education Credits, for details about the credits. 2012 tax software free Can You Claim the Deduction The following rules will help you determine if you can claim the tuition and fees deduction. 2012 tax software free Who Can Claim the Deduction Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. 2012 tax software free You paid qualified education expenses of higher education in 2013 for academic periods beginning in 2013 and those beginning in the first three months of 2014. 2012 tax software free You paid the education expenses for an eligible student. 2012 tax software free The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption (defined in chapter 3) on your tax return. 2012 tax software free Qualified education expenses are defined under What Expenses Qualify . 2012 tax software free Eligible students are defined later under Who Is an Eligible Student . 2012 tax software free Who Cannot Claim the Deduction You cannot claim the tuition and fees deduction if any of the following apply. 2012 tax software free Your filing status is married filing separately. 2012 tax software free Another person can claim an exemption for you as a dependent on his or her tax return. 2012 tax software free You cannot take the deduction even if the other person does not actually claim that exemption. 2012 tax software free Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). 2012 tax software free You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. 2012 tax software free More information on nonresident aliens can be found in Publication 519, U. 2012 tax software free S. 2012 tax software free Tax Guide for Aliens. 2012 tax software free You or anyone else claims an American opportunity or lifetime learning credit in 2013 with respect to expenses of the student for whom the qualified education expenses were paid. 2012 tax software free However, a state tax credit will not disqualify you from claiming a tuition and fees deduction. 2012 tax software free Table 19-2. 2012 tax software free Tuition and Fees Deduction at a Glance Do not rely on this table alone. 2012 tax software free Refer to the text for more details. 2012 tax software free Question   Answer What is the maximum benefit?   You can reduce your income subject to tax by up to $4,000. 2012 tax software free Where is the deduction taken?   As an adjustment to income on Form 1040, line 34, or Form 1040A, line 19. 2012 tax software free For whom must the expenses be paid?   A student enrolled in an eligible educational institution who is either: you, your spouse, or your dependent for whom you claim an exemption. 2012 tax software free What tuition and fees are deductible?   Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. 2012 tax software free What Expenses Qualify The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 2012 tax software free Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period (defined earlier under Student Loan Interest Deduction ) beginning in 2013 or in the first 3 months of 2014. 2012 tax software free Payments with borrowed funds. 2012 tax software free   You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. 2012 tax software free Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. 2012 tax software free Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. 2012 tax software free Student withdraws from class(es). 2012 tax software free   You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws. 2012 tax software free Qualified Education Expenses For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. 2012 tax software free Eligible educational institution. 2012 tax software free   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. 2012 tax software free S. 2012 tax software free Department of Education. 2012 tax software free It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2012 tax software free The educational institution should be able to tell you if it is an eligible educational institution. 2012 tax software free   Certain educational institutions located outside the United States also participate in the U. 2012 tax software free S. 2012 tax software free Department of Education's Federal Student Aid (FSA) programs. 2012 tax software free Academic period. 2012 tax software free    An academic period is any quarter, semester, trimester, or any other period of study as reasonably determined by an eligible educational institution. 2012 tax software free If an eligible educational institution uses credit hours and does not have academic terms, each payment period may be treated as an academic period. 2012 tax software free Related expenses. 2012 tax software free   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses for the tuition and fees deduction only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. 2012 tax software free Prepaid expenses. 2012 tax software free   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring the tuition and fees deduction. 2012 tax software free See Academic period, earlier. 2012 tax software free For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring the tuition and fees deduction for 2013 only if you meet all the other requirements. 2012 tax software free    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 tuition and fees deduction. 2012 tax software free No Double Benefit Allowed You cannot do any of the following. 2012 tax software free Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense. 2012 tax software free Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year. 2012 tax software free Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). 2012 tax software free For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. 2012 tax software free See Figuring the Taxable Portion of a Distribution in chapter 7 (Coverdell ESA) and chapter 8 (QTP) of Publication 970. 2012 tax software free Deduct qualified education expenses that have been paid with tax-free interest on U. 2012 tax software free S. 2012 tax software free savings bonds (Form 8815). 2012 tax software free See Figuring the Tax-Free Amount in chapter 10 of Publication 970. 2012 tax software free Deduct qualified education expenses that have been paid with tax-free educational assistance such as a scholarship, grant, or employer-provided educational assistance. 2012 tax software free See Adjustments to qualified education expenses, later. 2012 tax software free Adjustments to qualified education expenses. 2012 tax software free   For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. 2012 tax software free The result is the amount of adjusted qualified education expenses for each student. 2012 tax software free Tax-free educational assistance. 2012 tax software free   For tax-free educational assistance you received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance to that academic period. 2012 tax software free See Academic period, earlier. 2012 tax software free   This includes: The tax-free part of scholarships and fellowships, including Pell grants (see chapter 1 of Publication 970), The tax-free part of any employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2012 tax software free Generally, any scholarship or fellowship you receive is treated as tax-free educational assistance. 2012 tax software free However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent you include it in gross income (if you are required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 2012 tax software free 970, chapter 1. 2012 tax software free The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 2012 tax software free 970, chapter 1. 2012 tax software free You may be able to increase the combined value of your tuition and fees deduction and certain educational assistance if you include some or all of the educational assistance in income in the year it is received. 2012 tax software free For details, see Adjustments to Qualified Education Expenses in chapter 6 of Pub. 2012 tax software free 970. 2012 tax software free Some tax-free educational assistance received in 2013 may be treated as a refund of qualified education expenses paid in 2013. 2012 tax software free This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). 2012 tax software free If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. 2012 tax software free If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. 2012 tax software free Refunds. 2012 tax software free   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or may require you to include some or all of the refund in your gross income for the year the refund is received. 2012 tax software free See chapter 6 of Pub. 2012 tax software free 970 for more information. 2012 tax software free Some tax-free educational assistance received after 2013 may be treated as a refund. 2012 tax software free See Tax-free educational assistance, earlier. 2012 tax software free Refunds received in 2013. 2012 tax software free    For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. 2012 tax software free Refunds received after 2013 but before your income tax return is filed. 2012 tax software free   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. 2012 tax software free Refunds received after 2013 and after your income tax return is filed. 2012 tax software free   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received after you file your 2013 income tax return, you may need to include some or all of the refund in your gross income for the year the refund is received. 2012 tax software free See chapter 6 of Pub. 2012 tax software free 970 for more information. 2012 tax software free Coordination with Coverdell education savings accounts and qualified tuition programs. 2012 tax software free    Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). 2012 tax software free For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. 2012 tax software free Amounts that do not reduce qualified education expenses. 2012 tax software free   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 2012 tax software free   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. 2012 tax software free The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses. 2012 tax software free The use of the money is not restricted. 2012 tax software free Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. 2012 tax software free This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. 2012 tax software free Sports, games, hobbies, and noncredit courses. 2012 tax software free   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. 2012 tax software free However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. 2012 tax software free Comprehensive or bundled fees. 2012 tax software free   Some eligible educational institutions combine all of their fees for an academic period into one amount. 2012 tax software free If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. 2012 tax software free The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. 2012 tax software free See How Do You Figure the Deduction , later, for more information about Form 1098-T. 2012 tax software free Who Is an Eligible Student For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (defined earlier). 2012 tax software free Who Can Claim a Dependent's Expenses Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must: Have paid the expenses, and Claim an exemption for the student as a dependent. 2012 tax software free Table 19-3 summarizes who can claim the deduction. 2012 tax software free How Much Can You Deduct The maximum tuition and fees deduction in 2013 is $4,000, $2,000, or $0, depending on the amount of your MAGI. 2012 tax software free For details on figuring your MAGI, see chapter 6 of Publication 970. 2012 tax software free How Do You Figure the Deduction Figure the deduction using Form 8917. 2012 tax software free To help you figure your tuition and fees deduction, you should receive Form 1098-T, Tuition Statement. 2012 tax software free Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. 2012 tax software free To claim the deduction, enter the allowable amount on Form 1040, line 34, or Form 1040A, line 19, and attach your completed Form 8917. 2012 tax software free Table 19-3. 2012 tax software free Who Can Claim a Dependent's Expenses Do not rely on this table alone. 2012 tax software free See Who Can Claim a Dependent's Expenses in chapter 6 of Publication 970. 2012 tax software free IF your dependent is an eligible student and you. 2012 tax software free . 2012 tax software free . 2012 tax software free AND. 2012 tax software free . 2012 tax software free . 2012 tax software free THEN. 2012 tax software free . 2012 tax software free . 2012 tax software free claim an exemption for your dependent you paid all qualified education expenses for your dependent only you can deduct the qualified education expenses that you paid. 2012 tax software free Your dependent cannot take a deduction. 2012 tax software free claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. 2012 tax software free do not claim an exemption for your dependent you paid all qualified education expenses no one is allowed to take a deduction. 2012 tax software free do not claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. 2012 tax software free Educator Expenses If you were an eligible educator in 2013, you can deduct on Form 1040, line 23, or Form 1040A, line 16, up to $250 of qualified expenses you paid in 2013. 2012 tax software free If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. 2012 tax software free However, neither spouse can deduct more than $250 of his or her qualified expenses on Form 1040, line 23, or Form 1040A, line 16. 2012 tax software free You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A (Form 1040), line 21. 2012 tax software free Eligible educator. 2012 tax software free   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. 2012 tax software free Qualified expenses. 2012 tax software free   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. 2012 tax software free An ordinary expense is one that is common and accepted in your educational field. 2012 tax software free A necessary expense is one that is helpful and appropriate for your profession as an educator. 2012 tax software free An expense does not have to be required to be considered necessary. 2012 tax software free   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. 2012 tax software free   You must reduce your qualified expenses by the following amounts. 2012 tax software free Excludable U. 2012 tax software free S. 2012 tax software free series EE and I savings bond interest from Form 8815. 2012 tax software free See Figuring the Tax-Free Amount in chapter 10 of Publication 970. 2012 tax software free Nontaxable qualified tuition program earnings or distributions. 2012 tax software free See Figuring the Taxable Portion of a Distribution in chapter 8 of Publication 970. 2012 tax software free Nontaxable distribution of earnings from a Coverdell education savings account. 2012 tax software free See Figuring the Taxable Portion of a Distribution in chapter 7 of Publication 970. 2012 tax software free Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2. 2012 tax software free Prev  Up  Next   Home   More Online Publications