Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

File A 2011 Tax Return Online

Free State ReturnsHow Do I Amend My 2012 Tax Return Online1040x H&r BlockTurbo Tax Form 1040x1040 Ez Online FilingFile An Extension OnlinePenalties For Filing Taxes LateIncome Tax Forms 1040ezTax Amendment FormsTax 1040ezHow To File A Amended Tax ReturnH&r Block Taxcut Online2012 Tax Form 1040File Amended Tax ReturnH And R Block Free Online Tax Filing1040ez Illinois State Income Tax FormCan You Refile TaxesTurbotax 2008 E FileHow Do I File An Amended Tax Return For 2011Form 1040ez InstructionsInstructions For Filing 1040ezFree Tax Online2010 Amended Tax ReturnNeed Do 2011 TaxesAmend 2010 TaxMyfreetaxes.com/everettEz10402011 1040ez Form IrsUnemployment Tax FormTaxact2011onlineIrs Amended Tax FormsTurbotax Business Fed E File 2012Irs Mailing Address 1040ezAmend 2011 Tax Return2010 Income Tax FormsTax 1040ezFile 2010 Taxes OnlineFree Turbo Tax FilingFile For 2012 TaxesH&rblock Com

File A 2011 Tax Return Online

File a 2011 tax return online Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. File a 2011 tax return online A pension is generally a series of payments made to you after you retire from work. File a 2011 tax return online Pension payments are made regularly and are for past services with an employer. File a 2011 tax return online An annuity is a series of payments under a contract. File a 2011 tax return online You can buy the contract alone or you can buy it with the help of your employer. File a 2011 tax return online Annuity payments are made regularly for more than one full year. File a 2011 tax return online Note. File a 2011 tax return online Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. File a 2011 tax return online Types of pensions and annuities. File a 2011 tax return online   Particular types of pensions and annuities include: Fixed period annuities. File a 2011 tax return online You receive definite amounts at regular intervals for a definite length of time. File a 2011 tax return online Annuities for a single life. File a 2011 tax return online You receive definite amounts at regular intervals for life. File a 2011 tax return online The payments end at death. File a 2011 tax return online Joint and survivor annuities. File a 2011 tax return online The first annuitant receives a definite amount at regular intervals for life. File a 2011 tax return online After he or she dies, a second annuitant receives a definite amount at regular intervals for life. File a 2011 tax return online The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. File a 2011 tax return online Variable annuities. File a 2011 tax return online You receive payments that may vary in amount for a definite length of time or for life. File a 2011 tax return online The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. File a 2011 tax return online Disability pensions. File a 2011 tax return online You are under minimum retirement age and receive payments because you retired on disability. File a 2011 tax return online If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. File a 2011 tax return online If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. File a 2011 tax return online A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. File a 2011 tax return online This plan must meet Internal Revenue Code requirements. File a 2011 tax return online It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. File a 2011 tax return online However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. File a 2011 tax return online A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. File a 2011 tax return online A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. File a 2011 tax return online   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. File a 2011 tax return online A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. File a 2011 tax return online It does not qualify for most of the tax benefits of a qualified plan. File a 2011 tax return online Annuity worksheets. File a 2011 tax return online   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. File a 2011 tax return online Request for a ruling. File a 2011 tax return online   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. File a 2011 tax return online This is treated as a request for a ruling. File a 2011 tax return online See Requesting a Ruling on Taxation of Annuity near the end of this publication. File a 2011 tax return online Withholding tax and estimated tax. File a 2011 tax return online   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. File a 2011 tax return online If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. File a 2011 tax return online Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. File a 2011 tax return online Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). File a 2011 tax return online These payments are also known as amounts received as an annuity. File a 2011 tax return online If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. File a 2011 tax return online In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. File a 2011 tax return online The amount of each payment that is more than the part that represents your net cost is taxable. File a 2011 tax return online Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. File a 2011 tax return online These terms are explained in the following discussions. File a 2011 tax return online Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. File a 2011 tax return online First, find your net cost of the contract as of the annuity starting date (defined later). File a 2011 tax return online To find this amount, you must first figure the total premiums, contributions, or other amounts paid. File a 2011 tax return online This includes the amounts your employer contributed if you were required to include these amounts in income. File a 2011 tax return online It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). File a 2011 tax return online From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. File a 2011 tax return online Any additional premiums paid for double indemnity or disability benefits. File a 2011 tax return online Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). File a 2011 tax return online The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. File a 2011 tax return online Example. File a 2011 tax return online On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. File a 2011 tax return online The annuity starting date is July 1. File a 2011 tax return online This is the date you use in figuring your investment in the contract and your expected return (discussed later). File a 2011 tax return online Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. File a 2011 tax return online Foreign employment. File a 2011 tax return online   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. File a 2011 tax return online The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. File a 2011 tax return online Foreign employment contributions while a nonresident alien. File a 2011 tax return online   In determining your cost, special rules apply if you are a U. File a 2011 tax return online S. File a 2011 tax return online citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. File a 2011 tax return online Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. File a 2011 tax return online Death benefit exclusion. File a 2011 tax return online   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. File a 2011 tax return online The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. File a 2011 tax return online How to adjust your total cost. File a 2011 tax return online   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. File a 2011 tax return online Add it to the cost or unrecovered cost of the annuity at the annuity starting date. File a 2011 tax return online See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. File a 2011 tax return online Net cost. File a 2011 tax return online   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. File a 2011 tax return online This is the unrecovered investment in the contract as of the annuity starting date. File a 2011 tax return online If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. File a 2011 tax return online Refund feature. File a 2011 tax return online   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. File a 2011 tax return online Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. File a 2011 tax return online   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. File a 2011 tax return online Zero value of refund feature. File a 2011 tax return online   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. File a 2011 tax return online   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). File a 2011 tax return online   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. File a 2011 tax return online Examples. File a 2011 tax return online The first example shows how to figure the value of the refund feature when there is only one beneficiary. File a 2011 tax return online Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. File a 2011 tax return online In both examples, the taxpayer elects to use Tables V through VIII. File a 2011 tax return online If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. File a 2011 tax return online Example 1. File a 2011 tax return online At age 65, Barbara bought for $21,053 an annuity with a refund feature. File a 2011 tax return online She will get $100 a month for life. File a 2011 tax return online Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. File a 2011 tax return online In this case, the contract cost and the total guaranteed return are the same ($21,053). File a 2011 tax return online Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. File a 2011 tax return online 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. File a 2011 tax return online For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). File a 2011 tax return online In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. File a 2011 tax return online Example 2. File a 2011 tax return online John died while still employed. File a 2011 tax return online His widow, Eleanor, age 48, receives $171 a month for the rest of her life. File a 2011 tax return online John's son, Elmer, age 9, receives $50 a month until he reaches age 18. File a 2011 tax return online John's contributions to the retirement fund totaled $7,559. File a 2011 tax return online 45, with interest on those contributions of $1,602. File a 2011 tax return online 53. File a 2011 tax return online The guarantee or total refund feature of the contract is $9,161. File a 2011 tax return online 98 ($7,559. File a 2011 tax return online 45 plus $1,602. File a 2011 tax return online 53). File a 2011 tax return online The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. File a 2011 tax return online 9 $71,614. File a 2011 tax return online 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. File a 2011 tax return online 0 5,400. File a 2011 tax return online 00   3) Total expected return   $77,014. File a 2011 tax return online 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. File a 2011 tax return online 45   2) Guaranteed amount (contributions of $7,559. File a 2011 tax return online 45 plus interest of $1,602. File a 2011 tax return online 53) $9,161. File a 2011 tax return online 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. File a 2011 tax return online 00   4) Net guaranteed amount $3,761. File a 2011 tax return online 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. File a 2011 tax return online 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. File a 2011 tax return online 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. File a 2011 tax return online See the discussion of expected return, later in this publication. File a 2011 tax return online Free IRS help. File a 2011 tax return online   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. File a 2011 tax return online Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. File a 2011 tax return online The following discussions explain how to figure the expected return with each type of annuity. File a 2011 tax return online A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. File a 2011 tax return online Fixed period annuity. File a 2011 tax return online   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. File a 2011 tax return online It is the total amount you will get beginning at the annuity starting date. File a 2011 tax return online You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). File a 2011 tax return online To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. File a 2011 tax return online Single life annuity. File a 2011 tax return online   If you are to get annuity payments for the rest of your life, find your expected return as follows. File a 2011 tax return online You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. File a 2011 tax return online These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). File a 2011 tax return online   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. File a 2011 tax return online See Adjustments to Tables I, II, V, VI, and VIA following Table I. File a 2011 tax return online Example. File a 2011 tax return online Henry bought an annuity contract that will give him an annuity of $500 a month for his life. File a 2011 tax return online If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. File a 2011 tax return online 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. File a 2011 tax return online 2 multiple by +. File a 2011 tax return online 1. File a 2011 tax return online His expected return would then be $115,800 ($6,000 × 19. File a 2011 tax return online 3). File a 2011 tax return online Annuity for shorter of life or specified period. File a 2011 tax return online   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. File a 2011 tax return online To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. File a 2011 tax return online Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. File a 2011 tax return online Example. File a 2011 tax return online Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. File a 2011 tax return online She was age 65 at her birthday nearest the annuity starting date. File a 2011 tax return online She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. File a 2011 tax return online 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. File a 2011 tax return online See Special Elections, later. File a 2011 tax return online Joint and survivor annuities. File a 2011 tax return online   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. File a 2011 tax return online To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. File a 2011 tax return online If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. File a 2011 tax return online See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. File a 2011 tax return online Example. File a 2011 tax return online John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. File a 2011 tax return online At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. File a 2011 tax return online The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. File a 2011 tax return online 0 Expected return $132,000 Different payments to survivor. File a 2011 tax return online   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. File a 2011 tax return online Example 1. File a 2011 tax return online Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. File a 2011 tax return online If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. File a 2011 tax return online 0 Multiple for Gerald, age 70 (from Table V)   16. File a 2011 tax return online 0 Difference: Multiple applicable to Mary   6. File a 2011 tax return online 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. File a 2011 tax return online 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. File a 2011 tax return online 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. File a 2011 tax return online Your husband died while still employed. File a 2011 tax return online Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. File a 2011 tax return online Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. File a 2011 tax return online You were 50 years old at the annuity starting date. File a 2011 tax return online Marie was 16 and Jean was 14. File a 2011 tax return online Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. File a 2011 tax return online 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. File a 2011 tax return online 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. File a 2011 tax return online 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. File a 2011 tax return online Computation Under the General Rule Note. File a 2011 tax return online Variable annuities use a different computation for determining the exclusion amounts. File a 2011 tax return online See Variable annuities later. File a 2011 tax return online Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. File a 2011 tax return online   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. File a 2011 tax return online See Death benefit exclusion , earlier. File a 2011 tax return online Step 2. File a 2011 tax return online   Figure your expected return. File a 2011 tax return online Step 3. File a 2011 tax return online   Divide Step 1 by Step 2 and round to three decimal places. File a 2011 tax return online This will give you the exclusion percentage. File a 2011 tax return online Step 4. File a 2011 tax return online   Multiply the exclusion percentage by the first regular periodic payment. File a 2011 tax return online The result is the tax-free part of each pension or annuity payment. File a 2011 tax return online   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. File a 2011 tax return online However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. File a 2011 tax return online   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. File a 2011 tax return online Step 5. File a 2011 tax return online   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. File a 2011 tax return online This will give you the tax-free part of the total payment for the year. File a 2011 tax return online    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. File a 2011 tax return online This fractional amount is multiplied by your exclusion percentage to get the tax-free part. File a 2011 tax return online Step 6. File a 2011 tax return online   Subtract the tax-free part from the total payment you received. File a 2011 tax return online The rest is the taxable part of your pension or annuity. File a 2011 tax return online Example 1. File a 2011 tax return online You purchased an annuity with an investment in the contract of $10,800. File a 2011 tax return online Under its terms, the annuity will pay you $100 a month for life. File a 2011 tax return online The multiple for your age (age 65) is 20. File a 2011 tax return online 0 as shown in Table V. File a 2011 tax return online Your expected return is $24,000 (20 × 12 × $100). File a 2011 tax return online Your cost of $10,800, divided by your expected return of $24,000, equals 45. File a 2011 tax return online 0%. File a 2011 tax return online This is the percentage you will not have to include in income. File a 2011 tax return online Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. File a 2011 tax return online If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). File a 2011 tax return online Example 2. File a 2011 tax return online Gerald bought a joint and survivor annuity. File a 2011 tax return online Gerald's investment in the contract is $62,712 and the expected return is $121,200. File a 2011 tax return online The exclusion percentage is 51. File a 2011 tax return online 7% ($62,712 ÷ $121,200). File a 2011 tax return online Gerald will receive $500 a month ($6,000 a year). File a 2011 tax return online Each year, until his net cost is recovered, $3,102 (51. File a 2011 tax return online 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. File a 2011 tax return online If Gerald dies, his wife will receive $350 a month ($4,200 a year). File a 2011 tax return online If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. File a 2011 tax return online 7%). File a 2011 tax return online Each year, until the entire net cost is recovered, his wife will receive $2,171. File a 2011 tax return online 40 (51. File a 2011 tax return online 7% of her payments received of $4,200) tax free. File a 2011 tax return online She will include $2,028. File a 2011 tax return online 60 ($4,200 − $2,171. File a 2011 tax return online 40) in her income tax return. File a 2011 tax return online Example 3. File a 2011 tax return online Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. File a 2011 tax return online Your two daughters each receive annual annuities of $1,800 until they reach age 18. File a 2011 tax return online Your husband contributed $25,576 to the plan. File a 2011 tax return online You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. File a 2011 tax return online Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. File a 2011 tax return online The exclusion percentage of 18. File a 2011 tax return online 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. File a 2011 tax return online Each full year $864 (18. File a 2011 tax return online 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. File a 2011 tax return online Each year, until age 18, $324 (18. File a 2011 tax return online 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. File a 2011 tax return online Part-year payments. File a 2011 tax return online   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. File a 2011 tax return online   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. File a 2011 tax return online For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. File a 2011 tax return online   If you received a fractional payment, follow Step 5, discussed earlier. File a 2011 tax return online This gives you the tax-free part of your total payment. File a 2011 tax return online Example. File a 2011 tax return online On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. File a 2011 tax return online The applicable multiple from Table V is 23. File a 2011 tax return online 3 (age 61). File a 2011 tax return online Her expected return is $34,950 ($125 × 12 × 23. File a 2011 tax return online 3). File a 2011 tax return online Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. File a 2011 tax return online 1%. File a 2011 tax return online Each payment received will consist of 63. File a 2011 tax return online 1% return of cost and 36. File a 2011 tax return online 9% taxable income, until her net cost of the contract is fully recovered. File a 2011 tax return online During the first year, Mary received three payments of $125, or $375, of which $236. File a 2011 tax return online 63 (63. File a 2011 tax return online 1% × $375) is a return of cost. File a 2011 tax return online The remaining $138. File a 2011 tax return online 37 is included in income. File a 2011 tax return online Increase in annuity payments. File a 2011 tax return online   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. File a 2011 tax return online All increases in the installment payments are fully taxable. File a 2011 tax return online   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. File a 2011 tax return online 72-5(a)(5) of the regulations. File a 2011 tax return online Example. File a 2011 tax return online Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. File a 2011 tax return online In figuring the taxable part, Joe elects to use Tables V through VIII. File a 2011 tax return online The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. File a 2011 tax return online His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. File a 2011 tax return online 0 × $1,764 annual payment). File a 2011 tax return online The exclusion percentage is $7,938 ÷ $35,280, or 22. File a 2011 tax return online 5%. File a 2011 tax return online During the year he received 11 monthly payments of $147, or $1,617. File a 2011 tax return online Of this amount, 22. File a 2011 tax return online 5% × $147 × 11 ($363. File a 2011 tax return online 83) is tax free as a return of cost and the balance of $1,253. File a 2011 tax return online 17 is taxable. File a 2011 tax return online Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). File a 2011 tax return online The tax-free part is still only 22. File a 2011 tax return online 5% of the annuity payments as of the annuity starting date (22. File a 2011 tax return online 5% × $147 × 12 = $396. File a 2011 tax return online 90 for a full year). File a 2011 tax return online The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. File a 2011 tax return online Variable annuities. File a 2011 tax return online   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. File a 2011 tax return online   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. File a 2011 tax return online If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. File a 2011 tax return online Example. File a 2011 tax return online Frank purchased a variable annuity at age 65. File a 2011 tax return online The total cost of the contract was $12,000. File a 2011 tax return online The annuity starting date is January 1 of the year of purchase. File a 2011 tax return online His annuity will be paid, starting July 1, in variable annual installments for his life. File a 2011 tax return online The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. File a 2011 tax return online   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. File a 2011 tax return online Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. File a 2011 tax return online The result is added to the previously figured periodic tax-free part. File a 2011 tax return online The sum is the amount of each future payment that will be tax free. File a 2011 tax return online Example. File a 2011 tax return online Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. File a 2011 tax return online Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. File a 2011 tax return online Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. File a 2011 tax return online 00 Amount received in second year 500. File a 2011 tax return online 00 Difference $100. File a 2011 tax return online 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. File a 2011 tax return online 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. File a 2011 tax return online 4) $5. File a 2011 tax return online 43 Revised annual tax-free part for third and later years ($600 + $5. File a 2011 tax return online 43) $605. File a 2011 tax return online 43 Amount taxable in third year ($1,200 − $605. File a 2011 tax return online 43) $594. File a 2011 tax return online 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. File a 2011 tax return online 72–4(d)(3) of the Income Tax Regulations. File a 2011 tax return online The statement must also show the following information: The annuity starting date and your age on that date. File a 2011 tax return online The first day of the first period for which you received an annuity payment in the current year. File a 2011 tax return online Your investment in the contract as originally figured. File a 2011 tax return online The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. File a 2011 tax return online Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. File a 2011 tax return online Exclusion limited to net cost. File a 2011 tax return online   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). File a 2011 tax return online This is the unrecovered investment in the contract as of the annuity starting date. File a 2011 tax return online   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. File a 2011 tax return online This deduction is not subject to the 2%-of-adjusted-gross-income limit. File a 2011 tax return online Example 1. File a 2011 tax return online Your annuity starting date is after 1986. File a 2011 tax return online Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. File a 2011 tax return online There is no refund feature. File a 2011 tax return online Your monthly annuity payment is $833. File a 2011 tax return online 33. File a 2011 tax return online Your exclusion ratio is 12% and you exclude $100 a month. File a 2011 tax return online Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. File a 2011 tax return online Thereafter, your annuity payments are fully taxable. File a 2011 tax return online Example 2. File a 2011 tax return online The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. File a 2011 tax return online The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. File a 2011 tax return online The exclusion ratio is 10. File a 2011 tax return online 8%, and your monthly exclusion is $90. File a 2011 tax return online After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). File a 2011 tax return online An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. File a 2011 tax return online Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. File a 2011 tax return online Exclusion not limited to net cost. File a 2011 tax return online   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. File a 2011 tax return online If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. File a 2011 tax return online The total exclusion may be more than your investment in the contract. File a 2011 tax return online How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. File a 2011 tax return online Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. File a 2011 tax return online These tables correspond to the old Tables I through IV. File a 2011 tax return online In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. File a 2011 tax return online If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. File a 2011 tax return online However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). File a 2011 tax return online Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. File a 2011 tax return online Contributions made both before July 1986 and after June 1986. File a 2011 tax return online   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. File a 2011 tax return online (See the examples below. File a 2011 tax return online )    Making the election. File a 2011 tax return online Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. File a 2011 tax return online 72–6 of the Income Tax Regulations. File a 2011 tax return online ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. File a 2011 tax return online   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. File a 2011 tax return online You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. File a 2011 tax return online    Advantages of election. File a 2011 tax return online In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. File a 2011 tax return online    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. File a 2011 tax return online If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. File a 2011 tax return online   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. File a 2011 tax return online Example 1. File a 2011 tax return online Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. File a 2011 tax return online Payment of the $42,000 contribution is guaranteed under a refund feature. File a 2011 tax return online Bill is 55 years old as of the annuity starting date. File a 2011 tax return online For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. File a 2011 tax return online       Pre- July 1986   Post- June 1986 A. File a 2011 tax return online Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. File a 2011 tax return online of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. File a 2011 tax return online Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. File a 2011 tax return online Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. File a 2011 tax return online 7   28. File a 2011 tax return online 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. File a 2011 tax return online Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . File a 2011 tax return online 079   . File a 2011 tax return online 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). File a 2011 tax return online The taxable part of his annuity is $22,080 ($24,000 minus $1,920). File a 2011 tax return online If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). File a 2011 tax return online Example 2. File a 2011 tax return online Al is age 62 at his nearest birthday to the annuity starting date. File a 2011 tax return online Al's wife is age 60 at her nearest birthday to the annuity starting date. File a 2011 tax return online The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. File a 2011 tax return online The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. File a 2011 tax return online Al makes the election described in Example 1 . File a 2011 tax return online For purposes of this example, assume the refund feature adjustment is zero. File a 2011 tax return online If an adjustment is required, IRS will figure the amount. File a 2011 tax return online See Requesting a Ruling on Taxation of Annuity near the end of this publication. File a 2011 tax return online       Pre-  July 1986   Post-  June 1986 A. File a 2011 tax return online Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. File a 2011 tax return online Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. File a 2011 tax return online Expected return         1) Multiple for both annuitants from Tables II and VI 25. File a 2011 tax return online 4   28. File a 2011 tax return online 8   2) Multiple for first annuitant from Tables I and V 16. File a 2011 tax return online 9   22. File a 2011 tax return online 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. File a 2011 tax return online 5   6. File a 2011 tax return online 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. File a 2011 tax return online Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . File a 2011 tax return online 209   . File a 2011 tax return online 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). File a 2011 tax return online The taxable part of his annuity is $9,216 ($12,000 − $2,784). File a 2011 tax return online The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. File a 2011 tax return online After Al's death, his widow will apply the same exclusion percentages (20. File a 2011 tax return online 9% and 2. File a 2011 tax return online 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. File a 2011 tax return online Annuity received after June 30, 1986. File a 2011 tax return online   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. File a 2011 tax return online Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. File a 2011 tax return online    Make the election by attaching the following statement to your income tax return. File a 2011 tax return online    “I elect, under section 1. File a 2011 tax return online 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. File a 2011 tax return online ”   The statement must also include your name, address, and social security number. File a 2011 tax return online   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. File a 2011 tax return online Disqualifying form of payment or settlement. File a 2011 tax return online   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. File a 2011 tax return online See regulations section 1. File a 2011 tax return online 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. File a 2011 tax return online You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. File a 2011 tax return online Worksheets for Determining Taxable Annuity Worksheets I and II. File a 2011 tax return online   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. File a 2011 tax return online 72–6(d)(6) Election. File a 2011 tax return online Worksheet I For Determining Taxable Annuity Under Regulations Section 1. File a 2011 tax return online 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. File a 2011 tax return online   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. File a 2011 tax return online )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. File a 2011 tax return online If not, the IRS will calculate the refund feature percentage. File a 2011 tax return online             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. File a 2011 tax return online   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. File a 2011 tax return online   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. File a 2011 tax return online   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. File a 2011 tax return online     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. File a 2011 tax return online 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. File a 2011 tax return online   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. File a 2011 tax return online )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. File a 2011 tax return online If not, the IRS will calculate the refund feature percentage. File a 2011 tax return online             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. File a 2011 tax return online   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. File a 2011 tax return online   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. File a 2011 tax return online Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. File a 2011 tax return online   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. File a 2011 tax return online   Actuarial Tables Please click here for the text description of the image. File a 2011 tax return online Actuarial Tables Please click here for the text description of the image. File a 2011 tax return online Actuarial Tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Please click here for the text description of the image. File a 2011 tax return online Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. File a 2011 tax return online If you make this request, you are asking for a ruling. File a 2011 tax return online User fee. File a 2011 tax return online   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. File a 2011 tax return online You should call the IRS for the proper fee. File a 2011 tax return online A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. File a 2011 tax return online Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. File a 2011 tax return online O. File a 2011 tax return online Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. File a 2011 tax return online When to make the request. File a 2011 tax return online   Please note that requests sent between February 1 and April 15 may experience some delay. File a 2011 tax return online We process requests in the order received, and we will reply to your request as soon as we can process it. File a 2011 tax return online If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. File a 2011 tax return online S. File a 2011 tax return online Individual Income Tax Return, to get an extension of time to file. File a 2011 tax return online Information you must furnish. File a 2011 tax return online   You must furnish the information listed below so the IRS can comply with your request. File a 2011 tax return online Failure to furnish the information will result in a delay in processing your request. File a 2011 tax return online Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. File a 2011 tax return online Copies of any documents showing distributions, annuity rates, and annuity options available to you. File a 2011 tax return online A copy of any Form 1099–R you received since your annuity began. File a 2011 tax return online A statement indicating whether you have filed your return for the year for which you are making the request. File a 2011 tax return online If you have requested an extension of time to file that return, please indicate the extension date. File a 2011 tax return online Your daytime phone number. File a 2011 tax return online Your current mailing address. File a 2011 tax return online A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. File a 2011 tax return online Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. File a 2011 tax return online A completed Tax Information Sheet (or facsimile) shown on the next page. File a 2011 tax return online Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. File a 2011 tax return online This statement must be signed by the retiree or the survivor annuitant. File a 2011 tax return online It cannot be signed by a representative. File a 2011 tax return online Tax Information Sheet Please click here for the text description of the image. File a 2011 tax return online Tax Information Sheet Please click here for the text description of the image. File a 2011 tax return online Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. File a 2011 tax return online Free help with your tax return. File a 2011 tax return online   You can get free help preparing your return nationwide from IRS-certified volunteers. File a 2011 tax return online The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. File a 2011 tax return online The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. File a 2011 tax return online Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. File a 2011 tax return online In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. File a 2011 tax return online To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. File a 2011 tax return online gov, download the IRS2Go app, or call 1-800-906-9887. File a 2011 tax return online   As part of the TCE program, AARP offers the Tax-Aide counseling program. File a 2011 tax return online To find the nearest AARP Tax-Aide site, visit AARP's website at www. File a 2011 tax return online aarp. File a 2011 tax return online org/money/taxaide or call 1-888-227-7669. File a 2011 tax return online For more information on these programs, go to IRS. File a 2011 tax return online gov and enter “VITA” in the search box. File a 2011 tax return online Internet. File a 2011 tax return online    IRS. File a 2011 tax return online gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. File a 2011 tax return online Download the free IRS2Go app from the iTunes app store or from Google Play. File a 2011 tax return online Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. File a 2011 tax return online Check the status of your 2013 refund with the Where's My Refund? application on IRS. File a 2011 tax return online gov or download the IRS2Go app and select the Refund Status option. File a 2011 tax return online The IRS issues more than 9 out of 10 refunds in less than 21 days. File a 2011 tax return online Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. File a 2011 tax return online You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. File a 2011 tax return online The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. File a 2011 tax return online Use the Interactive Tax Assistant (ITA) to research your tax questions. File a 2011 tax return online No need to wait on the phone or stand in line. File a 2011 tax return online The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. File a 2011 tax return online When you reach the response screen, you can print the entire interview and the final response for your records. File a 2011 tax return online New subject areas are added on a regular basis. File a 2011 tax return online  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. File a 2011 tax return online gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. File a 2011 tax return online You can use the IRS Tax Map, to search publications and instructions by topic or keyword. File a 2011 tax return online The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. File a 2011 tax return online When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. File a 2011 tax return online Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. File a 2011 tax return online You can also ask the IRS to mail a return or an account transcript to you. File a 2011 tax return online Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. File a 2011 tax return online gov or by calling 1-800-908-9946. File a 2011 tax return online Tax return and tax account transcripts are generally available for the current year and the past three years. File a 2011 tax return online Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. File a 2011 tax return online Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. File a 2011 tax return online If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. File a 2011 tax return online Check the status of your amended return using Where's My Amended Return? Go to IRS. File a 2011 tax return online gov and enter Where's My Amended Return? in the search box. File a 2011 tax return online You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. File a 2011 tax return online It can take up to 3 weeks from the date you mailed it to show up in our system. File a 2011 tax return online Make a payment using one of several safe and convenient electronic payment options available on IRS. File a 2011 tax return online gov. File a 2011 tax return online Select the Payment tab on the front page of IRS. File a 2011 tax return online gov for more information. File a 2011 tax return online Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. File a 2011 tax return online Figure your income tax withholding with the IRS Withholding Calculator on IRS. File a 2011 tax return online gov. File a 2011 tax return online Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. File a 2011 tax return online Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. File a 2011 tax return online gov. File a 2011 tax return online Request an Electronic Filing PIN by going to IRS. File a 2011 tax return online gov and entering Electronic Filing PIN in the search box. File a 2011 tax return online Download forms, instructions and publications, including accessible versions for people with disabilities. File a 2011 tax return online Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. File a 2011 tax return online gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. File a 2011 tax return online An employee can answer questions about your tax account or help you set up a payment plan. File a 2011 tax return online Before you visit, check the Office Locator on IRS. File a 2011 tax return online gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. File a 2011 tax return online If you have a special need, such as a disability, you can request an appointment. File a 2011 tax return online Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. File a 2011 tax return online Apply for an Employer Identification Number (EIN). File a 2011 tax return online Go to IRS. File a 2011 tax return online gov and enter Apply for an EIN in the search box. File a 2011 tax return online Read the Internal Revenue Code, regulations, or other official guidance. File a 2011 tax return online Read Internal Revenue Bulletins. File a 2011 tax return online Sign up to receive local and national tax news and more by email. File a 2011 tax return online Just click on “subscriptions” above the search box on IRS. File a 2011 tax return online gov and choose from a variety of options. File a 2011 tax return online    Phone. File a 2011 tax return online You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. File a 2011 tax return online Download the free IRS2Go app from the iTunes app store or from Google Play. File a 2011 tax return online Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. File a 2011 tax return online gov, or download the IRS2Go app. File a 2011 tax return online Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. File a 2011 tax return online The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. File a 2011 tax return online Mos
Print - Click this link to Print this page

Identity Protection

Español

The IRS is committed to working with taxpayers who are the victims of identity theft

The IRS has taken numerous steps to combat identity theft and protect taxpayers. We are continually looking at ways to increase data security and protect taxpayers' identities with assistance from our Identity Protection Specialized Unit. Identity theft cases are among the most complex ones we handle.

We know identity theft is a frustrating process for victims. We take this issue very seriously and continue to expand on our robust screening process in order to stop fraudulent returns and protect innocent taxpayers.

On this page, you will find a wide range of information. Depending upon your personal circumstances, the information found here will cover a variety of scenarios involving identity theft, ranging from contacting us with a case of identity theft to providing tips to help keep your records safe.

  • Victim of identity theft?

Do you have reason to believe you are the victim of identity theft and your tax accounts have been affected?

Have you been informed that someone may be using your Social Security number for employment purposes?

Remember:
The IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels.

Page Last Reviewed or Updated: 13-Mar-2014

The File A 2011 Tax Return Online

File a 2011 tax return online 2. File a 2011 tax return online   American Opportunity Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible StudentException. File a 2011 tax return online Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Refundable Part of Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. File a 2011 tax return online They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). File a 2011 tax return online This chapter explains: Who can claim the American opportunity credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. File a 2011 tax return online What is the tax benefit of the American opportunity credit. File a 2011 tax return online   For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student. File a 2011 tax return online   A tax credit reduces the amount of income tax you may have to pay. File a 2011 tax return online Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. File a 2011 tax return online Forty percent of the American opportunity credit may be refundable. File a 2011 tax return online This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. File a 2011 tax return online   Your allowable American opportunity credit may be limited by the amount of your income. File a 2011 tax return online Also, the nonrefundable part of the credit may be limited by the amount of your tax. File a 2011 tax return online Overview of the American opportunity credit. File a 2011 tax return online   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. File a 2011 tax return online The details are discussed in this chapter. File a 2011 tax return online Can you claim more than one education credit this year. File a 2011 tax return online   For each student, you can elect for any year only one of the credits. File a 2011 tax return online For example, if you elect to take the American opportunity credit for a child on your 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013. File a 2011 tax return online   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. File a 2011 tax return online If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. File a 2011 tax return online This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. File a 2011 tax return online Differences between the American opportunity and lifetime learning credits. File a 2011 tax return online   There are several differences between these two credits. File a 2011 tax return online For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope Scholarship Credit for that student. File a 2011 tax return online However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. File a 2011 tax return online The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. File a 2011 tax return online If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. File a 2011 tax return online If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. File a 2011 tax return online Table 2-1. File a 2011 tax return online Overview of the American Opportunity Credit Maximum credit Up to $2,500 credit per eligible student Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship Credit was claimed) Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return. File a 2011 tax return online Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. File a 2011 tax return online You pay qualified education expenses of higher education. File a 2011 tax return online You pay the education expenses for an eligible student. File a 2011 tax return online The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. File a 2011 tax return online Student qualifications. File a 2011 tax return online   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. File a 2011 tax return online As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. File a 2011 tax return online For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. File a 2011 tax return online Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. File a 2011 tax return online If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. File a 2011 tax return online For at least one academic period beginning (or treated as beginning) in 2013, the student both: Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and Carried at least one-half the normal full-time workload for his or her course of study. File a 2011 tax return online The standard for what is half of the normal full-time work load is determined by each eligible educational institution. File a 2011 tax return online However, the standard may not be lower than any of those established by the U. File a 2011 tax return online S. File a 2011 tax return online Department of Education under the Higher Education Act of 1965. File a 2011 tax return online For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. File a 2011 tax return online See Prepaid expenses, later. File a 2011 tax return online As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. File a 2011 tax return online Example 1. File a 2011 tax return online Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. File a 2011 tax return online Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. File a 2011 tax return online Sharon claimed the American opportunity credit on her 2012 tax return. File a 2011 tax return online The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. File a 2011 tax return online Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. File a 2011 tax return online If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. File a 2011 tax return online Example 2. File a 2011 tax return online Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. File a 2011 tax return online His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. File a 2011 tax return online No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. File a 2011 tax return online The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. File a 2011 tax return online Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. File a 2011 tax return online If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. File a 2011 tax return online If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. File a 2011 tax return online Example 3. File a 2011 tax return online Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. File a 2011 tax return online Glenda pays her tuition for the 2014 Spring semester in December 2013. File a 2011 tax return online Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. File a 2011 tax return online If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. File a 2011 tax return online You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. File a 2011 tax return online Note. File a 2011 tax return online Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. File a 2011 tax return online “Qualified education expenses” are defined later under Qualified Education Expenses . File a 2011 tax return online “Eligible students” are defined later under Who Is an Eligible Student . File a 2011 tax return online A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . File a 2011 tax return online You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2013 , later, helpful in determining if you can claim an American opportunity credit on your tax return. File a 2011 tax return online This image is too large to be displayed in the current screen. File a 2011 tax return online Please click the link to view the image. File a 2011 tax return online Figure 2-1 Can you claim the American opportunity credit for 2012? Who Cannot Claim the Credit You cannot claim the American opportunity credit for 2013 if any of the following apply. File a 2011 tax return online Your filing status is married filing separately. File a 2011 tax return online You are listed as a dependent on another person's tax return (such as your parents'). File a 2011 tax return online See Who Can Claim a Dependent's Expenses , later. File a 2011 tax return online Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). File a 2011 tax return online MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . File a 2011 tax return online 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. File a 2011 tax return online More information on nonresident aliens can be found in Publication 519, U. File a 2011 tax return online S. File a 2011 tax return online Tax Guide for Aliens. File a 2011 tax return online What Expenses Qualify The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. File a 2011 tax return online Generally, the credit is allowed for adjusted qualified education expenses paid in 2013 for an academic period beginning in 2013 or beginning in the first three months of 2014. File a 2011 tax return online For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning January 2014, you can use that $1,500 in figuring your 2013 credit. File a 2011 tax return online Academic period. File a 2011 tax return online   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. File a 2011 tax return online 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. File a 2011 tax return online Paid with borrowed funds. File a 2011 tax return online   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. File a 2011 tax return online Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. File a 2011 tax return online Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. File a 2011 tax return online Student withdraws from class(es). File a 2011 tax return online   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. File a 2011 tax return online Qualified Education Expenses For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. File a 2011 tax return online Eligible educational institution. File a 2011 tax return online   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. File a 2011 tax return online S. File a 2011 tax return online Department of Education. File a 2011 tax return online It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. File a 2011 tax return online The educational institution should be able to tell you if it is an eligible educational institution. File a 2011 tax return online   Certain educational institutions located outside the United States also participate in the U. File a 2011 tax return online S. File a 2011 tax return online Department of Education's Federal Student Aid (FSA) programs. File a 2011 tax return online Related expenses. File a 2011 tax return online   Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. File a 2011 tax return online   However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. File a 2011 tax return online Prepaid expenses. File a 2011 tax return online   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. File a 2011 tax return online See Academic period, earlier. File a 2011 tax return online For example, if you pay $2,000 in December 2013, for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). File a 2011 tax return online    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). File a 2011 tax return online   In the following examples, assume that each student is an eligible student at an eligible educational institution. File a 2011 tax return online Example 1. File a 2011 tax return online Jefferson is a sophomore in University V's degree program in dentistry. File a 2011 tax return online This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. File a 2011 tax return online Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. File a 2011 tax return online Example 2. File a 2011 tax return online Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. File a 2011 tax return online The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. File a 2011 tax return online William bought his books from a friend; Grace bought hers at College W's bookstore. File a 2011 tax return online Both are qualified education expenses for the American opportunity credit. File a 2011 tax return online Example 3. File a 2011 tax return online When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. File a 2011 tax return online This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. File a 2011 tax return online No portion of the fee covers personal expenses. File a 2011 tax return online Although labeled as a student activity fee, the fee is required for Kelly's enrollment and attendance at College X and is a qualified expense. File a 2011 tax return online No Double Benefit Allowed You cannot do any of the following. File a 2011 tax return online Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an American opportunity credit based on those same expenses. File a 2011 tax return online Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. File a 2011 tax return online Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. File a 2011 tax return online Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. File a 2011 tax return online See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. File a 2011 tax return online Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. File a 2011 tax return online See Adjustments to Qualified Education Expenses, next. File a 2011 tax return online Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. File a 2011 tax return online The result is the amount of adjusted qualified education expenses for each student. File a 2011 tax return online Tax-free educational assistance. File a 2011 tax return online   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. File a 2011 tax return online See Academic period, earlier. File a 2011 tax return online   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. File a 2011 tax return online 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). File a 2011 tax return online   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. File a 2011 tax return online 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. File a 2011 tax return online   Tax-free educational assistance includes: The tax-free parts of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). File a 2011 tax return online Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. File a 2011 tax return online Generally, any scholarship or fellowship is treated as tax free. File a 2011 tax return online However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. File a 2011 tax return online 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. File a 2011 tax return online 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. File a 2011 tax return online You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. File a 2011 tax return online For examples, see Coordination with Pell grants and other scholarships, later. File a 2011 tax return online Refunds. File a 2011 tax return online   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. File a 2011 tax return online Some tax-free educational assistance received after 2013 may be treated as a refund. File a 2011 tax return online See Tax-free educational assistance, earlier. File a 2011 tax return online Refunds received in 2013. File a 2011 tax return online   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. File a 2011 tax return online Refunds received after 2013 but before your income tax return is filed. File a 2011 tax return online   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. File a 2011 tax return online Refunds received after 2013 and after your income tax return is filed. File a 2011 tax return online   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. File a 2011 tax return online See Credit recapture, next. File a 2011 tax return online Credit recapture. File a 2011 tax return online    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. File a 2011 tax return online You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. File a 2011 tax return online You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you claimed the refigured credit(s). File a 2011 tax return online Include that amount as an additional tax for the year the refund or tax-free assistance was received. File a 2011 tax return online Example. File a 2011 tax return online   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. File a 2011 tax return online You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. File a 2011 tax return online After you filed your return, you received a refund of $4,000. File a 2011 tax return online You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. File a 2011 tax return online The refigured credit is $2,250. File a 2011 tax return online The increase to your tax liability is also $250. File a 2011 tax return online Include the difference of $250 as additional tax on your 2014 tax return. File a 2011 tax return online See the instructions for your 2014 income tax return to determine where to include this tax. File a 2011 tax return online If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. File a 2011 tax return online Amounts that do not reduce qualified education expenses. File a 2011 tax return online   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. File a 2011 tax return online   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. File a 2011 tax return online The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. File a 2011 tax return online The use of the money is not restricted. File a 2011 tax return online Example 1. File a 2011 tax return online Joan paid $3,000 for tuition and $5,000 for room and board at University X. File a 2011 tax return online The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. File a 2011 tax return online To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. File a 2011 tax return online The terms of the scholarship state that it can be used to pay any of Joan's college expenses. File a 2011 tax return online University X applies the $2,000 scholarship against Joan's $8,000 total bill, and Joan pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. File a 2011 tax return online Joan does not report any portion of the scholarship as income on her tax return. File a 2011 tax return online In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. File a 2011 tax return online The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. File a 2011 tax return online Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). File a 2011 tax return online Example 2. File a 2011 tax return online The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. File a 2011 tax return online Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. File a 2011 tax return online Joan is treated as having paid $3,000 in qualified education expenses. File a 2011 tax return online Coordination with Pell grants and other scholarships. File a 2011 tax return online   In some cases, you may be able to reduce your tax liability by including scholarships in income. File a 2011 tax return online If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. File a 2011 tax return online The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. File a 2011 tax return online Example 1—No scholarship. File a 2011 tax return online Bill Pass, age 28 and unmarried, enrolled full-time in 2013 as a first-year student at a local college to earn a degree in law enforcement. File a 2011 tax return online This was his first year of postsecondary education. File a 2011 tax return online During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. File a 2011 tax return online He and the college meet all the requirements for the American opportunity credit. File a 2011 tax return online Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. File a 2011 tax return online Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. File a 2011 tax return online His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. File a 2011 tax return online He figures his American opportunity credit based on qualified education expenses of $4,000, which results in a credit of $2,500 and tax after credits of $99. File a 2011 tax return online Example 2—Scholarship excluded from income. File a 2011 tax return online The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. File a 2011 tax return online Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. File a 2011 tax return online If Bill excludes the scholarship from income, he will be deemed (for purposes of computing his education credit) to have used the scholarship to pay for tuition, required fees, and course materials. File a 2011 tax return online His adjusted qualified education expenses will be zero and he will not have an education credit. File a 2011 tax return online Therefore, Bill's tax after credits would be $2,599. File a 2011 tax return online Example 3—Scholarship partially included in income. File a 2011 tax return online The facts are the same as in Example 2—Scholarship excluded from income. File a 2011 tax return online If, unlike Example 2, Bill includes $4,000 of the scholarship in income, he will be deemed to have used that amount to pay for room and board. File a 2011 tax return online The remaining $1,600 of the $5,600 scholarship will reduce his qualified education expenses and his adjusted qualified education expenses will be $4,000. File a 2011 tax return online Bill's AGI will increase to $34,000, his taxable income will increase to $24,250, and his tax before credits will increase to $3,199. File a 2011 tax return online Based on his adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity tax credit of $2,500 and his tax after credits would be $699. File a 2011 tax return online 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. File a 2011 tax return online This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. File a 2011 tax return online Sports, games, hobbies, and noncredit courses. File a 2011 tax return online   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. File a 2011 tax return online However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. File a 2011 tax return online Comprehensive or bundled fees. File a 2011 tax return online   Some eligible educational institutions combine all of their fees for an academic period into one amount. File a 2011 tax return online 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 earlier, contact the institution. File a 2011 tax return online 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. File a 2011 tax return online See Figuring the Credit , later, for more information about Form 1098-T. File a 2011 tax return online Who Is an Eligible Student To claim the American opportunity credit, the student for whom you pay qualified education expenses must be an eligible student. File a 2011 tax return online This is a student who meets all of the following requirements. File a 2011 tax return online The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. File a 2011 tax return online This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. File a 2011 tax return online The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. File a 2011 tax return online For at least one academic period beginning in 2013, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. File a 2011 tax return online The student has not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2013. File a 2011 tax return online These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. File a 2011 tax return online Completion of first 4 years. File a 2011 tax return online   A student has completed the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4 years of academic credit at that institution for coursework completed by the student before 2013. File a 2011 tax return online This student generally would not be an eligible student for purposes of the American opportunity credit. File a 2011 tax return online Exception. File a 2011 tax return online   Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education. File a 2011 tax return online Enrolled at least half-time. File a 2011 tax return online   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. File a 2011 tax return online   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. File a 2011 tax return online However, the standard may not be lower than any of those established by the U. File a 2011 tax return online S. File a 2011 tax return online Department of Education under the Higher Education Act of 1965. File a 2011 tax return online Please click here for the text description of the image. File a 2011 tax return online Figure 2-2 Example 1. File a 2011 tax return online Mack graduated from high school in June 2012. File a 2011 tax return online In September, he enrolled in an undergraduate degree program at College U, and attended full-time for both the 2012 fall and 2013 spring semesters. File a 2011 tax return online For the 2013 fall semester, Mack was enrolled less than half-time. File a 2011 tax return online Because Mack was enrolled in an undergraduate degree program on at least a half-time basis for at least one academic period that began during 2012 and at least one academic period that began during 2013, he is an eligible student for tax years 2012 and 2013 (including the 2013 fall semester when he enrolled at College U on less than a half-time basis). File a 2011 tax return online Example 2. File a 2011 tax return online After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2013 spring semester. File a 2011 tax return online College V classified Shelly as a second-semester senior (fourth year) for the 2013 spring semester and as a first-semester graduate student (fifth year) for the 2013 fall semester. File a 2011 tax return online Because College V did not classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2013, Shelly is an eligible student for tax year 2013. File a 2011 tax return online Therefore, the qualified education expenses paid for the 2013 spring semester and the 2013 fall semester are taken into account in calculating the American opportunity credit for 2013. File a 2011 tax return online Example 3. File a 2011 tax return online During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. File a 2011 tax return online Larry was not enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. File a 2011 tax return online Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. File a 2011 tax return online Example 4. File a 2011 tax return online The facts are the same as in Example 3. File a 2011 tax return online During the 2013 spring semester, Larry again attended College X but not as part of a degree program. File a 2011 tax return online Larry graduated from high school in June 2013. File a 2011 tax return online For the 2013 fall semester, Larry enrolled as a full-time student in College X as part of a degree program, and College X awarded Larry credit for his prior coursework at College X. File a 2011 tax return online Because Larry was enrolled in a degree program at College X for the 2013 fall term on at least a half-time basis, Larry is an eligible student for all of tax year 2013. File a 2011 tax return online Therefore, the qualified education expenses paid for classes taken at College X during both the 2013 spring semester (during which Larry was not enrolled in a degree program) and the 2013 fall semester are taken into account in computing any American opportunity credit. File a 2011 tax return online Example 5. File a 2011 tax return online Dee graduated from high school in June 2012. File a 2011 tax return online In January 2013, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a travel agent. File a 2011 tax return online Dee completed the program in December 2013, and was awarded a certificate. File a 2011 tax return online In January 2014, she enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a computer programmer. File a 2011 tax return online Dee is an eligible student for both tax years 2013 and 2014 because she meets the degree requirement, the work load requirement, and the year of study requirement for those years. File a 2011 tax return online Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim an American opportunity credit for your dependent's expenses for that year. File a 2011 tax return online For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. File a 2011 tax return online You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. File a 2011 tax return online IF you. File a 2011 tax return online . File a 2011 tax return online . File a 2011 tax return online THEN only. File a 2011 tax return online . File a 2011 tax return online . File a 2011 tax return online claim an exemption on  your tax return for a  dependent who is an  eligible student you can claim the American opportunity credit based on that dependent's expenses. File a 2011 tax return online The dependent cannot claim the credit. File a 2011 tax return online do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the American opportunity credit. File a 2011 tax return online You cannot claim the credit based on this dependent's expenses. File a 2011 tax return online Expenses paid by dependent. File a 2011 tax return online   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. File a 2011 tax return online Include these expenses when figuring the amount of your American opportunity credit. File a 2011 tax return online    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. File a 2011 tax return online Expenses paid by you. File a 2011 tax return online   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the American opportunity credit. File a 2011 tax return online If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the American opportunity credit. File a 2011 tax return online Expenses paid by others. File a 2011 tax return online   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. File a 2011 tax return online In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. File a 2011 tax return online If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. File a 2011 tax return online Example. File a 2011 tax return online In 2013, Ms. File a 2011 tax return online Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. File a 2011 tax return online For purposes of claiming an American opportunity credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. File a 2011 tax return online Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim an American opportunity credit. File a 2011 tax return online If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim an American opportunity credit. File a 2011 tax return online If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. File a 2011 tax return online Tuition reduction. File a 2011 tax return online    When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. File a 2011 tax return online If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. File a 2011 tax return online For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. File a 2011 tax return online Figuring the Credit The amount of the American opportunity credit (per eligible student) is the sum of: 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and 25% of the next $2,000 of qualified education expenses you paid for that student. File a 2011 tax return online The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. File a 2011 tax return online You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. File a 2011 tax return online However, the credit may be reduced based on your MAGI. File a 2011 tax return online See Effect of the Amount of Your Income on the Amount of Your Credit , later. File a 2011 tax return online Example. File a 2011 tax return online Jack and Kay Ford are married and file a joint tax return. File a 2011 tax return online For 2013, they claim an exemption for their dependent daughter on their tax return. File a 2011 tax return online Their MAGI is $70,000. File a 2011 tax return online Their daughter is in her junior (third) year of studies at the local university. File a 2011 tax return online Jack and Kay paid qualified education expenses of $4,300 in 2013. File a 2011 tax return online Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. File a 2011 tax return online Jack and Kay can claim a $2,500 American opportunity credit in 2013. File a 2011 tax return online This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. File a 2011 tax return online Form 1098-T. File a 2011 tax return online   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. File a 2011 tax return online 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. File a 2011 tax return online An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. File a 2011 tax return online However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. File a 2011 tax return online When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. File a 2011 tax return online   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. File a 2011 tax return online    The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. File a 2011 tax return online Effect of the Amount of Your Income on the Amount of Your Credit The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). File a 2011 tax return online You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). File a 2011 tax return online Modified adjusted gross income (MAGI). File a 2011 tax return online   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. File a 2011 tax return online MAGI when using Form 1040A. File a 2011 tax return online   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. File a 2011 tax return online MAGI when using Form 1040. File a 2011 tax return online   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. File a 2011 tax return online You can use Worksheet 2-1, next, to figure your MAGI. File a 2011 tax return online    Worksheet 2-1. File a 2011 tax return online MAGI for the American Opportunity Credit 1. File a 2011 tax return online Enter your adjusted gross income  (Form 1040, line 38)   1. File a 2011 tax return online   2. File a 2011 tax return online Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. File a 2011 tax return online       3. File a 2011 tax return online Enter your foreign housing deduction (Form 2555, line 50)   3. File a 2011 tax return online       4. File a 2011 tax return online Enter the amount of income from Puerto Rico you are excluding   4. File a 2011 tax return online       5. File a 2011 tax return online Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. File a 2011 tax return online       6. File a 2011 tax return online Add the amounts on lines 2, 3, 4, and 5   6. File a 2011 tax return online   7. File a 2011 tax return online Add the amounts on lines 1 and 6. File a 2011 tax return online  This is your modified adjusted  gross income. File a 2011 tax return online Enter here and  on Form 8863, line 3   7. File a 2011 tax return online   Phaseout. File a 2011 tax return online   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2-7, of Form 8863, Part I. File a 2011 tax return online The same method is shown in the following example. File a 2011 tax return online Example. File a 2011 tax return online You are filing a joint return and your MAGI is $165,000. File a 2011 tax return online In 2013, you paid $5,000 of qualified education expenses. File a 2011 tax return online You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses). File a 2011 tax return online Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. File a 2011 tax return online The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. File a 2011 tax return online The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). File a 2011 tax return online The result is the amount of your phased out (reduced) American opportunity credit ($1,875). File a 2011 tax return online      $2,500 × $180,000 − $165,000  $20,000 = $1,875   Refundable Part of Credit Forty percent of the American opportunity credit is refundable for most taxpayers. File a 2011 tax return online However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. File a 2011 tax return online Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. File a 2011 tax return online You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. File a 2011 tax return online You were: Under age 18 at the end of 2013, or Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). File a 2011 tax return online At least one of your parents was alive at the end of 2013. File a 2011 tax return online You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. File a 2011 tax return online Earned income. File a 2011 tax return online   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. File a 2011 tax return online Earned income includes the part of any scholarship or fellowship that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship. File a 2011 tax return online Earned income does not include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. File a 2011 tax return online   If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). File a 2011 tax return online However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. File a 2011 tax return online Support. File a 2011 tax return online   Your support includes food, shelter, clothing, medical and dental care, education, and the like. File a 2011 tax return online Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. File a 2011 tax return online If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. File a 2011 tax return online However, a scholarship received by you is not considered support if you are a full-time student. File a 2011 tax return online See Publication 501 for details. File a 2011 tax return online Full-time student. File a 2011 tax return online   You are a full-time student for 2013 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. File a 2011 tax return online Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. File a 2011 tax return online Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. File a 2011 tax return online Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. File a 2011 tax return online A filled-in Form 8863 is shown at the end of this publication. File a 2011 tax return online Note. File a 2011 tax return online In Appendix A. File a 2011 tax return online at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. File a 2011 tax return online Prev  Up  Next   Home   More Online Publications