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Filing Taxes If Unemployed

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Filing Taxes If Unemployed

Filing taxes if unemployed Publication 596 - Main Content Table of Contents Chapter 1—Rules for EveryoneRule 1—Adjusted Gross Income (AGI) Limits Rule 2—You Must Have a Valid Social Security Number (SSN) Rule 3—Your Filing Status Cannot Be Married Filing Separately Rule 4—You Must Be a U. Filing taxes if unemployed S. Filing taxes if unemployed Citizen or Resident Alien All Year Rule 5—You Cannot File Form 2555 or Form 2555-EZ Rule 6—Your Investment Income Must Be $3,300 or Less Rule 7—You Must Have Earned Income Chapter 2—Rules If You Have a Qualifying ChildRule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer Chapter 3—Rules If You Do Not Have a Qualifying ChildRule 11—You Must Be at Least Age 25 but Under Age 65 Rule 12—You Cannot Be the Dependent of Another Person Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer Rule 14—You Must Have Lived in the United States More Than Half of the Year Chapter 4—Figuring and Claiming the EICRule 15—Earned Income Limits IRS Will Figure the EIC for You How To Figure the EIC Yourself Schedule EIC Chapter 5—Disallowance of the EICForm 8862 Are You Prohibited From Claiming the EIC for a Period of Years? Chapter 6—Detailed ExamplesExample 1—Sharon Rose Example 2—Cynthia and Jerry Grey Chapter 1—Rules for Everyone This chapter discusses Rules 1 through 7. Filing taxes if unemployed You must meet all seven rules to qualify for the earned income credit. Filing taxes if unemployed If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the publication. Filing taxes if unemployed If you meet all seven rules in this chapter, then read either chapter 2 or chapter 3 (whichever applies) for more rules you must meet. Filing taxes if unemployed Rule 1—Adjusted Gross Income (AGI) Limits Your adjusted gross income (AGI) must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Filing taxes if unemployed Adjusted gross income (AGI). Filing taxes if unemployed   AGI is the amount on line 4 of Form 1040EZ, line 22 of Form 1040A, or line 38 of Form 1040. Filing taxes if unemployed   If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. Filing taxes if unemployed You do not need to read the rest of this publication. Filing taxes if unemployed Example—AGI is more than limit. Filing taxes if unemployed Your AGI is $38,550, you are single, and you have one qualifying child. Filing taxes if unemployed You cannot claim the EIC because your AGI is not less than $37,870. Filing taxes if unemployed However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. Filing taxes if unemployed Community property. Filing taxes if unemployed   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. Filing taxes if unemployed This is different from the community property rules that apply under Rule 7. Filing taxes if unemployed Rule 2—You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). Filing taxes if unemployed Any qualifying child listed on Schedule EIC also must have a valid SSN. Filing taxes if unemployed (See Rule 8 if you have a qualifying child. Filing taxes if unemployed ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. Filing taxes if unemployed An example of a federally funded benefit is Medicaid. Filing taxes if unemployed If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. Filing taxes if unemployed S. Filing taxes if unemployed citizen or permanent resident, ask the SSA for a new social security card without the legend. Filing taxes if unemployed If you get the new card after you have already filed your return, you can file an amended return on Form 1040X, Amended U. Filing taxes if unemployed S. Filing taxes if unemployed Individual Income Tax Return, to claim the EIC. Filing taxes if unemployed U. Filing taxes if unemployed S. Filing taxes if unemployed citizen. Filing taxes if unemployed   If you were a U. Filing taxes if unemployed S. Filing taxes if unemployed citizen when you received your SSN, you have a valid SSN. Filing taxes if unemployed Valid for work only with INS authorization or DHS authorization. Filing taxes if unemployed   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. Filing taxes if unemployed SSN missing or incorrect. Filing taxes if unemployed   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. Filing taxes if unemployed Other taxpayer identification number. Filing taxes if unemployed   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). Filing taxes if unemployed ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. Filing taxes if unemployed No SSN. Filing taxes if unemployed   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Filing taxes if unemployed You cannot claim the EIC. Filing taxes if unemployed Getting an SSN. Filing taxes if unemployed   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5 with the SSA. Filing taxes if unemployed You can get Form SS-5 online at www. Filing taxes if unemployed socialsecurity. Filing taxes if unemployed gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. Filing taxes if unemployed Filing deadline approaching and still no SSN. Filing taxes if unemployed   If the filing deadline is approaching and you still do not have an SSN, you have two choices. Filing taxes if unemployed Request an automatic 6-month extension of time to file your return. Filing taxes if unemployed You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. Filing taxes if unemployed S. Filing taxes if unemployed Individual Income Tax Return. Filing taxes if unemployed For more information, see the instructions for Form 4868. Filing taxes if unemployed File the return on time without claiming the EIC. Filing taxes if unemployed After receiving the SSN, file an amended return, Form 1040X, claiming the EIC. Filing taxes if unemployed Attach a filled-in Schedule EIC, Earned Income Credit, if you have a qualifying child. Filing taxes if unemployed Rule 3—Your Filing Status Cannot Be “Married Filing Separately” If you are married, you usually must file a joint return to claim the EIC. Filing taxes if unemployed Your filing status cannot be “Married filing separately. Filing taxes if unemployed ” Spouse did not live with you. Filing taxes if unemployed   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. Filing taxes if unemployed In that case, you may be able to claim the EIC. Filing taxes if unemployed For detailed information about filing as head of household, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Filing taxes if unemployed Rule 4—You Must Be a U. Filing taxes if unemployed S. Filing taxes if unemployed Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. Filing taxes if unemployed You can use that filing status only if one spouse is a U. Filing taxes if unemployed S. Filing taxes if unemployed citizen or resident alien and you choose to treat the nonresident spouse as a U. Filing taxes if unemployed S. Filing taxes if unemployed resident. Filing taxes if unemployed If you make this choice, you and your spouse are taxed on your worldwide income. Filing taxes if unemployed If you need more information on making this choice, get Publication 519, U. Filing taxes if unemployed S. Filing taxes if unemployed Tax Guide for Aliens. Filing taxes if unemployed If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). Filing taxes if unemployed Rule 5—You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Filing taxes if unemployed You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. Filing taxes if unemployed U. Filing taxes if unemployed S. Filing taxes if unemployed possessions are not foreign countries. Filing taxes if unemployed See Publication 54, Tax Guide for U. Filing taxes if unemployed S. Filing taxes if unemployed Citizens and Resident Aliens Abroad, for more detailed information. Filing taxes if unemployed Rule 6—Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. Filing taxes if unemployed If your investment income is more than $3,300, you cannot claim the credit. Filing taxes if unemployed Form 1040EZ. Filing taxes if unemployed   If you file Form 1040EZ, your investment income is the total of the amount on line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. Filing taxes if unemployed Form 1040A. Filing taxes if unemployed   If you file Form 1040A, your investment income is the total of the amounts on lines 8a (taxable interest), 8b (tax-exempt interest), 9a (ordinary dividends), and 10 (capital gain distributions) on that form. Filing taxes if unemployed Form 1040. Filing taxes if unemployed   If you file Form 1040, use Worksheet 1 in this chapter to figure your investment income. Filing taxes if unemployed    Worksheet 1. Filing taxes if unemployed Investment Income If You Are Filing Form 1040 Use this worksheet to figure investment income for the earned income credit when you file Form 1040. Filing taxes if unemployed Interest and Dividends         1. Filing taxes if unemployed Enter any amount from Form 1040, line 8a 1. Filing taxes if unemployed   2. Filing taxes if unemployed Enter any amount from Form 1040, line 8b, plus any amount on Form 8814, line 1b 2. Filing taxes if unemployed   3. Filing taxes if unemployed Enter any amount from Form 1040, line 9a 3. Filing taxes if unemployed   4. Filing taxes if unemployed Enter the amount from Form 1040, line 21, that is from Form 8814 if you are filing that form to report your child's interest and dividend income on your return. Filing taxes if unemployed (If your child received an Alaska Permanent Fund dividend, use Worksheet 2 in this chapter to figure the amount to enter on this line. Filing taxes if unemployed ) 4. Filing taxes if unemployed   Capital Gain Net Income         5. Filing taxes if unemployed Enter the amount from Form 1040, line 13. Filing taxes if unemployed If the amount on that line is a loss, enter -0- 5. Filing taxes if unemployed       6. Filing taxes if unemployed Enter any gain from Form 4797, Sales of Business Property, line 7. Filing taxes if unemployed If the amount on that line is a loss, enter -0-. Filing taxes if unemployed (But, if you completed lines 8 and 9 of Form 4797, enter the amount from line 9 instead. Filing taxes if unemployed ) 6. Filing taxes if unemployed       7. Filing taxes if unemployed Substract line 6 of this worksheet from line 5 of this worksheet. Filing taxes if unemployed (If the result is less than zero, enter -0-. Filing taxes if unemployed ) 7. Filing taxes if unemployed   Royalties and Rental Income From Personal Property         8. Filing taxes if unemployed Enter any royalty income from Schedule E, line 23b, plus any income from the rental of personal property shown on Form 1040, line 21 8. Filing taxes if unemployed       9. Filing taxes if unemployed Enter any expenses from Schedule E, line 20, related to royalty income, plus any expenses from the rental of personal property deducted on Form 1040, line 36 9. Filing taxes if unemployed       10. Filing taxes if unemployed Subtract the amount on line 9 of this worksheet from the amount on line 8. Filing taxes if unemployed (If the result is less than zero, enter -0-. Filing taxes if unemployed ) 10. Filing taxes if unemployed   Passive Activities         11. Filing taxes if unemployed Enter the total of any net income from passive activities (such as income included on Schedule E, line 26, 29a (col. Filing taxes if unemployed (g)), 34a (col. Filing taxes if unemployed (d)), or 40). Filing taxes if unemployed (See instructions below for lines 11 and 12. Filing taxes if unemployed ) 11. Filing taxes if unemployed       12. Filing taxes if unemployed Enter the total of any losses from passive activities (such as losses included on Schedule E, line 26, 29b (col. Filing taxes if unemployed (f)), 34b (col. Filing taxes if unemployed (c)), or 40). Filing taxes if unemployed (See instructions below for lines 11 and 12. Filing taxes if unemployed ) 12. Filing taxes if unemployed       13. Filing taxes if unemployed Combine the amounts on lines 11 and 12 of this worksheet. Filing taxes if unemployed (If the result is less than zero, enter -0-. Filing taxes if unemployed ) 13. Filing taxes if unemployed   14. Filing taxes if unemployed Add the amounts on lines 1, 2, 3, 4, 7, 10, and 13. Filing taxes if unemployed Enter the total. Filing taxes if unemployed This is your investment income 14. Filing taxes if unemployed   15. Filing taxes if unemployed Is the amount on line 14 more than $3,300? ❑ Yes. Filing taxes if unemployed You cannot take the credit. Filing taxes if unemployed  ❑ No. Filing taxes if unemployed Go to Step 3 of the Form 1040 instructions for lines 64a and 64b to find out if you can take the credit (unless you are using this publication to find out if you can take the credit; in that case, go to Rule 7, next). Filing taxes if unemployed       Instructions for lines 11 and 12. Filing taxes if unemployed In figuring the amount to enter on lines 11 and 12, do not take into account any royalty income (or loss) included on line 26 of Schedule E or any amount included in your earned income. Filing taxes if unemployed To find out if the income on line 26 or line 40 of Schedule E is from a passive activity, see the Schedule E instructions. Filing taxes if unemployed If any of the rental real estate income (or loss) included on Schedule E, line 26, is not from a passive activity, print “NPA” and the amount of that income (or loss) on the dotted line next to line 26. Filing taxes if unemployed Worksheet 2. Filing taxes if unemployed Worksheet for Line 4 of Worksheet 1 Complete this worksheet only if Form 8814 includes an Alaska Permanent Fund dividend. Filing taxes if unemployed Note. Filing taxes if unemployed Fill out a separate Worksheet 2 for each Form 8814. Filing taxes if unemployed     1. Filing taxes if unemployed Enter the amount from Form 8814, line 2a 1. Filing taxes if unemployed   2. Filing taxes if unemployed Enter the amount from Form 8814, line 2b 2. Filing taxes if unemployed   3. Filing taxes if unemployed Subtract line 2 from line 1 3. Filing taxes if unemployed   4. Filing taxes if unemployed Enter the amount from Form 8814, line 1a 4. Filing taxes if unemployed   5. Filing taxes if unemployed Add lines 3 and 4 5. Filing taxes if unemployed   6. Filing taxes if unemployed Enter the amount of the child's Alaska Permanent Fund dividend 6. Filing taxes if unemployed   7. Filing taxes if unemployed Divide line 6 by line 5. Filing taxes if unemployed Enter the result as a decimal (rounded to at least three places) 7. Filing taxes if unemployed   8. Filing taxes if unemployed Enter the amount from Form 8814, line 12 8. Filing taxes if unemployed   9. Filing taxes if unemployed Multiply line 7 by line 8 9. Filing taxes if unemployed   10. Filing taxes if unemployed Subtract line 9 from line 8. Filing taxes if unemployed Enter the result on line 4 of Worksheet 1 10. Filing taxes if unemployed     (If filing more than one Form 8814, enter on line 4 of Worksheet 1 the total of the amounts on line 10 of all Worksheets 2. Filing taxes if unemployed )     Example—completing Worksheet 2. Filing taxes if unemployed Your 10-year-old child has taxable interest income of $400, an Alaska Permanent Fund dividend of $1,000, and ordinary dividends of $1,100, of which $500 are qualified dividends. Filing taxes if unemployed You choose to report this income on your return. Filing taxes if unemployed You enter $400 on line 1a of Form 8814, $2,100 ($1,000 + $1,100) on line 2a, and $500 on line 2b. Filing taxes if unemployed After completing lines 4 through 11, you enter $400 on line 12 of Form 8814 and line 21 of Form 1040. Filing taxes if unemployed On Worksheet 2, you enter $2,100 on line 1, $500 on line 2, $1,600 on line 3, $400 on line 4, $2,000 on line 5, $1,000 on line 6, 0. Filing taxes if unemployed 500 on line 7, $400 on line 8, $200 on line 9, and $200 on line 10. Filing taxes if unemployed You then enter $200 on line 4 of Worksheet 1. Filing taxes if unemployed Rule 7—You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. Filing taxes if unemployed If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. Filing taxes if unemployed If you are an employee, earned income includes all the taxable income you get from your employer. Filing taxes if unemployed Rule 15 has information that will help you figure the amount of your earned income. Filing taxes if unemployed If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the Form 1040 instructions. Filing taxes if unemployed Earned Income Earned income includes all of the following types of income. Filing taxes if unemployed Wages, salaries, tips, and other taxable employee pay. Filing taxes if unemployed Employee pay is earned income only if it is taxable. Filing taxes if unemployed Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Filing taxes if unemployed But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained later in this chapter. Filing taxes if unemployed Net earnings from self-employment. Filing taxes if unemployed Gross income received as a statutory employee. Filing taxes if unemployed Wages, salaries, and tips. Filing taxes if unemployed    Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. Filing taxes if unemployed You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). Filing taxes if unemployed Nontaxable combat pay election. Filing taxes if unemployed   You can elect to include your nontaxable combat pay in earned income for the earned income credit. Filing taxes if unemployed The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q. Filing taxes if unemployed Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. Filing taxes if unemployed For details, see Nontaxable combat pay in chapter 4. Filing taxes if unemployed Net earnings from self-employment. Filing taxes if unemployed   You may have net earnings from self-employment if: You own your own business, or You are a minister or member of a religious order. Filing taxes if unemployed Minister's housing. Filing taxes if unemployed   The rental value of a home or a housing allowance provided to a minister as part of the minister's pay generally is not subject to income tax but is included in net earnings from self-employment. Filing taxes if unemployed For that reason, it is included in earned income for the EIC (except in the cases described in Approved Form 4361 or Form 4029 , below). Filing taxes if unemployed Statutory employee. Filing taxes if unemployed   You are a statutory employee if you receive a Form W-2 on which the “Statutory employee” box (box 13) is checked. Filing taxes if unemployed You report your income and expenses as a statutory employee on Schedule C or C-EZ (Form 1040). Filing taxes if unemployed Strike benefits. Filing taxes if unemployed   Strike benefits paid by a union to its members are earned income. Filing taxes if unemployed Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. Filing taxes if unemployed Each approved form exempts certain income from social security taxes. Filing taxes if unemployed Each form is discussed here in terms of what is or is not earned income for the EIC. Filing taxes if unemployed Form 4361. Filing taxes if unemployed   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. Filing taxes if unemployed This includes wages, salaries, tips, and other taxable employee compensation. Filing taxes if unemployed A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. Filing taxes if unemployed Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. Filing taxes if unemployed Examples include fees for performing marriages and honoraria for delivering speeches. Filing taxes if unemployed Form 4029. Filing taxes if unemployed   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. Filing taxes if unemployed However, amounts you received as a self-employed individual do not count as earned income. Filing taxes if unemployed Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. Filing taxes if unemployed Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Filing taxes if unemployed Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Filing taxes if unemployed You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. Filing taxes if unemployed Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Filing taxes if unemployed Report taxable pension payments on Form 1040, lines 16a and 16b, or Form 1040A, lines 12a and 12b. Filing taxes if unemployed Disability insurance payments. Filing taxes if unemployed   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. Filing taxes if unemployed It does not matter whether you have reached minimum retirement age. Filing taxes if unemployed If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. Filing taxes if unemployed ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Filing taxes if unemployed Do not include any of these items in your earned income. Filing taxes if unemployed Earnings while an inmate. Filing taxes if unemployed   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. Filing taxes if unemployed This includes amounts for work performed while in a work release program or while in a halfway house. Filing taxes if unemployed Workfare payments. Filing taxes if unemployed   Nontaxable workfare payments are not earned income for the EIC. Filing taxes if unemployed These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities. Filing taxes if unemployed Community property. Filing taxes if unemployed   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. Filing taxes if unemployed That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. Filing taxes if unemployed Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. Filing taxes if unemployed Nevada, Washington, and California domestic partners. Filing taxes if unemployed   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. Filing taxes if unemployed Your earned income for the EIC does not include any amount earned by your partner. Filing taxes if unemployed Your earned income includes the entire amount you earned. Filing taxes if unemployed For details, see Publication 555. Filing taxes if unemployed Conservation Reserve Program (CRP) payments. Filing taxes if unemployed   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. Filing taxes if unemployed Nontaxable military pay. Filing taxes if unemployed   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. Filing taxes if unemployed Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). Filing taxes if unemployed See Publication 3, Armed Forces' Tax Guide, for more information. Filing taxes if unemployed    Combat pay. Filing taxes if unemployed You can elect to include your nontaxable combat pay in earned income for the EIC. Filing taxes if unemployed See Nontaxable combat pay in chapter 4. Filing taxes if unemployed Chapter 2—Rules If You Have a Qualifying Child If you have met all the rules in chapter 1, use this chapter to see if you have a qualifying child. Filing taxes if unemployed This chapter discusses Rules 8 through 10. Filing taxes if unemployed You must meet all three of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit with a qualifying child. Filing taxes if unemployed You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. Filing taxes if unemployed (You cannot file Form 1040EZ. Filing taxes if unemployed ) You also must complete Schedule EIC and attach it to your return. Filing taxes if unemployed If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. Filing taxes if unemployed No qualifying child. Filing taxes if unemployed   If you do not meet Rule 8, you do not have a qualifying child. Filing taxes if unemployed Read chapter 3 to find out if you can get the earned income credit without a qualifying child. Filing taxes if unemployed Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. Filing taxes if unemployed The fours tests are: Relationship, Age, Residency, and Joint return. Filing taxes if unemployed The four tests are illustrated in Figure 1. Filing taxes if unemployed The paragraphs that follow contain more information about each test. Filing taxes if unemployed Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). Filing taxes if unemployed The following definitions clarify the relationship test. Filing taxes if unemployed Adopted child. Filing taxes if unemployed   An adopted child is always treated as your own child. Filing taxes if unemployed The term “adopted child” includes a child who was lawfully placed with you for legal adoption. Filing taxes if unemployed Foster child. Filing taxes if unemployed   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Filing taxes if unemployed (An authorized placement agency includes a state or local government agency. Filing taxes if unemployed It also includes a tax-exempt organization licensed by a state. Filing taxes if unemployed In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. Filing taxes if unemployed ) Example. Filing taxes if unemployed Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. Filing taxes if unemployed Debbie is your foster child. Filing taxes if unemployed Figure 1. Filing taxes if unemployed Tests for Qualifying Child Please click here for the text description of the image. Filing taxes if unemployed Conditions for Qualifying Child Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly, or Permanently and totally disabled at any time during 2013, regardless of age. Filing taxes if unemployed The following examples and definitions clarify the age test. Filing taxes if unemployed Example 1—child not under age 19. Filing taxes if unemployed Your son turned 19 on December 10. Filing taxes if unemployed Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. Filing taxes if unemployed Example 2—child not younger than you or your spouse. Filing taxes if unemployed Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. Filing taxes if unemployed He is not disabled. Filing taxes if unemployed Both you and your spouse are 21 years old, and you file a joint return. Filing taxes if unemployed Your brother is not your qualifying child because he is not younger than you or your spouse. Filing taxes if unemployed Example 3—child younger than your spouse but not younger than you. Filing taxes if unemployed The facts are the same as in Example 2 except that your spouse is 25 years old. Filing taxes if unemployed Because your brother is younger than your spouse, he is your qualifying child, even though he is not younger than you. Filing taxes if unemployed Student defined. Filing taxes if unemployed   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. Filing taxes if unemployed   The 5 calendar months need not be consecutive. Filing taxes if unemployed   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. Filing taxes if unemployed School defined. Filing taxes if unemployed   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. Filing taxes if unemployed However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. Filing taxes if unemployed Vocational high school students. Filing taxes if unemployed   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. Filing taxes if unemployed Permanently and totally disabled. Filing taxes if unemployed   Your child is permanently and totally disabled if both of the following apply. Filing taxes if unemployed He or she cannot engage in any substantial gainful activity because of a physical or mental condition. Filing taxes if unemployed A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. Filing taxes if unemployed Residency Test Your child must have lived with you in the United States for more than half of 2013. Filing taxes if unemployed The following definitions clarify the residency test. Filing taxes if unemployed United States. Filing taxes if unemployed   This means the 50 states and the District of Columbia. Filing taxes if unemployed It does not include Puerto Rico or U. Filing taxes if unemployed S. Filing taxes if unemployed possessions such as Guam. Filing taxes if unemployed Homeless shelter. Filing taxes if unemployed   Your home can be any location where you regularly live. Filing taxes if unemployed You do not need a traditional home. Filing taxes if unemployed For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. Filing taxes if unemployed Military personnel stationed outside the United States. Filing taxes if unemployed   U. Filing taxes if unemployed S. Filing taxes if unemployed military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Filing taxes if unemployed Extended active duty. Filing taxes if unemployed   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Filing taxes if unemployed Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Filing taxes if unemployed Birth or death of child. Filing taxes if unemployed    child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. Filing taxes if unemployed Temporary absences. Filing taxes if unemployed   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. Filing taxes if unemployed Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. Filing taxes if unemployed Kidnapped child. Filing taxes if unemployed   A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. Filing taxes if unemployed The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. Filing taxes if unemployed This treatment applies for all years until the child is returned. Filing taxes if unemployed However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. Filing taxes if unemployed   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. Filing taxes if unemployed Joint Return Test To meet this test, the child cannot file a joint return for the year. Filing taxes if unemployed Exception. Filing taxes if unemployed   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. Filing taxes if unemployed Example 1—child files joint return. Filing taxes if unemployed You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. Filing taxes if unemployed He earned $25,000 for the year. Filing taxes if unemployed The couple files a joint return. Filing taxes if unemployed Because your daughter and her husband file a joint return, she is not your qualifying child. Filing taxes if unemployed Example 2—child files joint return to get refund of tax withheld. Filing taxes if unemployed Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. Filing taxes if unemployed They do not have a child. Filing taxes if unemployed Neither is required to file a tax return. Filing taxes if unemployed Taxes were taken out of their pay, so they file a joint return only to get a refund of the withheld taxes. Filing taxes if unemployed The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. Filing taxes if unemployed Example 3—child files joint return to claim American opportunity credit. Filing taxes if unemployed The facts are the same as in Example 2 except no taxes were taken out of your son's pay. Filing taxes if unemployed He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. Filing taxes if unemployed Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to claim a refund of income tax withheld or estimated tax paid. Filing taxes if unemployed The exception to the joint return test does not apply, so your son is not your qualifying child. Filing taxes if unemployed Married child. Filing taxes if unemployed   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) described later. Filing taxes if unemployed    Social security number. Filing taxes if unemployed Your qualifying child must have a valid social security number (SSN), unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. Filing taxes if unemployed You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. Filing taxes if unemployed   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. Filing taxes if unemployed For more information about SSNs, see Rule 2. Filing taxes if unemployed Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. Filing taxes if unemployed However, only one of these persons can actually treat the child as a qualifying child. Filing taxes if unemployed Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Filing taxes if unemployed The exemption for the child. Filing taxes if unemployed The child tax credit. Filing taxes if unemployed Head of household filing status. Filing taxes if unemployed The credit for child and dependent care expenses. Filing taxes if unemployed The exclusion for dependent care benefits. Filing taxes if unemployed The EIC. Filing taxes if unemployed The other person cannot take any of these benefits based on this qualifying child. Filing taxes if unemployed In other words, you and the other person cannot agree to divide these tax benefits between you. Filing taxes if unemployed The other person cannot take any of these tax benefits unless he or she has a different qualifying child. Filing taxes if unemployed The tiebreaker rules, which follow, explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. Filing taxes if unemployed However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. Filing taxes if unemployed Tiebreaker rules. Filing taxes if unemployed   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. Filing taxes if unemployed If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Filing taxes if unemployed If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. Filing taxes if unemployed If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Filing taxes if unemployed If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Filing taxes if unemployed If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Filing taxes if unemployed If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Filing taxes if unemployed If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. Filing taxes if unemployed See Example 8. Filing taxes if unemployed   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Filing taxes if unemployed See Examples 1 through 13. Filing taxes if unemployed   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in chapter 3 for people who do not have a qualifying child. Filing taxes if unemployed If the other person cannot claim the EIC. Filing taxes if unemployed   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. Filing taxes if unemployed See Examples 6 and 7. Filing taxes if unemployed But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier in this chapter. Filing taxes if unemployed Examples. Filing taxes if unemployed    The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. Filing taxes if unemployed Example 1—child lived with parent and grandparent. Filing taxes if unemployed You and your 2-year-old son Jimmy lived with your mother all year. Filing taxes if unemployed You are 25 years old, unmarried, and your AGI is $9,000. Filing taxes if unemployed Your only income was $9,000 from a part-time job. Filing taxes if unemployed Your mother's only income was $20,000 from her job, and her AGI is $20,000. Filing taxes if unemployed Jimmy's father did not live with you or Jimmy. Filing taxes if unemployed The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. Filing taxes if unemployed Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. Filing taxes if unemployed However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier in this chapter for which that person qualifies). Filing taxes if unemployed He is not a qualifying child of anyone else, including his father. Filing taxes if unemployed If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). Filing taxes if unemployed Example 2—parent has higher AGI than grandparent. Filing taxes if unemployed The facts are the same as in Example 1 except your AGI is $25,000. Filing taxes if unemployed Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. Filing taxes if unemployed Only you can claim him. Filing taxes if unemployed Example 3—two persons claim same child. Filing taxes if unemployed The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. Filing taxes if unemployed In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. Filing taxes if unemployed The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. Filing taxes if unemployed Example 4—qualifying children split between two persons. Filing taxes if unemployed The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. Filing taxes if unemployed Only one of you can claim each child. Filing taxes if unemployed However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. Filing taxes if unemployed For example, if you claim one child, your mother can claim the other two. Filing taxes if unemployed Example 5—taxpayer who is a qualifying child. Filing taxes if unemployed The facts are the same as in Example 1 except that you are only 18 years old. Filing taxes if unemployed This means you are a qualifying child of your mother. Filing taxes if unemployed Because of Rule 10, discussed next, you cannot claim the EIC and cannot claim your son as a qualifying child. Filing taxes if unemployed Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. Filing taxes if unemployed If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. Filing taxes if unemployed Example 6—grandparent with too much earned income to claim EIC. Filing taxes if unemployed The facts are the same as in Example 1 except that your mother earned $50,000 from her job. Filing taxes if unemployed Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. Filing taxes if unemployed Example 7—parent with too much earned income to claim EIC. Filing taxes if unemployed The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. Filing taxes if unemployed Your earned income is too high for you to claim the EIC. Filing taxes if unemployed But your mother cannot claim the EIC either, because her AGI is not higher than yours. Filing taxes if unemployed Example 8—child lived with both parents and grandparent. Filing taxes if unemployed The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have AGI of $30,000 on a joint return. Filing taxes if unemployed If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. Filing taxes if unemployed Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. Filing taxes if unemployed In other words, each parent's AGI can be treated as $15,000. Filing taxes if unemployed Example 9—separated parents. Filing taxes if unemployed You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. Filing taxes if unemployed In August and September, Joey lived with you. Filing taxes if unemployed For the rest of the year, Joey lived with your husband, who is Joey's father. Filing taxes if unemployed Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. Filing taxes if unemployed At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the Special rule for divorced or separated parents (or parents who live apart) does not apply. Filing taxes if unemployed You and your husband will file separate returns. Filing taxes if unemployed Your husband agrees to let you treat Joey as a qualifying child. Filing taxes if unemployed This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. Filing taxes if unemployed However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. Filing taxes if unemployed See Rule 3. Filing taxes if unemployed Example 10—separated parents claim same child. Filing taxes if unemployed The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. Filing taxes if unemployed In this case, only your husband will be allowed to treat Joey as a qualifying child. Filing taxes if unemployed This is because, during 2013, the boy lived with him longer than with you. Filing taxes if unemployed You cannot claim the EIC (either with or without a qualifying child). Filing taxes if unemployed However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. Filing taxes if unemployed See Rule 3. Filing taxes if unemployed Example 11—unmarried parents. Filing taxes if unemployed You, your 5-year-old son, and your son's father lived together all year. Filing taxes if unemployed You and your son's father are not married. Filing taxes if unemployed Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. Filing taxes if unemployed Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. Filing taxes if unemployed Neither of you had any other income. Filing taxes if unemployed Your son's father agrees to let you treat the child as a qualifying child. Filing taxes if unemployed This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. Filing taxes if unemployed Example 12—unmarried parents claim same child. Filing taxes if unemployed The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. Filing taxes if unemployed In this case, only your son's father will be allowed to treat your son as a qualifying child. Filing taxes if unemployed This is because his AGI, $14,000, is more than your AGI, $12,000. Filing taxes if unemployed You cannot claim the EIC (either with or without a qualifying child). Filing taxes if unemployed Example 13—child did not live with a parent. Filing taxes if unemployed You and your 7-year-old niece, your sister's child, lived with your mother all year. Filing taxes if unemployed You are 25 years old, and your AGI is $9,300. Filing taxes if unemployed Your only income was from a part-time job. Filing taxes if unemployed Your mother's AGI is $15,000. Filing taxes if unemployed Her only income was from her job. Filing taxes if unemployed Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. Filing taxes if unemployed Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. Filing taxes if unemployed However, only your mother can treat her as a qualifying child. Filing taxes if unemployed This is because your mother's AGI, $15,000, is more than your AGI, $9,300. Filing taxes if unemployed Special rule for divorced or separated parents (or parents who live apart). Filing taxes if unemployed   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. Filing taxes if unemployed The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all time during the last 6 months of 2013, whether or not they are or were married. Filing taxes if unemployed The child received over half of his or her support for the year from the parents. Filing taxes if unemployed The child is in the custody of one or both parents for more than half of 2013. Filing taxes if unemployed Either of the following statements is true. Filing taxes if unemployed The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. Filing taxes if unemployed If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Filing taxes if unemployed A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. Filing taxes if unemployed For details, see Publication 501. Filing taxes if unemployed Also see Applying Rule 9 to divorced or separated parents (or parents who live apart), next. Filing taxes if unemployed Applying Rule 9 to divorced or separated parents (or parents who live apart). Filing taxes if unemployed   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. Filing taxes if unemployed However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. Filing taxes if unemployed If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. Filing taxes if unemployed Example 1. Filing taxes if unemployed You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Filing taxes if unemployed Your AGI is $10,000. Filing taxes if unemployed Your mother’s AGI is $25,000. Filing taxes if unemployed Your son's father did not live with you or your son. Filing taxes if unemployed Under the Special rule for divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. Filing taxes if unemployed However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. Filing taxes if unemployed You and your mother did not have any child care expenses or dependent care benefits. Filing taxes if unemployed If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. Filing taxes if unemployed Example 2. Filing taxes if unemployed The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. Filing taxes if unemployed Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Filing taxes if unemployed Example 3. Filing taxes if unemployed The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. Filing taxes if unemployed Your mother also claims him as a qualifying child for head of household filing status. Filing taxes if unemployed You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. Filing taxes if unemployed The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. Filing taxes if unemployed Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. Filing taxes if unemployed ) if all of the following statements are true. Filing taxes if unemployed You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. Filing taxes if unemployed Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Filing taxes if unemployed You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. Filing taxes if unemployed You lived with that person in the United States for more than half of the year. Filing taxes if unemployed You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). Filing taxes if unemployed For more details about the tests to be a qualifying child, see Rule 8. Filing taxes if unemployed If you are a qualifying child of another taxpayer, you cannot claim the EIC. Filing taxes if unemployed This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Filing taxes if unemployed Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). Filing taxes if unemployed Example. Filing taxes if unemployed You and your daughter lived with your mother all year. Filing taxes if unemployed You are 22 years old, unmarried, and attended a trade school full time. Filing taxes if unemployed You had a part-time job and earned $5,700. Filing taxes if unemployed You had no other income. Filing taxes if unemployed Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. Filing taxes if unemployed She can claim the EIC if she meets all the other requirements. Filing taxes if unemployed Because you are your mother's qualifying child, you cannot claim the EIC. Filing taxes if unemployed This is so even if your mother cannot or does not claim the EIC. Filing taxes if unemployed Child of person not required to file a return. Filing taxes if unemployed   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you met the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Filing taxes if unemployed Example 1—return not required. Filing taxes if unemployed The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Filing taxes if unemployed As a result, you are not your mother's qualifying child. Filing taxes if unemployed You can claim the EIC if you meet all the other requirements to do so. Filing taxes if unemployed Example 2—return filed to get refund of tax withheld. Filing taxes if unemployed The facts are the same as in Example 1 except your mother had wages of $1,500 and had income tax withheld from her wages. Filing taxes if unemployed She files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. Filing taxes if unemployed As a result, you are not your mother's qualifying child. Filing taxes if unemployed You can claim the EIC if you meet all the other requirements to do so. Filing taxes if unemployed Example 3—return filed to get EIC. Filing taxes if unemployed The facts are the same as in Example 2 except your mother claimed the EIC on her return. Filing taxes if unemployed Since she filed the return to get the EIC, she is not filing it only to get a refund of income tax withheld. Filing taxes if unemployed As a result, you are your mother's qualifying child. Filing taxes if unemployed You cannot claim the EIC. Filing taxes if unemployed Chapter 3—Rules If You Do Not Have a Qualifying Child Use this chapter if you do not have a qualifying child and have met all the rules in chapter 1. Filing taxes if unemployed This chapter discusses Rules 11 through 14. Filing taxes if unemployed You must meet all four of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit without a qualifying child. Filing taxes if unemployed You can file Form 1040, Form 1040A, or Form 1040EZ to claim the EIC without a qualifying child. Filing taxes if unemployed If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. Filing taxes if unemployed If you have a qualifying child. Filing taxes if unemployed   If you meet Rule 8, you have a qualifying child. Filing taxes if unemployed If you meet Rule 8 and do not claim the EIC with a qualifying child, you cannot claim the EIC without a qualifying child. Filing taxes if unemployed Rule 11—You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. Filing taxes if unemployed If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. Filing taxes if unemployed It does not matter which spouse meets the age test, as long as one of the spouses does. Filing taxes if unemployed You meet the age test if you were born after December 31, 1948, and before January 2, 1989. Filing taxes if unemployed If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. Filing taxes if unemployed If neither you nor your spouse meets the age test, you cannot claim the EIC. Filing taxes if unemployed Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Filing taxes if unemployed Death of spouse. Filing taxes if unemployed   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. Filing taxes if unemployed Example 1. Filing taxes if unemployed You are age 28 and unmarried. Filing taxes if unemployed You meet the age test. Filing taxes if unemployed Example 2—spouse meets age test. Filing taxes if unemployed You are married and filing a joint return. Filing taxes if unemployed You are age 23 and your spouse is age 27. Filing taxes if unemployed You meet the age test because your spouse is at least age 25 but under age 65. Filing taxes if unemployed Example 3—spouse dies in 2013. Filing taxes if unemployed You are married and filing a joint return with your spouse who died in August 2013. Filing taxes if unemployed You are age 67. Filing taxes if unemployed Your spouse would have become age 65 in November 2013. Filing taxes if unemployed Because your spouse was under age 65 when she died, you meet the age test. Filing taxes if unemployed Rule 12—You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. Filing taxes if unemployed If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. Filing taxes if unemployed If you are not sure whether someone else can claim you as a dependent, get Publication 501 and read the rules for claiming a dependent. Filing taxes if unemployed If someone else can claim you as a dependent on his or her return, but does not, you still cannot claim the credit. Filing taxes if unemployed Example 1. Filing taxes if unemployed In 2013, you were age 25, single, and living at home with your parents. Filing taxes if unemployed You worked and were not a student. Filing taxes if unemployed You earned $7,500. Filing taxes if unemployed Your parents cannot claim you as a dependent. Filing taxes if unemployed When you file your return, you claim an exemption for yourself by not checking the You box on line 5 of your Form 1040EZ and by entering $10,000 on that line. Filing taxes if unemployed You meet this rule. Filing taxes if unemployed You can claim the EIC if you meet all the other requirements. Filing taxes if unemployed Example 2. Filing taxes if unemployed The facts are the same as in Example 1, except that you earned $2,000. Filing taxes if unemployed Your parents can claim you as a dependent but decide not to. Filing taxes if unemployed You do not meet this rule. Filing taxes if unemployed You cannot claim the credit because your parents could have claimed you as a dependent. Filing taxes if unemployed Joint returns. Filing taxes if unemployed   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. Filing taxes if unemployed   However, another person may be able to claim you as a dependent if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. Filing taxes if unemployed But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. Filing taxes if unemployed Example 1—return filed to get refund of tax withheld. Filing taxes if unemployed You are 26 years old. Filing taxes if unemployed You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. Filing taxes if unemployed Neither you nor your wife is required to file a tax return. Filing taxes if unemployed You do not have a child. Filing taxes if unemployed Taxes were taken out of your pay so you file a joint return only to get a refund of the withheld taxes. Filing taxes if unemployed Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. Filing taxes if unemployed They can claim exemptions for you and your wife if all the other tests to do so are met. Filing taxes if unemployed Example 2—return filed to get EIC. Filing taxes if unemployed The facts are the same as in Example 1except no taxes were taken out of your pay. Filing taxes if unemployed Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. Filing taxes if unemployed Because claiming the EIC is your reason for filing the return, you are not filing it only to claim a refund of income tax withheld or estimated tax paid. Filing taxes if unemployed Your parents cannot claim an exemption for either you or your wife. Filing taxes if unemployed Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. Filing taxes if unemployed ) if all of the following statements are true. Filing taxes if unemployed You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. Filing taxes if unemployed Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Filing taxes if unemployed You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. Filing taxes if unemployed You lived with that person in the United States for more than half of the year. Filing taxes if unemployed You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). Filing taxes if unemployed For more details about the tests to be a qualifying child, see Rule 8. Filing taxes if unemployed If you are a qualifying child of another taxpayer, you cannot claim the EIC. Filing taxes if unemployed This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Filing taxes if unemployed Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Filing taxes if unemployed Example. Filing taxes if unemployed You lived with your mother all year. Filing taxes if unemployed You are age 26, unmarried, and permanently and totally disabled. Filing taxes if unemployed Your only income was from a community center where you went three days a week to answer telephones. Filing taxes if unemployed You earned $5,000 for the year and provided more than half of your own support. Filing taxes if unemployed Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. Filing taxes if unemployed She can claim the EIC if she meets all the other requirements. Filing taxes if unemployed Because you are a qualifying child of your mother, you cannot claim the EIC. Filing taxes if unemployed This is so even if your mother cannot or does not claim the EIC. Filing taxes if unemployed Joint returns. Filing taxes if unemployed   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. Filing taxes if unemployed   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. Filing taxes if unemployed But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. Filing taxes if unemployed Child of person not required to file a return. Filing taxes if unemployed   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Filing taxes if unemployed Example 1—return not required. Filing taxes if unemployed You lived all year with your father. Filing taxes if unemployed You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. Filing taxes if unemployed You have no other income, no children, and provided more than half of your own support. Filing taxes if unemployed Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Filing taxes if unemployed As a result, you are not your father's qualifying child. Filing taxes if unemployed You can claim the EIC if you meet all the other requirements to do so. Filing taxes if unemployed Example 2—return filed to get refund of tax withheld. Filing taxes if unemployed The facts are the same as in Example 1 except your father had wages of $1,500 and had income tax withheld from his wages. Filing taxes if unemployed He files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. Filing taxes if unemployed As a result, you are not your father's qualifying child. Filing taxes if unemployed You can claim the EIC if you meet all the other requirements to do so. Filing taxes if unemployed Example 3—return filed to get EIC. Filing taxes if unemployed The facts are the same as in Example 2 except your father claimed the EIC on his return. Filing taxes if unemployed Since he filed the return to get the EIC, he is not filing it only to get a refund of income tax withheld. Filing taxes if unemployed As a result, you are your father's qualifying child. Filing taxes if unemployed You cannot claim the EIC. Filing taxes if unemployed Rule 14—You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. Filing taxes if unemployed If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Filing taxes if unemployed United States. Filing taxes if unemployed   This means the 50 states and the District of Columbia. Filing taxes if unemployed It does not include Puerto Rico or U. Filing taxes if unemployed S. Filing taxes if unemployed possessions such as Guam. Filing taxes if unemployed Homeless shelter. Filing taxes if unemployed   Your home can be any location where you regularly live. Filing taxes if unemployed You do not need a traditional home. Filing taxes if unemployed If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. Filing taxes if unemployed Military personnel stationed outside the United States. Filing taxes if unemployed   U. Filing taxes if unemployed S. Filing taxes if unemployed military personnel stationed outside the United States on extended active duty (defined in chapter 2) are considered to live in the United States during that duty period for purposes of the EIC. Filing taxes if unemployed Chapter 4—Figuring and Claiming the EIC You must meet one more rule to claim the EIC. Filing taxes if unemployed You need to know the amount of your earned income to see if you meet the rule in this chapter. Filing taxes if unemployed You also need to know that amount to figure your EIC. Filing taxes if unemployed Rule 15—Earned Income Limits Your earned income must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Filing taxes if unemployed Earned Income Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. Filing taxes if unemployed Employee pay is earned income only if it is taxable. Filing taxes if unemployed Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Filing taxes if unemployed But there is an exception for nontaxable combat pay, which you can choose to include in earned income. Filing taxes if unemployed Earned income is explained in detail in Rule 7 in chapter 1. Filing taxes if unemployed Figuring earned income. Filing taxes if unemployed   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. Filing taxes if unemployed   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. Filing taxes if unemployed   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). Filing taxes if unemployed You will then reduce that amount by any amount included on that line and described in the following list. Filing taxes if unemployed Scholarship or fellowship grants not reported on a Form W-2. Filing taxes if unemployed A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. Filing taxes if unemployed Inmate's income. Filing taxes if unemployed Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. Filing taxes if unemployed This includes amounts received for work performed while in a work release program or while in a halfway house. Filing taxes if unemployed If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). Filing taxes if unemployed Pension or annuity from deferred compensation plans. Filing taxes if unemployed A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. Filing taxes if unemployed If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). Filing taxes if unemployed This amount may be reported in box 11 of your Form W-2. Filing taxes if unemployed If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or an annuity. Filing taxes if unemployed Clergy. Filing taxes if unemployed   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also re
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The Filing Taxes If Unemployed

Filing taxes if unemployed 2. Filing taxes if unemployed   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. Filing taxes if unemployed 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. Filing taxes if unemployed They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). Filing taxes if unemployed 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. Filing taxes if unemployed What is the tax benefit of the American opportunity credit. Filing taxes if unemployed   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. Filing taxes if unemployed   A tax credit reduces the amount of income tax you may have to pay. Filing taxes if unemployed Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Filing taxes if unemployed Forty percent of the American opportunity credit may be refundable. Filing taxes if unemployed This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. Filing taxes if unemployed   Your allowable American opportunity credit may be limited by the amount of your income. Filing taxes if unemployed Also, the nonrefundable part of the credit may be limited by the amount of your tax. Filing taxes if unemployed Overview of the American opportunity credit. Filing taxes if unemployed   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. Filing taxes if unemployed The details are discussed in this chapter. Filing taxes if unemployed Can you claim more than one education credit this year. Filing taxes if unemployed   For each student, you can elect for any year only one of the credits. Filing taxes if unemployed 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. Filing taxes if unemployed   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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed Differences between the American opportunity and lifetime learning credits. Filing taxes if unemployed   There are several differences between these two credits. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. Filing taxes if unemployed Table 2-1. Filing taxes if unemployed 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. Filing taxes if unemployed Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. Filing taxes if unemployed You pay qualified education expenses of higher education. Filing taxes if unemployed You pay the education expenses for an eligible student. Filing taxes if unemployed The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Filing taxes if unemployed Student qualifications. Filing taxes if unemployed   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. Filing taxes if unemployed 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. Filing taxes if unemployed For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Filing taxes if unemployed However, the standard may not be lower than any of those established by the U. Filing taxes if unemployed S. Filing taxes if unemployed Department of Education under the Higher Education Act of 1965. Filing taxes if unemployed 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. Filing taxes if unemployed See Prepaid expenses, later. Filing taxes if unemployed 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. Filing taxes if unemployed Example 1. Filing taxes if unemployed Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. Filing taxes if unemployed 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. Filing taxes if unemployed Sharon claimed the American opportunity credit on her 2012 tax return. Filing taxes if unemployed The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. Filing taxes if unemployed Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. Filing taxes if unemployed 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. Filing taxes if unemployed Example 2. Filing taxes if unemployed Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. Filing taxes if unemployed His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. Filing taxes if unemployed No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. Filing taxes if unemployed The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. Filing taxes if unemployed Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. Filing taxes if unemployed If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. Filing taxes if unemployed If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. Filing taxes if unemployed Example 3. Filing taxes if unemployed Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. Filing taxes if unemployed Glenda pays her tuition for the 2014 Spring semester in December 2013. Filing taxes if unemployed 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. Filing taxes if unemployed If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. Filing taxes if unemployed You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Filing taxes if unemployed Note. Filing taxes if unemployed 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. Filing taxes if unemployed “Qualified education expenses” are defined later under Qualified Education Expenses . Filing taxes if unemployed “Eligible students” are defined later under Who Is an Eligible Student . Filing taxes if unemployed A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Filing taxes if unemployed 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. Filing taxes if unemployed This image is too large to be displayed in the current screen. Filing taxes if unemployed Please click the link to view the image. Filing taxes if unemployed 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. Filing taxes if unemployed Your filing status is married filing separately. Filing taxes if unemployed You are listed as a dependent on another person's tax return (such as your parents'). Filing taxes if unemployed See Who Can Claim a Dependent's Expenses , later. Filing taxes if unemployed Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). Filing taxes if unemployed MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Filing taxes if unemployed 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. Filing taxes if unemployed More information on nonresident aliens can be found in Publication 519, U. Filing taxes if unemployed S. Filing taxes if unemployed Tax Guide for Aliens. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed Academic period. Filing taxes if unemployed   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. Filing taxes if unemployed 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. Filing taxes if unemployed Paid with borrowed funds. Filing taxes if unemployed   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Filing taxes if unemployed 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. Filing taxes if unemployed Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Filing taxes if unemployed Student withdraws from class(es). Filing taxes if unemployed   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. Filing taxes if unemployed 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. Filing taxes if unemployed Eligible educational institution. Filing taxes if unemployed   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. Filing taxes if unemployed S. Filing taxes if unemployed Department of Education. Filing taxes if unemployed It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Filing taxes if unemployed The educational institution should be able to tell you if it is an eligible educational institution. Filing taxes if unemployed   Certain educational institutions located outside the United States also participate in the U. Filing taxes if unemployed S. Filing taxes if unemployed Department of Education's Federal Student Aid (FSA) programs. Filing taxes if unemployed Related expenses. Filing taxes if unemployed   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. Filing taxes if unemployed   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. Filing taxes if unemployed Prepaid expenses. Filing taxes if unemployed   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. Filing taxes if unemployed See Academic period, earlier. Filing taxes if unemployed 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). Filing taxes if unemployed    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). Filing taxes if unemployed   In the following examples, assume that each student is an eligible student at an eligible educational institution. Filing taxes if unemployed Example 1. Filing taxes if unemployed Jefferson is a sophomore in University V's degree program in dentistry. Filing taxes if unemployed 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. Filing taxes if unemployed Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. Filing taxes if unemployed Example 2. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed William bought his books from a friend; Grace bought hers at College W's bookstore. Filing taxes if unemployed Both are qualified education expenses for the American opportunity credit. Filing taxes if unemployed Example 3. Filing taxes if unemployed When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Filing taxes if unemployed 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. Filing taxes if unemployed No portion of the fee covers personal expenses. Filing taxes if unemployed 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. Filing taxes if unemployed No Double Benefit Allowed You cannot do any of the following. Filing taxes if unemployed 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. Filing taxes if unemployed Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. Filing taxes if unemployed Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed See Adjustments to Qualified Education Expenses, next. Filing taxes if unemployed 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. Filing taxes if unemployed The result is the amount of adjusted qualified education expenses for each student. Filing taxes if unemployed Tax-free educational assistance. Filing taxes if unemployed   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. Filing taxes if unemployed See Academic period, earlier. Filing taxes if unemployed   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Filing taxes if unemployed 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). Filing taxes if unemployed   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. Filing taxes if unemployed 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. Filing taxes if unemployed   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). Filing taxes if unemployed 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. Filing taxes if unemployed Generally, any scholarship or fellowship is treated as tax free. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed For examples, see Coordination with Pell grants and other scholarships, later. Filing taxes if unemployed Refunds. Filing taxes if unemployed   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. Filing taxes if unemployed Some tax-free educational assistance received after 2013 may be treated as a refund. Filing taxes if unemployed See Tax-free educational assistance, earlier. Filing taxes if unemployed Refunds received in 2013. Filing taxes if unemployed   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. Filing taxes if unemployed Refunds received after 2013 but before your income tax return is filed. Filing taxes if unemployed   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. Filing taxes if unemployed Refunds received after 2013 and after your income tax return is filed. Filing taxes if unemployed   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. Filing taxes if unemployed See Credit recapture, next. Filing taxes if unemployed Credit recapture. Filing taxes if unemployed    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. Filing taxes if unemployed 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. Filing taxes if unemployed 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). Filing taxes if unemployed Include that amount as an additional tax for the year the refund or tax-free assistance was received. Filing taxes if unemployed Example. Filing taxes if unemployed   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. Filing taxes if unemployed You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. Filing taxes if unemployed After you filed your return, you received a refund of $4,000. Filing taxes if unemployed You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. Filing taxes if unemployed The refigured credit is $2,250. Filing taxes if unemployed The increase to your tax liability is also $250. Filing taxes if unemployed Include the difference of $250 as additional tax on your 2014 tax return. Filing taxes if unemployed See the instructions for your 2014 income tax return to determine where to include this tax. Filing taxes if unemployed 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. Filing taxes if unemployed Amounts that do not reduce qualified education expenses. Filing taxes if unemployed   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. Filing taxes if unemployed   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. Filing taxes if unemployed 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. Filing taxes if unemployed The use of the money is not restricted. Filing taxes if unemployed Example 1. Filing taxes if unemployed Joan paid $3,000 for tuition and $5,000 for room and board at University X. Filing taxes if unemployed The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. Filing taxes if unemployed To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. Filing taxes if unemployed The terms of the scholarship state that it can be used to pay any of Joan's college expenses. Filing taxes if unemployed 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. Filing taxes if unemployed Joan does not report any portion of the scholarship as income on her tax return. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). Filing taxes if unemployed Example 2. Filing taxes if unemployed The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. Filing taxes if unemployed Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Filing taxes if unemployed Joan is treated as having paid $3,000 in qualified education expenses. Filing taxes if unemployed Coordination with Pell grants and other scholarships. Filing taxes if unemployed   In some cases, you may be able to reduce your tax liability by including scholarships in income. Filing taxes if unemployed 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. Filing taxes if unemployed The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Filing taxes if unemployed Example 1—No scholarship. Filing taxes if unemployed 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. Filing taxes if unemployed This was his first year of postsecondary education. Filing taxes if unemployed During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. Filing taxes if unemployed He and the college meet all the requirements for the American opportunity credit. Filing taxes if unemployed Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. Filing taxes if unemployed Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. Filing taxes if unemployed His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. Filing taxes if unemployed 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. Filing taxes if unemployed Example 2—Scholarship excluded from income. Filing taxes if unemployed The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. Filing taxes if unemployed Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. Filing taxes if unemployed 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. Filing taxes if unemployed His adjusted qualified education expenses will be zero and he will not have an education credit. Filing taxes if unemployed Therefore, Bill's tax after credits would be $2,599. Filing taxes if unemployed Example 3—Scholarship partially included in income. Filing taxes if unemployed The facts are the same as in Example 2—Scholarship excluded from income. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Filing taxes if unemployed Sports, games, hobbies, and noncredit courses. Filing taxes if unemployed   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. Filing taxes if unemployed However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Filing taxes if unemployed Comprehensive or bundled fees. Filing taxes if unemployed   Some eligible educational institutions combine all of their fees for an academic period into one amount. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed See Figuring the Credit , later, for more information about Form 1098-T. Filing taxes if unemployed 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. Filing taxes if unemployed This is a student who meets all of the following requirements. Filing taxes if unemployed The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. Filing taxes if unemployed This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. Filing taxes if unemployed The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. Filing taxes if unemployed Completion of first 4 years. Filing taxes if unemployed   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. Filing taxes if unemployed This student generally would not be an eligible student for purposes of the American opportunity credit. Filing taxes if unemployed Exception. Filing taxes if unemployed   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. Filing taxes if unemployed Enrolled at least half-time. Filing taxes if unemployed   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. Filing taxes if unemployed   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Filing taxes if unemployed However, the standard may not be lower than any of those established by the U. Filing taxes if unemployed S. Filing taxes if unemployed Department of Education under the Higher Education Act of 1965. Filing taxes if unemployed Please click here for the text description of the image. Filing taxes if unemployed Figure 2-2 Example 1. Filing taxes if unemployed Mack graduated from high school in June 2012. Filing taxes if unemployed 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. Filing taxes if unemployed For the 2013 fall semester, Mack was enrolled less than half-time. Filing taxes if unemployed 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). Filing taxes if unemployed Example 2. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed Example 3. Filing taxes if unemployed During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. Filing taxes if unemployed 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. Filing taxes if unemployed Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. Filing taxes if unemployed Example 4. Filing taxes if unemployed The facts are the same as in Example 3. Filing taxes if unemployed During the 2013 spring semester, Larry again attended College X but not as part of a degree program. Filing taxes if unemployed Larry graduated from high school in June 2013. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed Example 5. Filing taxes if unemployed Dee graduated from high school in June 2012. Filing taxes if unemployed 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. Filing taxes if unemployed Dee completed the program in December 2013, and was awarded a certificate. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. Filing taxes if unemployed You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Filing taxes if unemployed IF you. Filing taxes if unemployed . Filing taxes if unemployed . Filing taxes if unemployed THEN only. Filing taxes if unemployed . Filing taxes if unemployed . Filing taxes if unemployed 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. Filing taxes if unemployed The dependent cannot claim the credit. Filing taxes if unemployed 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. Filing taxes if unemployed You cannot claim the credit based on this dependent's expenses. Filing taxes if unemployed Expenses paid by dependent. Filing taxes if unemployed   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. Filing taxes if unemployed Include these expenses when figuring the amount of your American opportunity credit. Filing taxes if unemployed    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. Filing taxes if unemployed Expenses paid by you. Filing taxes if unemployed   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. Filing taxes if unemployed 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. Filing taxes if unemployed Expenses paid by others. Filing taxes if unemployed   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. Filing taxes if unemployed In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Filing taxes if unemployed If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Filing taxes if unemployed Example. Filing taxes if unemployed In 2013, Ms. Filing taxes if unemployed Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. Filing taxes if unemployed Tuition reduction. Filing taxes if unemployed    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. Filing taxes if unemployed 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. Filing taxes if unemployed For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Filing taxes if unemployed 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. Filing taxes if unemployed The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. Filing taxes if unemployed You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. Filing taxes if unemployed However, the credit may be reduced based on your MAGI. Filing taxes if unemployed See Effect of the Amount of Your Income on the Amount of Your Credit , later. Filing taxes if unemployed Example. Filing taxes if unemployed Jack and Kay Ford are married and file a joint tax return. Filing taxes if unemployed For 2013, they claim an exemption for their dependent daughter on their tax return. Filing taxes if unemployed Their MAGI is $70,000. Filing taxes if unemployed Their daughter is in her junior (third) year of studies at the local university. Filing taxes if unemployed Jack and Kay paid qualified education expenses of $4,300 in 2013. Filing taxes if unemployed Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. Filing taxes if unemployed Jack and Kay can claim a $2,500 American opportunity credit in 2013. Filing taxes if unemployed This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. Filing taxes if unemployed Form 1098-T. Filing taxes if unemployed   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. Filing taxes if unemployed 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. Filing taxes if unemployed An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Filing taxes if unemployed However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. Filing taxes if unemployed When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Filing taxes if unemployed   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. Filing taxes if unemployed    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. Filing taxes if unemployed 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). Filing taxes if unemployed 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). Filing taxes if unemployed Modified adjusted gross income (MAGI). Filing taxes if unemployed   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Filing taxes if unemployed MAGI when using Form 1040A. Filing taxes if unemployed   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Filing taxes if unemployed MAGI when using Form 1040. Filing taxes if unemployed   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. Filing taxes if unemployed You can use Worksheet 2-1, next, to figure your MAGI. Filing taxes if unemployed    Worksheet 2-1. Filing taxes if unemployed MAGI for the American Opportunity Credit 1. Filing taxes if unemployed Enter your adjusted gross income  (Form 1040, line 38)   1. Filing taxes if unemployed   2. Filing taxes if unemployed Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Filing taxes if unemployed       3. Filing taxes if unemployed Enter your foreign housing deduction (Form 2555, line 50)   3. Filing taxes if unemployed       4. Filing taxes if unemployed Enter the amount of income from Puerto Rico you are excluding   4. Filing taxes if unemployed       5. Filing taxes if unemployed Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Filing taxes if unemployed       6. Filing taxes if unemployed Add the amounts on lines 2, 3, 4, and 5   6. Filing taxes if unemployed   7. Filing taxes if unemployed Add the amounts on lines 1 and 6. Filing taxes if unemployed  This is your modified adjusted  gross income. Filing taxes if unemployed Enter here and  on Form 8863, line 3   7. Filing taxes if unemployed   Phaseout. Filing taxes if unemployed   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. Filing taxes if unemployed The same method is shown in the following example. Filing taxes if unemployed Example. Filing taxes if unemployed You are filing a joint return and your MAGI is $165,000. Filing taxes if unemployed In 2013, you paid $5,000 of qualified education expenses. Filing taxes if unemployed 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). Filing taxes if unemployed 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. Filing taxes if unemployed The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. Filing taxes if unemployed The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). Filing taxes if unemployed The result is the amount of your phased out (reduced) American opportunity credit ($1,875). Filing taxes if unemployed      $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. Filing taxes if unemployed 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. Filing taxes if unemployed Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. Filing taxes if unemployed You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. Filing taxes if unemployed 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). Filing taxes if unemployed At least one of your parents was alive at the end of 2013. Filing taxes if unemployed You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. Filing taxes if unemployed Earned income. Filing taxes if unemployed   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Filing taxes if unemployed 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. Filing taxes if unemployed 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. Filing taxes if unemployed   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). Filing taxes if unemployed However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. Filing taxes if unemployed Support. Filing taxes if unemployed   Your support includes food, shelter, clothing, medical and dental care, education, and the like. Filing taxes if unemployed Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. Filing taxes if unemployed 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. Filing taxes if unemployed However, a scholarship received by you is not considered support if you are a full-time student. Filing taxes if unemployed See Publication 501 for details. Filing taxes if unemployed Full-time student. Filing taxes if unemployed   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. Filing taxes if unemployed Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Filing taxes if unemployed Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. Filing taxes if unemployed Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. Filing taxes if unemployed A filled-in Form 8863 is shown at the end of this publication. Filing taxes if unemployed Note. Filing taxes if unemployed In Appendix A. Filing taxes if unemployed 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. Filing taxes if unemployed Prev  Up  Next   Home   More Online Publications