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Free File State And Federal Taxes

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Free File State And Federal Taxes

Free file state and federal taxes 19. Free file state and federal taxes   Education- Related Adjustments Table of Contents Introduction Useful Items - You may want to see: Student Loan Interest DeductionStudent Loan Interest Defined Can You Claim the Deduction How Much Can You Deduct How Do You Figure the Deduction Tuition and Fees DeductionCan You Claim the Deduction What Expenses Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses How Much Can You Deduct Educator Expenses Introduction This chapter discusses the education-related adjustment you can deduct in figuring your adjusted gross income. Free file state and federal taxes This chapter covers the student loan interest deduction, tuition and fees deduction, and the deduction for educator expenses. Free file state and federal taxes Useful Items - You may want to see: Publication 970 Tax Benefits for Education Student Loan Interest Deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. Free file state and federal taxes However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Free file state and federal taxes For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. Free file state and federal taxes This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Free file state and federal taxes Table 19-1 summarizes the features of the student loan interest deduction. Free file state and federal taxes Table 19-1. Free file state and federal taxes Student Loan Interest Deduction at a Glance Do not rely on this table alone. Free file state and federal taxes Refer to the text for more details. Free file state and federal taxes Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. Free file state and federal taxes Loan qualifications Your student loan: •  must have been taken out solely to pay qualified education expenses, and   • cannot be from a related person or made under a qualified employer plan. Free file state and federal taxes Student qualifications The student must be: • you, your spouse, or your dependent, and   • enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. Free file state and federal taxes Time limit on deduction You can deduct interest paid during the remaining period of your student loan. Free file state and federal taxes Phaseout The amount of your deduction depends on your income level. Free file state and federal taxes Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Free file state and federal taxes It includes both required and voluntary interest payments. Free file state and federal taxes Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent (defined in chapter 3) when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period when the student is an eligible student. Free file state and federal taxes Loans from the following sources are not qualified student loans. Free file state and federal taxes A related person. Free file state and federal taxes A qualified employer plan. Free file state and federal taxes Exceptions. Free file state and federal taxes   For purposes of the student loan interest deduction, the following are exceptions to the general rules for dependents. Free file state and federal taxes An individual can be your dependent even if you are the dependent of another taxpayer. Free file state and federal taxes An individual can be your dependent even if the individual files a joint return with a spouse. Free file state and federal taxes An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). Free file state and federal taxes    Reasonable period of time. Free file state and federal taxes   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. Free file state and federal taxes   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. Free file state and federal taxes The expenses relate to a specific academic period. Free file state and federal taxes The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. Free file state and federal taxes   If neither of the above situations applies, the reasonable period of time is determined based on all the relevant facts and circumstances. Free file state and federal taxes Academic period. Free file state and federal taxes   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. Free file state and federal taxes 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. Free file state and federal taxes Eligible student. Free file state and federal taxes   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Free file state and federal taxes Enrolled at least half-time. Free file state and federal taxes   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. Free file state and federal taxes   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Free file state and federal taxes However, the standard may not be lower than any of those established by the U. Free file state and federal taxes S. Free file state and federal taxes Department of Education under the Higher Education Act of 1965. Free file state and federal taxes Related person. Free file state and federal taxes   You cannot deduct interest on a loan you get from a related person. Free file state and federal taxes Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Free file state and federal taxes ), Your lineal descendants (children, grandchildren, etc. Free file state and federal taxes ), and Certain corporations, partnerships, trusts, and exempt organizations. Free file state and federal taxes Qualified employer plan. Free file state and federal taxes   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Free file state and federal taxes Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. Free file state and federal taxes They include amounts paid for the following items. Free file state and federal taxes Tuition and fees. Free file state and federal taxes Room and board. Free file state and federal taxes Books, supplies, and equipment. Free file state and federal taxes Other necessary expenses (such as transportation). Free file state and federal taxes The cost of room and board qualifies only to the extent that it is not more than: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Free file state and federal taxes Eligible educational institution. Free file state and federal taxes   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. Free file state and federal taxes S. Free file state and federal taxes Department of Education. Free file state and federal taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free file state and federal taxes   Certain educational institutions located outside the United States also participate in the U. Free file state and federal taxes S. Free file state and federal taxes Department of Education's Federal Student Aid (FSA) programs. Free file state and federal taxes   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. Free file state and federal taxes   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Free file state and federal taxes The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Free file state and federal taxes    The educational institution should be able to tell you if it is an eligible educational institution. Free file state and federal taxes Adjustments to qualified education expenses. Free file state and federal taxes   You must reduce your qualified education expenses by certain tax-free items (such as the tax-free part of scholarships and fellowships). Free file state and federal taxes See chapter 4 of Publication 970 for details. Free file state and federal taxes Include as Interest In addition to simple interest on the loan, certain loan origination fees, capitalized interest, interest on revolving lines of credit, and interest on refinanced student loans can be student loan interest if all other requirements are met. Free file state and federal taxes Loan origination fee. Free file state and federal taxes   In general, this is a one-time fee charged by the lender when a loan is made. Free file state and federal taxes To be deductible as interest, the fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. Free file state and federal taxes A loan origination fee treated as interest accrues over the life of the loan. Free file state and federal taxes Capitalized interest. Free file state and federal taxes    This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Free file state and federal taxes Interest on revolving lines of credit. Free file state and federal taxes   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. Free file state and federal taxes See Qualified Education Expenses , earlier. Free file state and federal taxes Interest on refinanced student loans. Free file state and federal taxes   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. Free file state and federal taxes If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. Free file state and federal taxes Voluntary interest payments. Free file state and federal taxes   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. Free file state and federal taxes Do Not Include as Interest You cannot claim a student loan interest deduction for any of the following items. Free file state and federal taxes Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Free file state and federal taxes Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Free file state and federal taxes Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. Free file state and federal taxes For more information, see Student Loan Repayment Assistance in chapter 5 of Publication 970. Free file state and federal taxes Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Free file state and federal taxes Your filing status is any filing status except married filing separately. Free file state and federal taxes No one else is claiming an exemption for you on his or her tax return. Free file state and federal taxes You are legally obligated to pay interest on a qualified student loan. Free file state and federal taxes You paid interest on a qualified student loan. Free file state and federal taxes Interest paid by others. Free file state and federal taxes   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. Free file state and federal taxes See chapter 4 of Publication 970 for more information. Free file state and federal taxes No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, home mortgage interest). Free file state and federal taxes How Much Can You Deduct Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Free file state and federal taxes However, the amount determined above is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). Free file state and federal taxes You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). Free file state and federal taxes For details on figuring your MAGI, see chapter 4 of Publication 970. Free file state and federal taxes How Do You Figure the Deduction Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the Form 1040 or Form 1040A instructions. Free file state and federal taxes However, if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1 in chapter 4 of Publication 970. Free file state and federal taxes To help you figure your student loan interest deduction, you should receive Form 1098-E, Student Loan Interest Statement. Free file state and federal taxes Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. Free file state and federal taxes For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. Free file state and federal taxes Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Free file state and federal taxes However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Free file state and federal taxes For information on allocating payments between interest and principal, see chapter 4 of Publication 970. Free file state and federal taxes To claim the deduction, enter the allowable amount on Form 1040, line 33, or Form 1040A, line 18. Free file state and federal taxes Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). Free file state and federal taxes You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. Free file state and federal taxes The qualified expenses must be for higher education, as explained later under What Expenses Qualify . Free file state and federal taxes The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. Free file state and federal taxes Table 19-2 summarizes the features of the tuition and fees deduction. Free file state and federal taxes You may be able to take a credit for your education expenses instead of a deduction. Free file state and federal taxes You can choose the one that will give you the lower tax. Free file state and federal taxes See chapter 35, Education Credits, for details about the credits. Free file state and federal taxes Can You Claim the Deduction The following rules will help you determine if you can claim the tuition and fees deduction. Free file state and federal taxes Who Can Claim the Deduction Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. Free file state and federal taxes You paid qualified education expenses of higher education in 2013 for academic periods beginning in 2013 and those beginning in the first three months of 2014. Free file state and federal taxes You paid the education expenses for an eligible student. Free file state and federal taxes The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption (defined in chapter 3) on your tax return. Free file state and federal taxes Qualified education expenses are defined under What Expenses Qualify . Free file state and federal taxes Eligible students are defined later under Who Is an Eligible Student . Free file state and federal taxes Who Cannot Claim the Deduction You cannot claim the tuition and fees deduction if any of the following apply. Free file state and federal taxes Your filing status is married filing separately. Free file state and federal taxes Another person can claim an exemption for you as a dependent on his or her tax return. Free file state and federal taxes You cannot take the deduction even if the other person does not actually claim that exemption. Free file state and federal taxes Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). Free file state and federal taxes 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. Free file state and federal taxes More information on nonresident aliens can be found in Publication 519, U. Free file state and federal taxes S. Free file state and federal taxes Tax Guide for Aliens. Free file state and federal taxes You or anyone else claims an American opportunity or lifetime learning credit in 2013 with respect to expenses of the student for whom the qualified education expenses were paid. Free file state and federal taxes However, a state tax credit will not disqualify you from claiming a tuition and fees deduction. Free file state and federal taxes Table 19-2. Free file state and federal taxes Tuition and Fees Deduction at a Glance Do not rely on this table alone. Free file state and federal taxes Refer to the text for more details. Free file state and federal taxes Question   Answer What is the maximum benefit?   You can reduce your income subject to tax by up to $4,000. Free file state and federal taxes Where is the deduction taken?   As an adjustment to income on Form 1040, line 34, or Form 1040A, line 19. Free file state and federal taxes For whom must the expenses be paid?   A student enrolled in an eligible educational institution who is either: you, your spouse, or your dependent for whom you claim an exemption. Free file state and federal taxes What tuition and fees are deductible?   Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. Free file state and federal taxes What Expenses Qualify The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Free file state and federal taxes Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period (defined earlier under Student Loan Interest Deduction ) beginning in 2013 or in the first 3 months of 2014. Free file state and federal taxes Payments with borrowed funds. Free file state and federal taxes   You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. Free file state and federal taxes Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. Free file state and federal taxes Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Free file state and federal taxes Student withdraws from class(es). Free file state and federal taxes   You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws. Free file state and federal taxes Qualified Education Expenses For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Free file state and federal taxes Eligible educational institution. Free file state and federal taxes   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. Free file state and federal taxes S. Free file state and federal taxes Department of Education. Free file state and federal taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free file state and federal taxes The educational institution should be able to tell you if it is an eligible educational institution. Free file state and federal taxes   Certain educational institutions located outside the United States also participate in the U. Free file state and federal taxes S. Free file state and federal taxes Department of Education's Federal Student Aid (FSA) programs. Free file state and federal taxes Academic period. Free file state and federal taxes    An academic period is any quarter, semester, trimester, or any other period of study as reasonably determined by an eligible educational institution. Free file state and federal taxes If an eligible educational institution uses credit hours and does not have academic terms, each payment period may be treated as an academic period. Free file state and federal taxes Related expenses. Free file state and federal taxes   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses for the tuition and fees deduction only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Free file state and federal taxes Prepaid expenses. Free file state and federal taxes   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring the tuition and fees deduction. Free file state and federal taxes See Academic period, earlier. Free file state and federal taxes For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring the tuition and fees deduction for 2013 only if you meet all the other requirements. Free file state and federal taxes    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 tuition and fees deduction. Free file state and federal taxes No Double Benefit Allowed You cannot do any of the following. Free file state and federal taxes Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense. Free file state and federal taxes Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year. Free file state and federal taxes Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). Free file state and federal taxes For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Free file state and federal taxes See Figuring the Taxable Portion of a Distribution in chapter 7 (Coverdell ESA) and chapter 8 (QTP) of Publication 970. Free file state and federal taxes Deduct qualified education expenses that have been paid with tax-free interest on U. Free file state and federal taxes S. Free file state and federal taxes savings bonds (Form 8815). Free file state and federal taxes See Figuring the Tax-Free Amount in chapter 10 of Publication 970. Free file state and federal taxes Deduct qualified education expenses that have been paid with tax-free educational assistance such as a scholarship, grant, or employer-provided educational assistance. Free file state and federal taxes See Adjustments to qualified education expenses, later. Free file state and federal taxes Adjustments to qualified education expenses. Free file state and federal taxes   For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Free file state and federal taxes The result is the amount of adjusted qualified education expenses for each student. Free file state and federal taxes Tax-free educational assistance. Free file state and federal taxes   For tax-free educational assistance you received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance to that academic period. Free file state and federal taxes See Academic period, earlier. Free file state and federal taxes   This includes: The tax-free part of scholarships and fellowships, including Pell grants (see chapter 1 of Publication 970), The tax-free part of any employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free file state and federal taxes Generally, any scholarship or fellowship you receive is treated as tax-free educational assistance. Free file state and federal taxes However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent you include it in gross income (if you are required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Free file state and federal taxes 970, chapter 1. Free file state and federal taxes The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Free file state and federal taxes 970, chapter 1. Free file state and federal taxes You may be able to increase the combined value of your tuition and fees deduction and certain educational assistance if you include some or all of the educational assistance in income in the year it is received. Free file state and federal taxes For details, see Adjustments to Qualified Education Expenses in chapter 6 of Pub. Free file state and federal taxes 970. Free file state and federal taxes Some tax-free educational assistance received in 2013 may be treated as a refund of qualified education expenses paid in 2013. Free file state and federal taxes 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). Free file state and federal taxes 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. Free file state and federal taxes 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. Free file state and federal taxes Refunds. Free file state and federal taxes   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or may require you to include some or all of the refund in your gross income for the year the refund is received. Free file state and federal taxes See chapter 6 of Pub. Free file state and federal taxes 970 for more information. Free file state and federal taxes Some tax-free educational assistance received after 2013 may be treated as a refund. Free file state and federal taxes See Tax-free educational assistance, earlier. Free file state and federal taxes Refunds received in 2013. Free file state and federal taxes    For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Free file state and federal taxes Refunds received after 2013 but before your income tax return is filed. Free file state and federal taxes   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. Free file state and federal taxes Refunds received after 2013 and after your income tax return is filed. Free file state and federal taxes   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received after you file your 2013 income tax return, you may need to include some or all of the refund in your gross income for the year the refund is received. Free file state and federal taxes See chapter 6 of Pub. Free file state and federal taxes 970 for more information. Free file state and federal taxes Coordination with Coverdell education savings accounts and qualified tuition programs. Free file state and federal taxes    Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). Free file state and federal taxes For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Free file state and federal taxes Amounts that do not reduce qualified education expenses. Free file state and federal taxes   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. Free file state and federal taxes   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. Free file state and federal taxes 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. Free file state and federal taxes The use of the money is not restricted. Free file state and federal taxes 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. Free file state and federal taxes This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Free file state and federal taxes Sports, games, hobbies, and noncredit courses. Free file state and federal taxes   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. Free file state and federal taxes However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Free file state and federal taxes Comprehensive or bundled fees. Free file state and federal taxes   Some eligible educational institutions combine all of their fees for an academic period into one amount. Free file state and federal taxes If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. Free file state and federal taxes 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. Free file state and federal taxes See How Do You Figure the Deduction , later, for more information about Form 1098-T. Free file state and federal taxes Who Is an Eligible Student For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (defined earlier). Free file state and federal taxes Who Can Claim a Dependent's Expenses Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must: Have paid the expenses, and Claim an exemption for the student as a dependent. Free file state and federal taxes Table 19-3 summarizes who can claim the deduction. Free file state and federal taxes How Much Can You Deduct The maximum tuition and fees deduction in 2013 is $4,000, $2,000, or $0, depending on the amount of your MAGI. Free file state and federal taxes For details on figuring your MAGI, see chapter 6 of Publication 970. Free file state and federal taxes How Do You Figure the Deduction Figure the deduction using Form 8917. Free file state and federal taxes To help you figure your tuition and fees deduction, you should receive Form 1098-T, Tuition Statement. Free file state and federal taxes 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. Free file state and federal taxes To claim the deduction, enter the allowable amount on Form 1040, line 34, or Form 1040A, line 19, and attach your completed Form 8917. Free file state and federal taxes Table 19-3. Free file state and federal taxes Who Can Claim a Dependent's Expenses Do not rely on this table alone. Free file state and federal taxes See Who Can Claim a Dependent's Expenses in chapter 6 of Publication 970. Free file state and federal taxes IF your dependent is an eligible student and you. Free file state and federal taxes . Free file state and federal taxes . Free file state and federal taxes AND. Free file state and federal taxes . Free file state and federal taxes . Free file state and federal taxes THEN. Free file state and federal taxes . Free file state and federal taxes . Free file state and federal taxes claim an exemption for your dependent you paid all qualified education expenses for your dependent only you can deduct the qualified education expenses that you paid. Free file state and federal taxes Your dependent cannot take a deduction. Free file state and federal taxes claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Free file state and federal taxes do not claim an exemption for your dependent you paid all qualified education expenses no one is allowed to take a deduction. Free file state and federal taxes do not claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Free file state and federal taxes Educator Expenses If you were an eligible educator in 2013, you can deduct on Form 1040, line 23, or Form 1040A, line 16, up to $250 of qualified expenses you paid in 2013. Free file state and federal taxes If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Free file state and federal taxes However, neither spouse can deduct more than $250 of his or her qualified expenses on Form 1040, line 23, or Form 1040A, line 16. Free file state and federal taxes You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A (Form 1040), line 21. Free file state and federal taxes Eligible educator. Free file state and federal taxes   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. Free file state and federal taxes Qualified expenses. Free file state and federal taxes   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Free file state and federal taxes An ordinary expense is one that is common and accepted in your educational field. Free file state and federal taxes A necessary expense is one that is helpful and appropriate for your profession as an educator. Free file state and federal taxes An expense does not have to be required to be considered necessary. Free file state and federal taxes   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Free file state and federal taxes   You must reduce your qualified expenses by the following amounts. Free file state and federal taxes Excludable U. Free file state and federal taxes S. Free file state and federal taxes series EE and I savings bond interest from Form 8815. Free file state and federal taxes See Figuring the Tax-Free Amount in chapter 10 of Publication 970. Free file state and federal taxes Nontaxable qualified tuition program earnings or distributions. Free file state and federal taxes See Figuring the Taxable Portion of a Distribution in chapter 8 of Publication 970. Free file state and federal taxes Nontaxable distribution of earnings from a Coverdell education savings account. Free file state and federal taxes See Figuring the Taxable Portion of a Distribution in chapter 7 of Publication 970. Free file state and federal taxes Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2. Free file state and federal taxes Prev  Up  Next   Home   More Online Publications
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Understanding your CP13R Notice

We made changes to your return involving the Recovery Rebate Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully — it will explain how the Recovery Rebate Credit relates to the changes we made.
  • Review the notice and compare our changes to the information on your tax return.
  • Correct the copy of your tax return that you kept for your records.
  • You don't need to do anything if you agree with the notice.
  • If you disagree with the notice, please contact us at the toll-free number listed on its top right corner (within 60 days of its date).

You may want to...


Answers to Common Questions

What is the Recovery Rebate Credit?
It is a refundable credit that relates to the 2008 economic stimulus payment. Generally, a refundable credit increases the amount of a refund received or it reduces the amount of taxes owed.

What should I do if I disagree with the changes you made?
Contact us at the toll free number listed on the top right corner of your notice if you disagree with the changes we made.

What should I do if I need to make another correction to my tax return?
You'll need to file an amended return to make a correction.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Perform a quick check on the amount you have withheld to make sure you won't owe money next year. You can use this IRS withholding calculator.

Page Last Reviewed or Updated: 20-Feb-2014

The Free File State And Federal Taxes

Free file state and federal taxes 9. Free file state and federal taxes   Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. Free file state and federal taxes This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. Free file state and federal taxes The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. Free file state and federal taxes See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. Free file state and federal taxes However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. Free file state and federal taxes You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. Free file state and federal taxes Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. Free file state and federal taxes If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. Free file state and federal taxes Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. Free file state and federal taxes Qualified education expenses. Free file state and federal taxes   For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Free file state and federal taxes They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Free file state and federal taxes   In addition, if the student is at least a half-time student, room and board are qualified education expenses. Free file state and federal taxes   The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Free file state and federal taxes The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Free file state and federal taxes The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Free file state and federal taxes You will need to contact the eligible educational institution for qualified room and board costs. Free file state and federal taxes Eligible educational institution. Free file state and federal taxes   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. Free file state and federal taxes S. Free file state and federal taxes Department of Education. Free file state and federal taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free file state and federal taxes The educational institution should be able to tell you if it is an eligible educational institution. Free file state and federal taxes   Certain educational institutions located outside the United States also participate in the U. Free file state and federal taxes S. Free file state and federal taxes Department of Education's Federal Student Aid (FSA) programs. Free file state and federal taxes Half-time student. Free file state and federal taxes   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. Free file state and federal taxes Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. Free file state and federal taxes You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part 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), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free file state and federal taxes Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). Free file state and federal taxes If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. Free file state and federal taxes Example 1. Free file state and federal taxes In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. Free file state and federal taxes She paid $5,800 of qualified education expenses from the following sources. Free file state and federal taxes   Employer-provided educational assistance  (tax free) $5,000     Early distribution from IRA (includes $500 taxable earnings) 3,200           Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. Free file state and federal taxes   Total qualified education expenses $5,800     Minus: Tax-free educational assistance −5,000     Equals: Adjusted qualified  education expenses (AQEE) $ 800   Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. Free file state and federal taxes However, she must include the $500 taxable earnings in her gross income subject to income tax. Free file state and federal taxes Example 2. Free file state and federal taxes Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. Free file state and federal taxes This must be included in her income subject to income tax. Free file state and federal taxes The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. Free file state and federal taxes Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). Free file state and federal taxes She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. Free file state and federal taxes Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free file state and federal taxes The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. Free file state and federal taxes If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). Free file state and federal taxes Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. Free file state and federal taxes See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. Free file state and federal taxes There are many other situations in which Form 5329 is required. Free file state and federal taxes If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. Free file state and federal taxes Prev  Up  Next   Home   More Online Publications