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Free online income tax filing 21. Free online income tax filing   Medical and Dental Expenses Table of Contents What's New Introduction Useful Items - You may want to see: What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. Free online income tax filing How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Yourself Spouse Dependent Decedent What Medical Expenses Are Includible?Insurance Premiums Meals and Lodging Transportation Disabled Dependent Care Expenses How Do You Treat Reimbursements?Insurance Reimbursement Damages for Personal Injuries How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons What's New Medical and dental expenses. Free online income tax filing  Beginning January 1, 2013, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted gross income (AGI) (7. Free online income tax filing 5% if either you or your spouse is age 65 or older). Free online income tax filing Standard mileage rate. Free online income tax filing  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. Free online income tax filing See Transportation under What Medical Expenses Are Includible. Free online income tax filing Introduction This chapter will help you determine the following. Free online income tax filing What medical expenses are. Free online income tax filing What expenses you can include this year. Free online income tax filing How much of the expenses you can deduct. Free online income tax filing Whose medical expenses you can include. Free online income tax filing What medical expenses are includible. Free online income tax filing How to treat reimbursements. Free online income tax filing How to report the deduction on your tax return. Free online income tax filing How to report impairment-related work expenses. Free online income tax filing How to report health insurance costs if you are self-employed. Free online income tax filing Useful Items - You may want to see: Publications 502 Medical and Dental Expenses 969 Health Savings Accounts and Other Tax-Favored Health Plans Form (and Instructions) Schedule A (Form 1040) Itemized Deductions What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Free online income tax filing These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. Free online income tax filing They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Free online income tax filing Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Free online income tax filing They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Free online income tax filing Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Free online income tax filing Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. Free online income tax filing What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Free online income tax filing If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Free online income tax filing If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Free online income tax filing If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Free online income tax filing Separate returns. Free online income tax filing   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Free online income tax filing Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Free online income tax filing Community property states. Free online income tax filing   If you and your spouse live in a community property state and file separate returns, or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. Free online income tax filing Each of you should include half the expenses. Free online income tax filing If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. Free online income tax filing If you live in a community property state, and are not filing a joint return, see Publication 555, Community Property. Free online income tax filing How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Free online income tax filing 5% of your AGI if either you or your spouse is age 65 or older)(Form 1040, line 38). Free online income tax filing Example. Free online income tax filing You are unmarried and under age 65 and your AGI is $40,000, 10% of which is $4,000. Free online income tax filing You paid medical expenses of $2,500. Free online income tax filing You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. Free online income tax filing Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. Free online income tax filing There are different rules for decedents and for individuals who are the subject of multiple support agreements. Free online income tax filing See Support claimed under a multiple support agreement , later. Free online income tax filing Yourself You can include medical expenses you paid for yourself. Free online income tax filing Spouse You can include medical expenses you paid for your spouse. Free online income tax filing To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. Free online income tax filing Example 1. Free online income tax filing Mary received medical treatment before she married Bill. Free online income tax filing Bill paid for the treatment after they married. Free online income tax filing Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. Free online income tax filing If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Free online income tax filing Mary would include the amounts she paid during the year in her separate return. Free online income tax filing If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. Free online income tax filing Example 2. Free online income tax filing This year, John paid medical expenses for his wife Louise, who died last year. Free online income tax filing John married Belle this year and they file a joint return. Free online income tax filing Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. Free online income tax filing Dependent You can include medical expenses you paid for your dependent. Free online income tax filing For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. Free online income tax filing A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. Free online income tax filing The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. Free online income tax filing S. Free online income tax filing citizen or national, or a resident of the United States, Canada, or Mexico. Free online income tax filing If your qualifying child was adopted, see Exception for adopted child , next. Free online income tax filing You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Free online income tax filing Exception for adopted child. Free online income tax filing   If you are a U. Free online income tax filing S. Free online income tax filing citizen or U. Free online income tax filing S. Free online income tax filing national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. Free online income tax filing S. Free online income tax filing citizen or national or a resident of the United States, Canada, or Mexico. Free online income tax filing Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: 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 full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, or, if he or she did, it was only to claim a refund. Free online income tax filing Adopted child. Free online income tax filing   A legally adopted child is treated as your own child. Free online income tax filing This includes a child lawfully placed with you for legal adoption. Free online income tax filing   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. Free online income tax filing   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. Free online income tax filing   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. Free online income tax filing    You may be able to take an adoption credit for other expenses related to an adoption. Free online income tax filing See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Free online income tax filing Child of divorced or separated parents. Free online income tax filing   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Free online income tax filing Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. Free online income tax filing This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). Free online income tax filing Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of either of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child earlier) of any other person for 2013, and For whom you provided over half of the support in 2013. Free online income tax filing But see Child of divorced or separated parents , earlier, and Support claimed under a multiple support agreement, next. Free online income tax filing Support claimed under a multiple support agreement. Free online income tax filing   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Free online income tax filing A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Free online income tax filing   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. Free online income tax filing However, you can include the entire unreimbursed amount you paid for medical expenses. Free online income tax filing Example. Free online income tax filing You and your three brothers each provide one-fourth of your mother's total support. Free online income tax filing Under a multiple support agreement, you treat your mother as your dependent. Free online income tax filing You paid all of her medical expenses. Free online income tax filing Your brothers reimbursed you for three-fourths of these expenses. Free online income tax filing In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Free online income tax filing Your brothers cannot include any part of the expenses. Free online income tax filing However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. Free online income tax filing Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. Free online income tax filing This includes expenses for the decedent's spouse and dependents as well as for the decedent. Free online income tax filing The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. Free online income tax filing The expenses must be paid within the 1-year period beginning with the day after the date of death. Free online income tax filing If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. Free online income tax filing Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. Free online income tax filing Amended returns and claims for refund are discussed in chapter 1. Free online income tax filing What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. Free online income tax filing The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. Free online income tax filing What Medical Expenses Are Includible? Use Table 21-1, later, as a guide to determine which medical and dental expenses you can include on Schedule A (Form 1040). Free online income tax filing This table does not include all possible medical expenses. Free online income tax filing To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. Free online income tax filing Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Free online income tax filing Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). Free online income tax filing See Qualified Long-Term Care Insurance Contracts in Publication 502. Free online income tax filing If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Free online income tax filing The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. Free online income tax filing Note. Free online income tax filing When figuring the amount of insurance premiums you can include in medical expenses on Schedule A, do not include any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Free online income tax filing Also, do not include insurance premiums attributable to a nondependent child under age 27 if your premiums increased as a result of adding this child to your policy. Free online income tax filing Employer-sponsored health insurance plan. Free online income tax filing   Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included in box 1 of your Form W-2. Free online income tax filing Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form W-2. Free online income tax filing Example. Free online income tax filing You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. Free online income tax filing Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. Free online income tax filing Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. Free online income tax filing Long-term care services. Free online income tax filing   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. Free online income tax filing This amount will be reported as wages in box 1 of your Form W-2. Free online income tax filing Health reimbursement arrangement (HRA). Free online income tax filing   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. Free online income tax filing This is because an HRA is funded solely by the employer. Free online income tax filing Retired public safety officers. Free online income tax filing   If you are a retired public safety officer, do not include as medical expenses any health or long-term care premiums that you elected to have paid with tax-free distributions from your retirement plan. Free online income tax filing This applies only to distributions that would otherwise be included in income. Free online income tax filing Medicare A. Free online income tax filing   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. Free online income tax filing The payroll tax paid for Medicare A is not a medical expense. Free online income tax filing   If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. Free online income tax filing In this situation you can include the premiums you paid for Medicare A as a medical expense. Free online income tax filing Medicare B. Free online income tax filing   Medicare B is supplemental medical insurance. Free online income tax filing Premiums you pay for Medicare B are a medical expense. Free online income tax filing Check the information you received from the Social Security Administration to find out your premium. Free online income tax filing Medicare D. Free online income tax filing    Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. Free online income tax filing You can include as a medical expense premiums you pay for Medicare D. Free online income tax filing Prepaid insurance premiums. Free online income tax filing   Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Free online income tax filing Unused sick leave used to pay premiums. Free online income tax filing   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. Free online income tax filing You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. Free online income tax filing You can include this cost of continuing participation in the health plan as a medical expense. Free online income tax filing   If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. Free online income tax filing You cannot include this cost of continuing participation in that health plan as a medical expense. Free online income tax filing Table 21-1. Free online income tax filing Medical and Dental Expenses Checklist. Free online income tax filing See Publication 502 for more information about these and other expenses. Free online income tax filing You can include: You cannot include: Bandages Birth control pills prescribed by your doctor Body scan Braille books Breast pump and supplies Capital expenses for equipment or improvements to your home needed for medical care (see the worksheet in Publication 502) Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Fertility enhancement, certain procedures Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. Free online income tax filing ) Lead-based paint removal Legal abortion Legal operation to prevent having children such as a vasectomy or tubal ligation Long-term care contracts, qualified Meals and lodging provided by a hospital during medical treatment Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Medical and hospital insurance premiums Nursing services Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Physical examination Pregnancy test kit Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services, below) Special items (artificial limbs, false teeth, eye-glasses, contact lenses, hearing aids, crutches, wheelchair, etc. Free online income tax filing ) Special education for mentally or physically disabled persons Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services Weight-loss, certain expenses for obesity Baby sitting and childcare Bottled water Contributions to Archer MSAs (see Publication 969) Diaper service Expenses for your general health (even if following your doctor's advice) such as— —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pre-tax basis) Funeral, burial, or cremation expenses Health savings account payments for medical expenses Illegal operation, treatment, or medicine Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. Free online income tax filing Maternity clothes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. Free online income tax filing , unless recommended by a medical practitioner as a treatment for a specific medical condition diagnosed by a physician Surgery for purely cosmetic reasons Toothpaste, toiletries, cosmetics, etc. Free online income tax filing Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to get medical care. Free online income tax filing See Nursing home , later. Free online income tax filing You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. Free online income tax filing You can include the cost of such lodging while away from home if all of the following requirements are met. Free online income tax filing The lodging is primarily for and essential to medical care. Free online income tax filing The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Free online income tax filing The lodging is not lavish or extravagant under the circumstances. Free online income tax filing There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Free online income tax filing The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. Free online income tax filing You can include lodging for a person traveling with the person receiving the medical care. Free online income tax filing For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Free online income tax filing Meals are not included. Free online income tax filing Nursing home. Free online income tax filing   You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. Free online income tax filing This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Free online income tax filing   Do not include the cost of meals and lodging if the reason for being in the home is personal. Free online income tax filing You can, however, include in medical expenses the part of the cost that is for medical or nursing care. Free online income tax filing Transportation Include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Free online income tax filing You can include: Bus, taxi, train, or plane fares, or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. Free online income tax filing Car expenses. Free online income tax filing   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use your car for medical reasons. Free online income tax filing You cannot include depreciation, insurance, general repair, or maintenance expenses. Free online income tax filing   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents per mile. Free online income tax filing    You can also include parking fees and tolls. Free online income tax filing You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. Free online income tax filing Example. Free online income tax filing In 2013, Bill Jones drove 2,800 miles for medical reasons. Free online income tax filing He spent $500 for gas, $30 for oil, and $100 for tolls and parking. Free online income tax filing He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. Free online income tax filing He figures the actual expenses first. Free online income tax filing He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. Free online income tax filing He then figures the standard mileage amount. Free online income tax filing He multiplies 2,800 miles by 24 cents a mile for a total of $672. Free online income tax filing He then adds the $100 tolls and parking for a total of $772. Free online income tax filing Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. Free online income tax filing Transportation expenses you cannot include. Free online income tax filing   You cannot include in medical expenses the cost of transportation in the following situations. Free online income tax filing Going to and from work, even if your condition requires an unusual means of transportation. Free online income tax filing Travel for purely personal reasons to another city for an operation or other medical care. Free online income tax filing Travel that is merely for the general improvement of one's health. Free online income tax filing The costs of operating a specially equipped car for other than medical reasons. Free online income tax filing Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. Free online income tax filing (See chapter 32 and Publication 503, Child and Dependent Care Expenses. Free online income tax filing ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. Free online income tax filing How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the taxable year for which you received no insurance or other reimbursement. Free online income tax filing Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. Free online income tax filing This includes payments from Medicare. Free online income tax filing Even if a policy provides reimbursement for only certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. Free online income tax filing Example. Free online income tax filing You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. Free online income tax filing The insurance you receive for the hospital and doctors' bills is more than their charges. Free online income tax filing In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. Free online income tax filing Health reimbursement arrangement (HRA). Free online income tax filing   A health reimbursement arrangement is an employer-funded plan that reimburses employees for medical care expenses and allows unused amounts to be carried forward. Free online income tax filing An HRA is funded solely by the employer and the reimbursements for medical expenses, up to a maximum dollar amount for a coverage period, are not included in your income. Free online income tax filing Other reimbursements. Free online income tax filing   Generally, you do not reduce medical expenses by payments you receive for: Permanent loss or loss of use of a member or function of the body (loss of limb, sight, hearing, etc. Free online income tax filing ) or disfigurement to the extent the payment is based on the nature of the injury without regard to the amount of time lost from work, or Loss of earnings. Free online income tax filing   You must, however, reduce your medical expenses by any part of these payments that is designated for medical costs. Free online income tax filing See How Do You Figure and Report the Deduction on Your Tax Return , later. Free online income tax filing   For how to treat damages received for personal injury or sickness, see Damages for Personal Injuries , later. Free online income tax filing You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year. Free online income tax filing Excess reimbursement. Free online income tax filing   If you are reimbursed more than your medical expenses, you may have to include the excess in income. Free online income tax filing You may want to use Figure 21-A to help you decide if any of your reimbursement is taxable. Free online income tax filing Premiums paid by you. Free online income tax filing   If you pay either the entire premium for your medical insurance or all of the costs of a plan similar to medical insurance and your insurance payments or other reimbursements are more than your total medical expenses for the year, you have an excess reimbursement. Free online income tax filing Generally, you do not include the excess reimbursement in your gross income. Free online income tax filing Premiums paid by you and your employer. Free online income tax filing   If both you and your employer contribute to your medical insurance plan and your employer's contributions are not included in your gross income, you must include in your gross income the part of your excess reimbursement that is from your employer's contribution. Free online income tax filing   See Publication 502 to figure the amount of the excess reimbursement you must include in gross income. Free online income tax filing Reimbursement in a later year. Free online income tax filing   If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you generally must report the reimbursement as income up to the amount you previously deducted as medical expenses. Free online income tax filing   However, do not report as income the amount of reimbursement you received up to the amount of your medical deductions that did not reduce your tax for the earlier year. Free online income tax filing For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Itemized Deduction Recoveries in chapter 12. Free online income tax filing Figure 21-A. Free online income tax filing Is Your Excess Medical Reimbursement Taxable? Please click here for the text description of the image. Free online income tax filing Figure 21-A. Free online income tax filing Is Your Excess Medical Reimbursement Taxable? Medical expenses not deducted. Free online income tax filing   If you did not deduct a medical expense in the year you paid it because your medical expenses were not more than 10% of your AGI (7. Free online income tax filing 5% of your AGI if either you or your spouse was age 65 or older), or because you did not itemize deductions, do not include the reimbursement up to the amount of the expense in income. Free online income tax filing However, if the reimbursement is more than the expense, see Excess reimbursement , earlier. Free online income tax filing Example. Free online income tax filing For 2013, you were unmarried and under age 65 and you had medical expenses of $500. Free online income tax filing You cannot deduct the $500 because it is less than 10% of your AGI. Free online income tax filing If, in a later year, you are reimbursed for any of the $500 in medical expenses, you do not include the amount reimbursed in your gross income. Free online income tax filing Damages for Personal Injuries If you receive an amount in settlement of a personal injury suit, part of that award may be for medical expenses that you deducted in an earlier year. Free online income tax filing If it is, you must include that part in your income in the year you receive it to the extent it reduced your taxable income in the earlier year. Free online income tax filing See Reimbursement in a Later Year , discussed under How Do You Treat Reimbursements, earlier. Free online income tax filing Future medical expenses. Free online income tax filing   If you receive an amount in settlement of a damage suit for personal injuries, part of that award may be for future medical expenses. Free online income tax filing If it is, you must reduce any future medical expenses for these injuries until the amount you received has been completely used. Free online income tax filing How Do You Figure and Report the Deduction on Your Tax Return? Once you have determined which medical expenses you can include, you figure and report the deduction on your tax return. Free online income tax filing What Tax Form Do You Use? You figure your medical expense deduction on Schedule A (Form 1040). Free online income tax filing You cannot claim medical expenses on Form 1040A or Form 1040EZ. Free online income tax filing If you need more information on itemized deductions or you are not sure if you can itemize, see chapter 20. Free online income tax filing Enter the amount you paid for medical and dental expenses on Schedule A (Form 1040). Free online income tax filing This should be your expenses that were not reimbursed by insurance or any other sources. Free online income tax filing Generally, you can deduct only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Free online income tax filing 5% if either you or your spouse was age 65 or older) shown on line 38, Form 1040. Free online income tax filing Impairment-Related Work Expenses If you are a person with a disability, you can take a business deduction for expenses that are necessary for you to be able to work. Free online income tax filing If you take a business deduction for impairment-related work expenses, do not take a medical deduction for the same expenses. Free online income tax filing You have a disability if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Free online income tax filing Impairment-related expenses defined. Free online income tax filing   Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Free online income tax filing Where to report. Free online income tax filing   If you are self-employed, deduct the business expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Free online income tax filing   If you are an employee, complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Free online income tax filing Enter on Schedule A (Form 1040), that part of the amount on Form 2106, or Form 2106-EZ, that is related to your impairment. Free online income tax filing Enter the amount that is unrelated to your impairment also on Schedule A (Form 1040). Free online income tax filing Your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. Free online income tax filing Example. Free online income tax filing You are blind. Free online income tax filing You must use a reader to do your work. Free online income tax filing You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Free online income tax filing The reader's services are only for your work. Free online income tax filing You can deduct your expenses for the reader as business expenses. Free online income tax filing Health Insurance Costs for Self-Employed Persons If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and, your children who were under age 27 at the end of 2013. Free online income tax filing For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. Free online income tax filing The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business. Free online income tax filing You cannot deduct payments for medical insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or, an employer of your dependent or your child under age 27 at the end of 2013. Free online income tax filing You cannot deduct payments for a qualified long-term care insurance contract for any month in which you were eligible to participate in a long-term care insurance plan subsidized by your employer or your spouse's employer. Free online income tax filing If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. Free online income tax filing But if any of the following applies, do not use that worksheet. Free online income tax filing You had more than one source of income subject to self-employment tax. Free online income tax filing You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Free online income tax filing You are using amounts paid for qualified long-term care insurance to figure the deduction. Free online income tax filing If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction. Free online income tax filing Note. Free online income tax filing When figuring the amount you can deduct for insurance premiums, do not include any advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Free online income tax filing If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, from the total insurance premiums you paid. Free online income tax filing Do not include amounts paid for health insurance coverage with retirement plan distributions that were tax-free because you are a retired public safety officer. Free online income tax filing Where to report. Free online income tax filing    You take this deduction on Form 1040. Free online income tax filing If you itemize your deductions and do not claim 100% of your self-employed health insurance on Form 1040, you can generally include any remaining premiums with all other medical expenses on Schedule A (Form 1040), subject to the 10% limit (7. Free online income tax filing 5% if either you or your spouse was age 65 or older). Free online income tax filing See Self-Employed Health Insurance Deduction in chapter 6 of Publication 535, Business Expenses, and Medical and Dental Expenses in the Instructions for Schedule A (Form 1040), for more information. Free online income tax filing Prev  Up  Next   Home   More Online Publications
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Understanding Your CP54B Notice

Your tax return shows a different name and/or ID number from the information we have for your account. Please provide more information to us in order to receive your refund.


What you need to do

  • Review your identifying information shown on this notice and compare it to your most recent social security card or taxpayer ID card.
  • Complete the CP54 response form to explain the discrepancies.
  • Include copies of documents to substantiate your name and identifying number.

You may want to

  • Contact the Social Security Administration (SSA) to update your records if any of the following occurred:
    • you recently married and are using your spouse’s last name and have not already contacted SSA,
    • you legally changed your name without contacting SSA,
    • or your social security number and/or name are different than on your  social security card.

 


Answers to Common Questions

Q. I sent you my information. When will I get my refund?

A. Once we receive your response form and verify the information you provided, you should receive your refund in 4 to 6 weeks. If you don’t hear from us after 4 to 6 weeks, call our “Where’s My Refund?” toll free line at 1-800-829-1954 to check on the status of your refund.

 


Tips for next year

Make sure you file using your name and taxpayer ID number as they appear on your social security card or taxpayer ID card.
 

Page Last Reviewed or Updated: 22-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Free Online Income Tax Filing

Free online income tax filing 8. Free online income tax filing   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. Free online income tax filing Half-time student. Free online income tax filing How Much Can You Contribute Are Distributions TaxableFiguring the Taxable Portion of a Distribution Additional Tax on Taxable Distributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Introduction Qualified tuition programs (QTPs) are also called “529 plans. Free online income tax filing ” States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. Free online income tax filing Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. Free online income tax filing If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. Free online income tax filing You cannot deduct either payments or contributions to a QTP. Free online income tax filing For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. Free online income tax filing What is the tax benefit of a QTP. Free online income tax filing   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. Free online income tax filing See Are Distributions Taxable , later, for more information. Free online income tax filing    Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American opportunity credit or the lifetime learning credit. Free online income tax filing See Coordination With American Opportunity and Lifetime Learning Credits, later. Free online income tax filing What Is a Qualified Tuition Program A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. Free online income tax filing QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. Free online income tax filing The program must meet certain requirements. Free online income tax filing Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. Free online income tax filing Qualified education expenses. Free online income tax filing   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). Free online income tax filing As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. Free online income tax filing See Half-time student , later. Free online income tax filing The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. Free online income tax filing Tuition and fees. Free online income tax filing Books, supplies, and equipment. Free online income tax filing Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution. Free online income tax filing Expenses for room and board must be incurred by students who are enrolled at least half-time. Free online income tax filing 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 online income tax filing 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 online income tax filing The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Free online income tax filing You will need to contact the eligible educational institution for qualified room and board costs. Free online income tax filing    For tax years after 2010, the purchase of computer technology or equipment is only a qualified education expense if the computer technology or equipment is required for enrollment or attendance at an eligible institution. Free online income tax filing Designated beneficiary. Free online income tax filing   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. Free online income tax filing The designated beneficiary can be changed after participation in the QTP begins. Free online income tax filing If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship. Free online income tax filing Half-time student. Free online income tax filing   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Free online income tax filing Eligible educational institution. Free online income tax filing   For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Free online income tax filing S. Free online income tax filing Department of Education. Free online income tax filing It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free online income tax filing The educational institution should be able to tell you if it is an eligible educational institution. Free online income tax filing   Certain educational institutions located outside the United States also participate in the U. Free online income tax filing S. Free online income tax filing Department of Education's Federal Student Aid (FSA) programs. Free online income tax filing   How Much Can You Contribute Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary. Free online income tax filing There are no income restrictions on the individual contributors. Free online income tax filing You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. Free online income tax filing   Are Distributions Taxable The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. Free online income tax filing This is a return of the investment in the plan. Free online income tax filing The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution , later). Free online income tax filing Earnings and return of investment. Free online income tax filing    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. Free online income tax filing The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment (box 3). Free online income tax filing Form 1099-Q should be sent to you by January 31, 2014. Free online income tax filing Figuring the Taxable Portion of a Distribution To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses. Free online income tax filing Adjusted qualified education expenses. Free online income tax filing   This amount is the total qualified education expenses reduced by any tax-free educational assistance. Free online income tax filing Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits 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), 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 online income tax filing Taxable earnings. Free online income tax filing   Use the following steps to figure the taxable part. Free online income tax filing Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. Free online income tax filing The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. Free online income tax filing Subtract the amount figured in (1) from the total distributed earnings. Free online income tax filing The result is the amount the beneficiary must include in income. Free online income tax filing Report it on Form 1040 or Form 1040NR, line 21. Free online income tax filing Example 1. Free online income tax filing In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. Free online income tax filing Over the years they contributed $18,000 to the account. Free online income tax filing The total balance in the account was $27,000 on the date the distribution was made. Free online income tax filing In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. Free online income tax filing She paid her college expenses from the following sources. Free online income tax filing   Gift from parents $1,600     Partial tuition scholarship (tax-free) 3,100     QTP distribution 5,300           Before Sara can determine the taxable part of her QTP distribution, she must reduce her total qualified education expenses by any tax-free educational assistance. Free online income tax filing   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Equals: Adjusted qualified  education expenses (AQEE) $5,200   Since the remaining expenses ($5,200) are less than the QTP distribution, part of the earnings will be taxable. Free online income tax filing Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. Free online income tax filing Sara figures the taxable part of the distributed earnings as follows. Free online income tax filing   1. Free online income tax filing $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. Free online income tax filing $950 (earnings)−$932 (tax-free earnings)     =$18 (taxable earnings)  Sara must include $18 in income (Form 1040, line 21) as distributed QTP earnings not used for adjusted qualified education expenses. Free online income tax filing Coordination With American Opportunity and Lifetime Learning Credits An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Free online income tax filing This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit. Free online income tax filing Example 2. Free online income tax filing Assume the same facts as in Example 1 , except that Sara's parents claimed an American opportunity credit of $2,500 (based on $4,000 expenses). Free online income tax filing   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Minus: Expenses taken into account  in figuring American opportunity credit −4,000     Equals: Adjusted qualified  education expenses (AQEE) $1,200           The taxable part of the distribution is figured as follows. Free online income tax filing   1. Free online income tax filing $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. Free online income tax filing $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). Free online income tax filing This represents distributed earnings not used for adjusted qualified education expenses. Free online income tax filing Coordination With Coverdell ESA Distributions If a designated beneficiary receives distributions from both a QTP and a Coverdell ESA in the same year, and the total of these distributions is more than the beneficiary's adjusted qualified higher education expenses, the expenses must be allocated between the distributions. Free online income tax filing For purposes of this allocation, disregard any qualified elementary and secondary education expenses. Free online income tax filing Example 3. Free online income tax filing Assume the same facts as in Example 2 , except that instead of receiving a $5,300 distribution from her QTP, Sara received $4,600 from that account and $700 from her Coverdell ESA. Free online income tax filing In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. Free online income tax filing   $1,200 AQHEE × $700 ESA distribution  $5,300 total distribution = $158 AQHEE (ESA)     $1,200 AQHEE × $4,600 QTP distribution  $5,300 total distribution = $1,042 AQHEE (QTP)   Sara then figures the taxable portion of her Coverdell ESA distribution based on qualified higher education expenses of $158, and the taxable portion of her QTP distribution based on the other $1,042. Free online income tax filing Note. Free online income tax filing If you are required to allocate your expenses between Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary education expenses, see the examples in chapter 7, Coverdell Education Savings Account under Coordination With Qualified Tuition Program (QTP) Distributions . Free online income tax filing Coordination With Tuition and Fees Deduction. Free online income tax filing   A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Free online income tax filing Losses on QTP Investments If you have a loss on your investment in a QTP account, you may be able to take the loss on your income tax return. Free online income tax filing You can take the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Free online income tax filing Your basis is the total amount of contributions to that QTP account. Free online income tax filing You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Free online income tax filing If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. Free online income tax filing ) from all such accounts in order to determine your taxable earnings for the year. Free online income tax filing By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. Free online income tax filing Example 1. Free online income tax filing In 2013, Taylor received a final distribution of $1,000 from QTP #1. Free online income tax filing His unrecovered basis in that account before the distribution was $3,000. Free online income tax filing If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). Free online income tax filing Example 2. Free online income tax filing Assume the same facts as in Example 1 , except that Taylor also had a distribution of $9,000 from QTP #2, giving him total distributions for 2013 of $10,000. Free online income tax filing His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). Free online income tax filing Taylor's adjusted qualified education expenses for 2013 totaled $6,000. Free online income tax filing In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. Free online income tax filing   1. Free online income tax filing $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. Free online income tax filing $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. Free online income tax filing $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. Free online income tax filing Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). Free online income tax filing Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. Free online income tax filing Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Free online income tax filing Exceptions. Free online income tax filing   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Free online income tax filing Made because the designated beneficiary is disabled. Free online income tax filing A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Free online income tax filing A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Free online income tax filing Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships 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 ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free online income tax filing Made on account of the attendance of the designated beneficiary at a U. Free online income tax filing S. Free online income tax filing military academy (such as the USNA at Annapolis). Free online income tax filing This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Free online income tax filing S. Free online income tax filing Code) attributable to such attendance. Free online income tax filing Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier. Free online income tax filing ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Free online income tax filing Figuring the additional tax. Free online income tax filing    Use Part II of Form 5329, to figure any additional tax. Free online income tax filing Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Free online income tax filing Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. Free online income tax filing In addition, the designated beneficiary can be changed without transferring accounts. Free online income tax filing Rollovers Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). Free online income tax filing An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. Free online income tax filing Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Free online income tax filing These are not taxable distributions. Free online income tax filing Members of the beneficiary's family. Free online income tax filing   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Free online income tax filing Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Free online income tax filing Brother, sister, stepbrother, or stepsister. Free online income tax filing Father or mother or ancestor of either. Free online income tax filing Stepfather or stepmother. Free online income tax filing Son or daughter of a brother or sister. Free online income tax filing Brother or sister of father or mother. Free online income tax filing Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Free online income tax filing The spouse of any individual listed above. Free online income tax filing First cousin. Free online income tax filing Example. Free online income tax filing When Aaron graduated from college last year he had $5,000 left in his QTP. Free online income tax filing He wanted to give this money to his younger brother, who was in junior high school. Free online income tax filing In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his brother's QTP within 60 days of the distribution. Free online income tax filing If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. Free online income tax filing Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. Free online income tax filing See Members of the beneficiary's family , earlier. Free online income tax filing Example. Free online income tax filing Assume the same situation as in the last example. Free online income tax filing Instead of closing his QTP and paying the distribution into his brother's QTP, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his brother. Free online income tax filing Prev  Up  Next   Home   More Online Publications