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Free State E Filing

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Free State E Filing

Free state e filing 2. Free state e filing   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. Free state e filing How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. Free state e filing Deferral percentage. Free state e filing Employee compensation. Free state e filing Compensation of self-employed individuals. Free state e filing Choice not to treat deferrals as compensation. Free state e filing Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. Free state e filing Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. Free state e filing S. Free state e filing Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. Free state e filing Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. Free state e filing A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. Free state e filing SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). Free state e filing A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). Free state e filing Eligible employee. Free state e filing   An eligible employee is an individual who meets all the following requirements. Free state e filing Has reached age 21. Free state e filing Has worked for you in at least 3 of the last 5 years. Free state e filing Has received at least $550 in compensation from you in 2013. Free state e filing This amount remains the same in 2014. Free state e filing    You can use less restrictive participation requirements than those listed, but not more restrictive ones. Free state e filing Excludable employees. Free state e filing   The following employees can be excluded from coverage under a SEP. Free state e filing Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Free state e filing Nonresident alien employees who have received no U. Free state e filing S. Free state e filing source wages, salaries, or other personal services compensation from you. Free state e filing For more information about nonresident aliens, see Publication 519, U. Free state e filing S. Free state e filing Tax Guide for Aliens. Free state e filing Setting Up a SEP There are three basic steps in setting up a SEP. Free state e filing You must execute a formal written agreement to provide benefits to all eligible employees. Free state e filing You must give each eligible employee certain information about the SEP. Free state e filing A SEP-IRA must be set up by or for each eligible employee. Free state e filing Many financial institutions will help you set up a SEP. Free state e filing Formal written agreement. Free state e filing   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. Free state e filing You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. Free state e filing However, see When not to use Form 5305-SEP, below. Free state e filing   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. Free state e filing Keep the original form. Free state e filing Do not file it with the IRS. Free state e filing Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. Free state e filing See the Form 5305-SEP instructions for details. Free state e filing If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. Free state e filing When not to use Form 5305-SEP. Free state e filing   You cannot use Form 5305-SEP if any of the following apply. Free state e filing You currently maintain any other qualified retirement plan other than another SEP. Free state e filing You have any eligible employees for whom IRAs have not been set up. Free state e filing You use the services of leased employees, who are not your common-law employees (as described in chapter 1). Free state e filing You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. Free state e filing An affiliated service group described in section 414(m). Free state e filing A controlled group of corporations described in section 414(b). Free state e filing Trades or businesses under common control described in section 414(c). Free state e filing You do not pay the cost of the SEP contributions. Free state e filing Information you must give to employees. Free state e filing   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. Free state e filing An IRS model SEP is not considered adopted until you give each employee this information. Free state e filing Setting up the employee's SEP-IRA. Free state e filing   A SEP-IRA must be set up by or for each eligible employee. Free state e filing SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. Free state e filing You send SEP contributions to the financial institution where the SEP-IRA is maintained. Free state e filing Deadline for setting up a SEP. Free state e filing   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. Free state e filing Credit for startup costs. Free state e filing   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. Free state e filing For more information, see Credit for startup costs under Reminders, earlier. Free state e filing How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. Free state e filing If you are self-employed, you can contribute to your own SEP-IRA. Free state e filing Contributions must be in the form of money (cash, check, or money order). Free state e filing You cannot contribute property. Free state e filing However, participants may be able to transfer or roll over certain property from one retirement plan to another. Free state e filing See Publication 590 for more information about rollovers. Free state e filing You do not have to make contributions every year. Free state e filing But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). Free state e filing When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. Free state e filing Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. Free state e filing A SEP-IRA cannot be a Roth IRA. Free state e filing Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Free state e filing Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. Free state e filing If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. Free state e filing Participants age 70½ or over must take required minimum distributions. Free state e filing Time limit for making contributions. Free state e filing   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. Free state e filing Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. Free state e filing Compensation generally does not include your contributions to the SEP. Free state e filing The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. Free state e filing Example. Free state e filing Your employee, Mary Plant, earned $21,000 for 2013. Free state e filing The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). Free state e filing Contributions for yourself. Free state e filing   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. Free state e filing However, special rules apply when figuring your maximum deductible contribution. Free state e filing See Deduction Limit for Self-Employed Individuals , later. Free state e filing Annual compensation limit. Free state e filing   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. Free state e filing However, $51,000 is the maximum contribution for an eligible employee. Free state e filing These limits are $260,000 and $52,000, respectively, in 2014. Free state e filing Example. Free state e filing Your employee, Susan Green, earned $210,000 for 2013. Free state e filing Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. Free state e filing More than one plan. Free state e filing   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. Free state e filing When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. Free state e filing Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. Free state e filing Tax treatment of excess contributions. Free state e filing   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. Free state e filing 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). Free state e filing $51,000. Free state e filing Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. Free state e filing For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. Free state e filing Reporting on Form W-2. Free state e filing   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). Free state e filing Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. Free state e filing If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. Free state e filing Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. Free state e filing Your contributions (including any excess contributions carryover). Free state e filing 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. Free state e filing In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. Free state e filing Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. Free state e filing When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. Free state e filing The deduction for the deductible part of your self-employment tax. Free state e filing The deduction for contributions to your own SEP-IRA. Free state e filing The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. Free state e filing For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. Free state e filing To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. Free state e filing Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Free state e filing Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. Free state e filing However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. Free state e filing If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. Free state e filing Excise tax. Free state e filing   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. Free state e filing For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. Free state e filing When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. Free state e filing If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. Free state e filing If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. Free state e filing Example. Free state e filing You are a fiscal year taxpayer whose tax year ends June 30. Free state e filing You maintain a SEP on a calendar year basis. Free state e filing You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. Free state e filing Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Free state e filing For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. Free state e filing S. Free state e filing Return of Partnership Income; and corporations deduct them on Form 1120, U. Free state e filing S. Free state e filing Corporation Income Tax Return, or Form 1120S, U. Free state e filing S. Free state e filing Income Tax Return for an S Corporation. Free state e filing Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Free state e filing (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Free state e filing , you receive from the partnership. Free state e filing ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. Free state e filing Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. Free state e filing (See the Caution, next. Free state e filing ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. Free state e filing This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. Free state e filing You are not allowed to set up a SARSEP after 1996. Free state e filing However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. Free state e filing If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. Free state e filing Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. Free state e filing At least 50% of your employees eligible to participate choose to make elective deferrals. Free state e filing You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. Free state e filing The elective deferrals of your highly compensated employees meet the SARSEP ADP test. Free state e filing SARSEP ADP test. Free state e filing   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. Free state e filing A highly compensated employee is defined in chapter 1. Free state e filing Deferral percentage. Free state e filing   The deferral percentage for an employee for a year is figured as follows. Free state e filing   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. Free state e filing Employee compensation. Free state e filing   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. Free state e filing Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. Free state e filing See Compensation in chapter 1. Free state e filing Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. Free state e filing Compensation of self-employed individuals. Free state e filing   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. Free state e filing   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. Free state e filing Choice not to treat deferrals as compensation. Free state e filing   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. Free state e filing Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. Free state e filing 25% of the participant's compensation (limited to $255,000 of the participant's compensation). Free state e filing $17,500. Free state e filing The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. Free state e filing Cash or deferred arrangement (section 401(k) plan). Free state e filing Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). Free state e filing SIMPLE IRA plan. Free state e filing In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. Free state e filing Catch-up contributions. Free state e filing   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Free state e filing The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. Free state e filing Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). Free state e filing However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Free state e filing The catch-up contribution limit. Free state e filing The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Free state e filing   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). Free state e filing Overall limit on SEP contributions. Free state e filing   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). Free state e filing The same rule applies to contributions you make to your own SEP-IRA. Free state e filing See Contribution Limits , earlier. Free state e filing Figuring the elective deferral. Free state e filing   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. Free state e filing Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. Free state e filing However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Free state e filing Excess deferrals. Free state e filing   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. Free state e filing For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. Free state e filing The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. Free state e filing See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. Free state e filing Excess SEP contributions. Free state e filing   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. Free state e filing You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. Free state e filing If you do not notify them within this time period, you must pay a 10% tax on the excess. Free state e filing For an explanation of the notification requirements, see Rev. Free state e filing Proc. Free state e filing 91-44, 1991-2 C. Free state e filing B. Free state e filing 733. Free state e filing If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. Free state e filing Reporting on Form W-2. Free state e filing   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Free state e filing You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Free state e filing You must also include them in box 12. Free state e filing Mark the “Retirement plan” checkbox in box 13. Free state e filing For more information, see the Form W-2 instructions. Free state e filing Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. Free state e filing Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. Free state e filing Distributions are subject to IRA rules. Free state e filing Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Free state e filing For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. Free state e filing Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. Free state e filing Making excess contributions. Free state e filing Making early withdrawals. Free state e filing Not making required withdrawals. Free state e filing For information about these taxes, see chapter 1 in Publication 590. Free state e filing Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. Free state e filing Prohibited transaction. Free state e filing   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. Free state e filing In that case, the SEP-IRA will no longer qualify as an IRA. Free state e filing For a list of prohibited transactions, see Prohibited Transactions in chapter 4. Free state e filing Effects on employee. Free state e filing   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. Free state e filing The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. Free state e filing Also, the employee may have to pay the additional tax for making early withdrawals. Free state e filing Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. Free state e filing See Setting Up a SEP , earlier. Free state e filing Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. Free state e filing You must also give them notice of any excess contributions. Free state e filing For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). Free state e filing Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. Free state e filing For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. Free state e filing Prev  Up  Next   Home   More Online Publications
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Japan 2011 Earthquake/Tsunami – U.S. Government Information


In the United States

Environmental Monitoring

The EPA has its radiation air monitoring (RadNet) data, frequently asked questions, and other resources on http://www.epa.gov/japan2011/. Here you can:

Food Safety

The U.S. Food and Drug Administration (FDA) has deemed that based on current information, there is no risk to the U.S. food supply.

In response to the ongoing situation in Japan, the EPA has taken steps to increase the level of nationwide monitoring of milk, precipitation, drinking water, and other potential exposure routes.

  • EPA conducts radiological monitoring of milk under its RADNET program
  • The U.S. Food and Drug Administration has jurisdiction over the safety, labeling and identity of milk and milk products in interstate commerce.
  • States have jurisdiction over those facilities located within their territory.

Results from a screening sample taken March 25 from Spokane, WA detected 0.8 pCi/L of iodine-131, which is more than 5,000 times lower than the Derived Intervention Level set by the U.S. Food and Drug Administration.

  • These types of findings are to be expected in the coming days and are far below levels of public health concern, including for infants and children.
  • Iodine-131 has a very short half-life of approximately eight days, and the level detected in milk and milk products is therefore expected to drop relatively quickly.

Radiation is all around us in our daily lives, and these findings are a miniscule amount compared to what people experience every day. For example, people are exposed to low levels of radiation on round trip cross country flights, watching television, and even from construction materials.

  • The U.S. Food and Drug Administration has jurisdiction over 80 percent of the food supply, including seafood, dairy, and produce. The U.S. Department of Agriculture regulates meat, poultry, and processed egg products, while FDA regulates all other food products.
  • The U.S. Department of Agriculture has stated that Japan has not exported any beef products to the United States for nearly a year.
  • The U.S. Department of Agriculture has stated that Japan is not currently eligible to export any poultry or processed egg products to the U.S.
  • The U.S. Food and Drug Administration and Customs and Border Protection carefully screen all food products for unsafe substances, including radiological material at Ports of Entry.
  • Learn more about keeping food safe during an emergency.

Potassium Iodide (KI)

The Centers for Disease Control (CDC) does not recommend that people in the United States take potassium iodide supplements (also called KI) in response to the damaged nuclear reactors in Japan.

  • Only take KI on the advice of emergency management officials, public health officials, or your doctor.
  • There are health risks associated with taking KI.

Food, Mail, Ships, and Cargo from Japan

The U.S. Customs and Border Protection (CBP) is monitoring developments in Japan carefully and uses several types of radiation detection equipment in air and sea ports, mail facilities, and elsewhere to ensure safety.

  • CBP and the U.S. Food and Drug Administration carefully screen all food products for unsafe substances, including radiological material, at Ports of Entry.
  • All inbound travelers, baggage, and cargo are screened for radiological materials.
  • CBP employs radiation monitors at international mail facilities.

American Citizens in Japan

American Embassy in Japan

All U.S. citizens in Japan should continue to carefully monitor the situation and follow the guidance of the U.S. and Japanese governments.

Authorized Departures

The U.S. government has authorized the voluntary departure from Japan of eligible family members of U.S. government personnel assigned to the U.S. Embassy in Tokyo, the U.S. Consulate in Nagoya, the Foreign Service Institute Field School in Yokohama, and U.S. Forces Japan.

Evacuations

Travel to and from Japan

Disaster Preparedness

The tragic events in Japan remind us that disasters can strike at any time. The best way to make sure your family is taken care of when disaster strikes is to be prepared.

Additional Information

  • Earthquake in Japan – See facts from the U.S. Geological Survey about the 9.0 earthquake.
  • Earthquake Preparedness and Response – The U.S. Centers for Disease Control and Prevention provides helpful tips on how to prepare for an earthquake and what to do during a quake.
  • Earthquakes, Flooding, and Radiation – The National Institutes of Health provides information and resources about natural disasters and their effects.
  • Tsunami Health Effects – The U.S. Centers for Disease Control and Prevention describes the immediate, secondary, and long-term health effects of a tsunami.
  • Tsunami Preparedness – The Federal Emergency Management Agency explains what a tsunami is and provides guidance on what to do during a tsunami watch or warning.
  • Radiation – Read about the assistance and expertise that the U.S. Department of Energy is providing to Japanese response and recovery efforts.

The Free State E Filing

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