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Free tax preparation 2012 Publication 4681 - Introductory Material Table of Contents Reminder IntroductionOrdering forms and publications. Free tax preparation 2012 Tax questions. Free tax preparation 2012 Useful Items - You may want to see: Common Situations Covered In This Publication Reminder Future Developments. Free tax preparation 2012  Information about any future developments affecting Publication 4681 (such as legislation enacted after we release it) will be posted at www. Free tax preparation 2012 irs. Free tax preparation 2012 gov/pub4681. Free tax preparation 2012 Photographs of missing children. Free tax preparation 2012   The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free tax preparation 2012 Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. Free tax preparation 2012 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free tax preparation 2012 Introduction This publication explains the federal tax treatment of canceled debts, foreclosures, repossessions, and abandonments. Free tax preparation 2012 Generally, if you owe a debt to someone else and they cancel or forgive that debt for less than its full amount, you are treated for income tax purposes as having income and may have to pay tax on this income. Free tax preparation 2012 Note. Free tax preparation 2012 This publication generally refers to debt that is canceled, forgiven, or discharged for less than the full amount of the debt as “canceled debt. Free tax preparation 2012 ” Sometimes a debt, or part of a debt, that you do not have to pay is not considered canceled debt. Free tax preparation 2012 These exceptions are discussed later under Exceptions . Free tax preparation 2012 Sometimes a canceled debt may be excluded from your income. Free tax preparation 2012 But if you do exclude canceled debt from income, you may be required to reduce your “tax attributes. Free tax preparation 2012 ” These exclusions and the reduction of tax attributes associated with them are discussed later under Exclusions . Free tax preparation 2012 Foreclosure and repossession are remedies that your lender may exercise if you fail to make payments on your loan and you have previously granted that lender a mortgage or other security interest in some of your property. Free tax preparation 2012 These remedies allow the lender to seize or sell the property securing the loan. Free tax preparation 2012 When your property is foreclosed upon or repossessed and sold, you are treated as having sold the property and you may recognize taxable gain. Free tax preparation 2012 Whether you also recognize income from canceled debt depends in part on whether you are personally liable for the debt and in part on whether the outstanding loan balance is more than the fair market value (FMV) of the property. Free tax preparation 2012 Figuring your gain or loss and income from canceled debt arising from a foreclosure or repossession is discussed later under Foreclosures and Repossessions . Free tax preparation 2012 Generally, you abandon property when you voluntarily and permanently give up possession and use of property you own with the intention of ending your ownership but without passing it on to anyone else. Free tax preparation 2012 Figuring your gain or loss and income from canceled debt arising from an abandonment is discussed later under Abandonments . Free tax preparation 2012 This publication also includes detailed examples with filled-in forms. Free tax preparation 2012 Comments and suggestions. Free tax preparation 2012    We welcome your comments about this publication and your suggestions for future editions. Free tax preparation 2012   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free tax preparation 2012 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free tax preparation 2012 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free tax preparation 2012   You can send your comments from www. Free tax preparation 2012 irs. Free tax preparation 2012 gov/formspubs. Free tax preparation 2012 Click on “More Information” and then on “Comment on Tax Forms and Publications”. Free tax preparation 2012   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free tax preparation 2012 Ordering forms and publications. Free tax preparation 2012    Visit www. Free tax preparation 2012 irs. Free tax preparation 2012 gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free tax preparation 2012 Internal Revenue Service 1201 N. Free tax preparation 2012 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free tax preparation 2012    If you have a tax question, check the information available on IRS. Free tax preparation 2012 gov or call 1-800-829-1040. Free tax preparation 2012 We cannot answer tax questions sent to either of the above addresses. Free tax preparation 2012 Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 334 Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 542 Corporations 544 Sales and Other Dispositions of Assets 551 Basis of Assets 908 Bankruptcy Tax Guide Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) 1099-C Cancellation of Debt 1099-DIV Dividends and Distributions 3800 General Business Credit Common Situations Covered In This Publication The sections of this publication that apply to you depend on the type of debt canceled, the tax attributes you have, and whether or not you continue to own the property that was subject to the debt. Free tax preparation 2012 Some examples of common circumstances are provided in the following paragraphs to help guide you through this publication. Free tax preparation 2012 These examples do not cover every situation but are intended to provide general guidance for the most common situations. Free tax preparation 2012 Nonbusiness credit card debt cancellation. Free tax preparation 2012    If you had a nonbusiness credit card debt canceled, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation. Free tax preparation 2012 You should read Bankruptcy or Insolvency under Exclusions in chapter 1 to see if you can exclude the canceled debt from income under one of those provisions. Free tax preparation 2012 If you can exclude part or all of the canceled debt from income, you should also read Bankruptcy and Insolvency under Reduction of Tax Attributes in chapter 1. Free tax preparation 2012 Personal vehicle repossession. Free tax preparation 2012    If you had a personal vehicle repossessed and disposed of by the lender during the year, you will need to determine your gain or nondeductible loss on the disposition. Free tax preparation 2012 This is explained in chapter 2 . Free tax preparation 2012 If the lender also canceled all or part of the remaining amount of the loan, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation. Free tax preparation 2012 You should read Bankruptcy or Insolvency under Exclusions in chapter 1 to see if you can exclude the canceled debt from income under one of those provisions. Free tax preparation 2012 If you can exclude part or all of the canceled debt from income, you should also read Bankruptcy and Insolvency under Reduction of Tax Attributes in chapter 1. Free tax preparation 2012 Main home foreclosure or abandonment. Free tax preparation 2012    If a lender foreclosed on your main home during the year, you will need to determine your gain or loss on the foreclosure. Free tax preparation 2012 Foreclosures are explained in chapter 2 and abandonments are explained in chapter 3. Free tax preparation 2012 If the lender also canceled all or part of the remaining amount on the mortgage loan and you were personally liable for the debt, you should also read Qualified Principal Residence Indebtedness under Exclusions in chapter 1 to see if you can exclude part or all of the canceled debt from income. Free tax preparation 2012 Detailed Example 2 and Example 3 in chapter 4 use filled-in forms to help explain these provisions. Free tax preparation 2012 Main home loan modification (workout agreement). Free tax preparation 2012    If a lender agrees to a mortgage loan modification (a “workout”) that includes a reduction in the principal balance of the loan, you should read Qualified Principal Residence Indebtedness under Exclusions in chapter 1 to see if you can exclude part or all of the canceled debt from income. Free tax preparation 2012 If you can exclude part or all of the canceled debt from income, you should also read Qualified Principal Residence Indebtedness under Reduction of Tax Attributes in chapter 1. Free tax preparation 2012 Detailed Example 1 in chapter 4 uses filled-in forms to help explain the tax implications of a mortgage workout scenario. Free tax preparation 2012 Prev  Up  Next   Home   More Online Publications
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Free tax preparation 2012 35. Free tax preparation 2012   Education Credits Table of Contents Introduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses Introduction For 2013, there are two tax credits available to persons who pay expenses for higher (postsecondary) education. Free tax preparation 2012 They are: The American opportunity credit, and The lifetime learning credit. Free tax preparation 2012 The chapter will present an overview of these education credits. Free tax preparation 2012 To get the detailed information you will need to claim either of the credits, and for examples illustrating that information, see chapters 2 and 3 of Publication 970. Free tax preparation 2012 Can you claim more than one education credit this year?   For each student, you can choose for any year only one of the credits. Free tax preparation 2012 For example, if you choose to take the American opportunity credit for a child on your 2013 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2013. Free tax preparation 2012   If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both. Free tax preparation 2012   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity and the lifetime learning credits on a per-student, per-year basis. Free tax preparation 2012 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 tax preparation 2012 Table 35-1. Free tax preparation 2012 Comparison of Education Credits Caution. Free tax preparation 2012 You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student. Free tax preparation 2012   American Opportunity Credit Lifetime Learning Credit Maximum credit Up to $2,500 credit per eligible student Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly;  $90,000 if single, head of household, or qualifying widow(er) $127,000 if married filing jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable Credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) the Hope credit was claimed) Available for an unlimited number of years Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Student does not need to 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 beginning during the tax year Available for one or more courses Felony drug conviction At the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Felony drug convictions do not make the student ineligible 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 Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Differences between the American opportunity and lifetime learning credits. Free tax preparation 2012   There are several differences between these two credits. Free tax preparation 2012 These differences are summarized in Table 35-1, later. Free tax preparation 2012 Useful Items - You may want to see: Publication 970 Tax Benefits for Education Form (and Instructions) 8863 Education Credits (American Opportunity and Lifetime Learning Credits) Who Can Claim an Education Credit You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. Free tax preparation 2012 The credits are based on the amount of qualified education expenses paid for the student in 2013 for academic periods beginning in 2013 and in the first 3 months of 2014. Free tax preparation 2012 For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 education credit(s). Free tax preparation 2012 Academic period. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 Eligible educational institution. Free tax preparation 2012   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 tax preparation 2012 S. Free tax preparation 2012 Department of Education. Free tax preparation 2012 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free tax preparation 2012 The educational institution should be able to tell you if it is an eligible educational institution. Free tax preparation 2012   Certain educational institutions located outside the United States also participate in the U. Free tax preparation 2012 S. Free tax preparation 2012 Department of Education's Federal Student Aid (FSA) programs. Free tax preparation 2012 Who can claim a dependent's expenses. Free tax preparation 2012   If an exemption is allowed as a deduction for any person who claims the student as a dependent, all qualified education expenses of the student are treated as having been paid by that person. Free tax preparation 2012 Therefore, only that person can claim an education credit for the student. Free tax preparation 2012 If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. Free tax preparation 2012 Expenses paid by a third party. Free tax preparation 2012   Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Free tax preparation 2012 However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Free tax preparation 2012 Therefore, you are treated as having paid expenses that were paid by the third party. Free tax preparation 2012 For more information and an example see Who Can Claim a Dependent's Expenses in Pub. Free tax preparation 2012 970, chapter 2 or 3. Free tax preparation 2012 Who cannot claim a credit. Free tax preparation 2012   You cannot take an education credit if any of the following apply. Free tax preparation 2012 You are claimed as a dependent on another person's tax return, such as your parent's return. Free tax preparation 2012 Your filing status is married filing separately. Free tax preparation 2012 You (or your spouse) were a nonresident alien for any part of 2013 and did not elect to be treated as a resident alien for tax purposes. Free tax preparation 2012 Your MAGI is one of the following. Free tax preparation 2012 American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er). Free tax preparation 2012 Lifetime learning credit: $127,000 or more if married filing jointly, or $63,000 or more if single, head of household, or qualifying widow(er) . Free tax preparation 2012   Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. Free tax preparation 2012 However, if you are filing Form 2555, Form 2555–EZ, or Form 4563, or are excluding income from Puerto RIco, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. Free tax preparation 2012 For details, see Pub. Free tax preparation 2012 970. Free tax preparation 2012    Figure 35-A may be helpful in determining if you can claim an education credit on your tax return. Free tax preparation 2012 The American opportunity credit will always be greater than or equal to the lifetime learning credit for any student who is eligible for both credits. Free tax preparation 2012 However, if any of the conditions for the American opportunity credit, listed in Table 35-1 earlier, are not met for any student, you cannot take the American opportunity credit for that student. Free tax preparation 2012 You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Free tax preparation 2012 See Pub. Free tax preparation 2012 970 for information on other education benefits. Free tax preparation 2012 Qualified Education Expenses Generally, qualified education expenses are amounts paid in 2013 for tuition and fees required for the student's enrollment or attendance at an eligible educational institution. Free tax preparation 2012 It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds. Free tax preparation 2012 For course-related books, supplies, and equipment, only certain expenses qualify. Free tax preparation 2012 American opportunity credit: Qualified education expenses include amounts spent on books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. Free tax preparation 2012 Lifetime learning credit: Qualified education expenses include amounts for books, supplies, and equipment only if required to be paid to the institution as a condition of enrollment or attendance. Free tax preparation 2012 Qualified education expenses include nonacademic fees, such as student activity fees, athletic fees, or other expenses unrelated to the academic course of instruction, only if the fee must be paid to the institution as a condition of enrollment or attendance. Free tax preparation 2012 However, fees for personal expenses (described below) are never qualified education expenses. Free tax preparation 2012 Qualified education expenses for either credit do not include amounts paid for: Personal expenses. Free tax preparation 2012 This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. Free tax preparation 2012 Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student's degree program or (for the lifetime learning credit only) helps the student acquire or improve job skills. Free tax preparation 2012 You should receive Form 1098–T, Tuition Statement, from the institution reporting either payments received in 2013 (box 1) or amounts billed in 2013 (box 2). Free tax preparation 2012 However, the amount in box 1 or 2 of Form 1098–T may be different from the amount you paid (or are treated as having paid). Free tax preparation 2012 In completing Form 8863, use only the amounts you actually paid (plus any amounts you are treated as having paid) in 2013, reduced as necessary, as described in Adjustments to Qualified Education Expenses , later. Free tax preparation 2012 Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Free tax preparation 2012 Qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Free tax preparation 2012 If you or the student takes a deduction for higher education expenses, such as on Schedule A or C (Form 1040), you cannot use those expenses in your qualified education expenses when figuring your education credits. Free tax preparation 2012 Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. Free tax preparation 2012 See Adjustments to Qualified Education Expenses, later. Free tax preparation 2012 Prepaid Expenses. Free tax preparation 2012   Qualified education expenses paid in 2013 for an academic period that begins in the first 3 months of 2014 can be used in figuring an education credit for 2013 only. Free tax preparation 2012 See Academic period , earlier. Free tax preparation 2012 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 tax preparation 2012    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 tax preparation 2012 Paid with borrowed funds. Free tax preparation 2012   You can claim an education credit for qualified education expenses paid with the proceeds of a loan. Free tax preparation 2012 Use the expenses to figure the credit for the year in which the expenses are paid, not the year in which the loan is repaid. Free tax preparation 2012 Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Free tax preparation 2012 Student withdraws from class(es). Free tax preparation 2012   You can claim an education credit for qualified education expenses not refunded when a student withdraws. Free tax preparation 2012 No Double Benefit Allowed You cannot do any of the following. Free tax preparation 2012 Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an education credit based on those same expenses. Free tax preparation 2012 Claim more than one education credit based on the same qualified education expenses. Free tax preparation 2012 Claim an education credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). Free tax preparation 2012 Claim an education credit based on qualified education expenses paid with educational assistance, such as a tax-free scholarship, grant, or employer-provided educational assistance. Free tax preparation 2012 See Adjustments to Qualified Education Expenses, next. Free tax preparation 2012 Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid in 2013 by or on behalf of that student under the following rules. Free tax preparation 2012 The result is the amount of adjusted qualified education expenses for each student. Free tax preparation 2012 Tax-free educational assistance. Free tax preparation 2012   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 tax preparation 2012 See Academic period , earlier. Free tax preparation 2012      Tax-free educational assistance includes:    Tax-free parts of scholarships and fellowships (see chapter 12 of this publication and chapter 1 of Pub. Free tax preparation 2012 970), The tax-free part of Pell grants (see chapter 1 of Pub. Free tax preparation 2012 970), The tax-free part of employer-provided educational assistance (see Pub. Free tax preparation 2012 970), Veterans' educational assistance (see chapter 1 of Pub. Free tax preparation 2012 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free tax preparation 2012 Generally, any scholarship or fellowship is treated as tax-free educational assistance. Free tax preparation 2012 However, a scholarship or fellowship is not treated as tax-free educational assistance 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: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Free tax preparation 2012 970, chapter 1; or The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Free tax preparation 2012 970, chapter 1. Free tax preparation 2012 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 received. Free tax preparation 2012 For details, see Adjustments of Qualified Education Expenses, in chapters 2 and 3 of Pub. Free tax preparation 2012 970. Free tax preparation 2012 Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Free tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 Refunds. Free tax preparation 2012   A refund of qualified education expenses may reduce qualified education expenses for the tax year or may require you to repay (recapture) the credit that you claimed in an earlier year. Free tax preparation 2012 Some tax-free educational assistance received after 2013 may be treated as a refund. Free tax preparation 2012 See Tax-free educational assistance, earlier. Free tax preparation 2012 Refunds received in 2013. Free tax preparation 2012   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Free tax preparation 2012 Refunds received after 2013 but before your income tax return is filed. Free tax preparation 2012   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. Free tax preparation 2012 Refunds received after 2013 and after your income tax return is filed. Free tax preparation 2012   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received after you file your 2013 income tax return, you may need to repay some or all of the credit that you claimed. Free tax preparation 2012 See Credit recapture, next. Free tax preparation 2012 Credit recapture. Free tax preparation 2012    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 tax preparation 2012 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 tax preparation 2012 You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Free tax preparation 2012 Include that amount as an additional tax for the year the refund or tax-free assistance was received. Free tax preparation 2012 Example. Free tax preparation 2012    You paid $8,000 tuition and fees in December 2013 for your child's Spring semester beginning in January 2014. Free tax preparation 2012 You filed your 2013 tax return on February 3, 2014, and claimed a lifetime learning credit of $1,600 ($8,000 qualified education expense paid x . Free tax preparation 2012 20). Free tax preparation 2012 You claimed no other tax credits. Free tax preparation 2012 After you filed your return, your child withdrew from two courses and you received a refund of $1,400. Free tax preparation 2012 You must refigure your 2013 lifetime learning credit using $6,600 ($8,000 qualified education expenses − $1,400 refund). Free tax preparation 2012 The refigured credit is $1,320 and your tax liability increased by $280. Free tax preparation 2012 You must include the difference of $280 ($1,600 credit originally claimed − $1,320 refigured credit) as additional tax on your 2014 income tax return. Free tax preparation 2012 See the instructions for your 2014 income tax return to determine where to include this tax. Free tax preparation 2012 If you also 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 tax preparation 2012 Amounts that do not reduce qualified education expenses. Free tax preparation 2012   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 tax preparation 2012   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 tax preparation 2012 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 Chapter 1 of Pub. Free tax preparation 2012 970. Free tax preparation 2012 The use of the money is not restricted. Free tax preparation 2012   For examples, see chapter 2 in Pub. Free tax preparation 2012 970. Free tax preparation 2012 Figure 35-A. Free tax preparation 2012 Can You Claim an Education Credit for 2013? This image is too large to be displayed in the current screen. Free tax preparation 2012 Please click the link to view the image. Free tax preparation 2012 Figure 35-A. Free tax preparation 2012 Can You Claim an Education Credit for 2013? Prev  Up  Next   Home   More Online Publications