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H and r block file free 3. H and r block file free   Lifetime Learning 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 Student Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your 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. H and r block file free They are the American opportunity credit and the lifetime learning credit. H and r block file free This chapter discusses the lifetime learning credit. H and r block file free The American opportunity credit is discussed in chapter 2, The American Opportunity Credit . H and r block file free This chapter explains: Who can claim the lifetime learning 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. H and r block file free What is the tax benefit of the lifetime learning credit. H and r block file free   For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. H and r block file free There is no limit on the number of years the lifetime learning credit can be claimed for each student. H and r block file free   A tax credit reduces the amount of income tax you may have to pay. H and r block file free Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. H and r block file free The lifetime learning credit is a nonrefundable credit. H and r block file free This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you. H and r block file free   Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. H and r block file free Can you claim more than one education credit this year. H and r block file free   For each student, you can elect for any year only one of the credits. H and r block file free For example, if you elect to take the lifetime learning credit for a child on your 2013 tax return, you cannot, for that same child, also claim the American opportunity credit for 2013. H and r block file free   If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. H and r block file free   If you pay qualified education expenses for more than one student in the same year, you can choose to take certain credits on a per-student, per-year basis. H and r block file free 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. H and r block file free Differences between the American opportunity and lifetime learning credits. H and r block file free   There are several differences between these two credits. H and r block file free For example, you can claim the American opportunity credit for the same student for no more than 4 tax years, but any year in which the Hope Scholarship Credit was claimed counts toward the 4 years. H and r block file free 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. H and r block file free 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. H and r block file free Overview of the lifetime learning credit. H and r block file free   See Table 3-1, Overview of the Lifetime Learning Credit for the basics of the lifetime learning credit. H and r block file free The details are discussed in this chapter. H and r block file free Can You Claim the Credit The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return. H and r block file free Who Can Claim the Credit Generally, you can claim the lifetime learning credit if all three of the following requirements are met. H and r block file free You pay qualified education expenses of higher education. H and r block file free You pay the education expenses for an eligible student. H and r block file free The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. H and r block file free Table 3-1. H and r block file free Overview of the Lifetime Learning Credit Maximum credit Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $127,000 if married filling jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable Nonrefundable—credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available for an unlimited number of years Type of program required Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Available for one or more courses Felony drug conviction Felony drug convictions do not make the student ineligible Qualified expenses 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 Note. H and r block file free 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. H and r block file free “Qualified education expenses” are defined later under Qualified Education Expenses . H and r block file free “Eligible students” are defined later under Who Is an Eligible Student . H and r block file free A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . H and r block file free You may find Figure 3-1, Can You Claim the Lifetime Learning Credit for 2013 , later, helpful in determining if you can claim a lifetime learning credit on your tax return. H and r block file free Who Cannot Claim the Credit You cannot claim the lifetime learning credit for 2013 if any of the following apply. H and r block file free Your filing status is married filing separately. H and r block file free You are listed as a dependent on another person's tax return (such as your parents'). H and r block file free See Who Can Claim a Dependent's Expenses , later. H and r block file free Your modified adjusted gross income (MAGI) is $63,000 or more ($127,000 or more in the case of a joint return). H and r block file free MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . H and r block file free 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. H and r block file free More information on nonresident aliens can be found in Publication 519. H and r block file free You claim the American Opportunity Credit (see chapter 2) or a Tuition and Fees Deduction (see chapter 6) for the same student in 2013. H and r block file free What Expenses Qualify The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. H and r block file free Generally, the credit is allowed for qualified education expenses paid in 2013 for an academic period beginning in 2013 or in the first 3 months of 2014. H and r block file free 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 credit. H and r block file free Academic period. H and r block file free   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. H and r block file free 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. H and r block file free Paid with borrowed funds. H and r block file free   You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. H and r block file free You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid. H and r block file free Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. H and r block file free Student withdraws from class(es). H and r block file free   You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. H and r block file free Qualified Education Expenses For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. H and r block file free The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. H and r block file free Eligible educational institution. H and r block file free   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. H and r block file free S. H and r block file free Department of Education. H and r block file free It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. H and r block file free The educational institution should be able to tell you if it is an eligible educational institution. H and r block file free   Certain educational institutions located outside the United States also participate in the U. H and r block file free S. H and r block file free Department of Education's Federal Student Aid (FSA) programs. H and r block file free Related expenses. H and r block file free   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance. H and r block file free Prepaid expenses. H and r block file free   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. H and r block file free See Academic period , earlier. H and r block file free For example, 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). H and r block file free 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). H and r block file free In the following examples, assume that each student is an eligible student at an eligible educational institution. H and r block file free Example 1. H and r block file free   Jackson is a sophomore in University V's degree program in dentistry. H and r block file free 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. H and r block file free Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense. H and r block file free Example 2. H and r block file free   Donna and Charles, 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. H and r block file free 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. H and r block file free Charles bought his books from a friend, so what he paid for them is not a qualified education expense. H and r block file free Donna bought hers at College W's bookstore. H and r block file free Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. H and r block file free Example 3. H and r block file free   When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. H and r block file free 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 student government. H and r block file free No portion of the fee covers personal expenses. H and r block file free Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. H and r block file free Therefore, it is a qualified expense. H and r block file free No Double Benefit Allowed You cannot do any of the following: Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses. H and r block file free Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student. H and r block file free Claim a lifetime learning credit and an American opportunity credit based on the same qualified education expenses. H and r block file free Claim a lifetime learning 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). H and r block file free 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. H and r block file free 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. H and r block file free See Adjustments to Qualified Education Expenses, next. H and r block file free This image is too large to be displayed in the current screen. H and r block file free Please click the link to view the image. H and r block file free Figure 3-1 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. H and r block file free The result is the amount of adjusted qualified education expenses for each student. H and r block file free Tax-free educational assistance. H and r block file free   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. H and r block file free See Academic period , earlier. H and r block file free   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. H and r block file free 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). H and r block file free   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. H and r block file free 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. H and r block file free   Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), 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. H and r block file free Generally, any scholarship or fellowship is treated as tax free. H and r block file free 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. H and r block file free 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. H and r block file free 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. H and r block file free 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. H and r block file free For examples, see Coordination with Pell grants and other scholarships, later. H and r block file free Refunds. H and r block file free   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. H and r block file free Some tax-free educational assistance received after 2013 may be treated as a refund. H and r block file free See Tax-free educational assistance , earlier. H and r block file free Refunds received in 2013. H and r block file free   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. H and r block file free Refunds received after 2013 but before your income tax return is filed. H and r block file free   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. H and r block file free Refunds received after 2013 and after your income tax return is filed. H and r block file free   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. H and r block file free See Credit recapture, next. H and r block file free Credit recapture. H and r block file free    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. H and r block file free 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. H and r block file free 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). H and r block file free Include that amount as an additional tax for the year the refund or tax-free assistance was received. H and r block file free Example. H and r block file free   You pay $9,300 in tuition and fees in December 2013, and your child began college in January 2014. H and r block file free You filed your 2013 tax return on February 14, 2014, and claimed a lifetime learning credit of $1,860. H and r block file free You claimed no other tax credits. H and r block file free After you filed your return, your child withdrew from two courses and you received a refund of $2,900. H and r block file free You must refigure your 2013 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. H and r block file free The refigured credit is $1,280 and your tax liability increased by $580. H and r block file free See instructions for your 2014 income tax return to determine where to include this tax. H and r block file free 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. H and r block file free Amounts that do not reduce qualified education expenses. H and r block file free   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. H and r block file free   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. H and r block file free 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. H and r block file free The use of the money is not restricted. H and r block file free For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit. H and r block file free Coordination with Pell grants and other scholarships. H and r block file free   In some cases, you may be able to reduce your tax liability by including scholarships in income. H and r block file free 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. H and r block file free The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. H and r block file free Example 1—No scholarship. H and r block file free Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. H and r block file free Her AGI and her MAGI, for purposes of the credit, are $27,000. H and r block file free Judy takes the standard deduction of $5,950 and personal exemption of $3,800, reducing her AGI to taxable income of $17,250 and her tax before credits is $2,156. H and r block file free She claims no credits other than the lifetime learning credit. H and r block file free In July 2013 she paid $700 for the summer 2013 semester; in August 2013 she paid $1,900 for the fall 2013 semester; and in December 2013 she paid another $1,900 for the spring semester beginning in January 2014. H and r block file free Judy and the college meet all requirements for the lifetime learning tax credit. H and r block file free She can use all of the $4,500 tuition she paid in 2013 when figuring her 2013 lifetime learning credit. H and r block file free She claims a $900 lifetime learning credit and her tax after credits is $1,256. H and r block file free Example 2—Scholarship excluded from income. H and r block file free The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. H and r block file free Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. H and r block file free If Judy excludes the scholarship from income, she will be deemed (for purposes of computing her education credit) as having used the scholarship to pay for tuition, required fees, and course materials. H and r block file free Only $3,000 of the $4,500 tuition she paid in 2013 could be used when figuring her 2013 lifetime learning credit. H and r block file free Her lifetime learning credit would be reduced to $600 and her tax after credits would be $1,556. H and r block file free Example 3—Scholarship included in income. H and r block file free The facts are the same as in Example 2—Scholarship excluded from income. H and r block file free If, unlike Example 2, Judy includes the $1,500 scholarship in income, she will be deemed to have used the entire scholarship to pay for room and board. H and r block file free Judy's AGI will increase to $28,500, her taxable income would be $18,750, and her tax before credits would be $2,381. H and r block file free She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. H and r block file free Judy could claim a $900 lifetime learning credit and her tax after credits would be $1,481. H and r block file free 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. H and r block file free This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. H and r block file free Sports, games, hobbies, and noncredit courses. H and r block file free   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. H and r block file free However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify. H and r block file free Comprehensive or bundled fees. H and r block file free   Some eligible educational institutions combine all of their fees for an academic period into one amount. H and r block file free If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. H and r block file free 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. H and r block file free See Figuring the Credit , later, for more information about Form 1098-T. H and r block file free Who Is an Eligible Student For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses , earlier). H and r block file free 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 a lifetime learning credit for your dependent's expenses for that year. H and r block file free For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. H and r block file free You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. H and r block file free IF you. H and r block file free . H and r block file free . H and r block file free THEN only. H and r block file free . H and r block file free . H and r block file free claim an exemption on your tax return for a dependent who is an eligible student you can claim the lifetime learning credit based on that dependent's expenses. H and r block file free The dependent cannot claim the credit. H and r block file free 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 lifetime learning credit. H and r block file free You cannot claim the credit based on this dependent's expenses. H and r block file free Expenses paid by dependent. H and r block file free   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. H and r block file free Include these expenses when figuring the amount of your lifetime learning credit. H and r block file free    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. H and r block file free Expenses paid by you. H and r block file free   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 lifetime learning credit. H and r block file free If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the lifetime learning credit. H and r block file free Expenses paid by others. H and r block file free   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. H and r block file free In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. H and r block file free If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. H and r block file free Example. H and r block file free In 2013, Ms. H and r block file free Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. H and r block file free For purposes of claiming a lifetime learning credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. H and r block file free Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim a lifetime learning credit. H and r block file free 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 a lifetime learning credit. H and r block file free If anyone else claims an exemption for Todd, Todd cannot claim a lifetime learning credit. H and r block file free Tuition reduction. H and r block file free   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. H and r block file free 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. H and r block file free For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. H and r block file free Figuring the Credit The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. H and r block file free The maximum amount of lifetime learning credit you can claim for 2013 is $2,000 (20% × $10,000). H and r block file free However, that amount may be reduced based on your MAGI. H and r block file free See Effect of the Amount of Your Income on the Amount of Your Credit , later. H and r block file free Example. H and r block file free Bruce and Toni Harper are married and file a joint tax return. H and r block file free For 2013, their MAGI is $75,000. H and r block file free Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. H and r block file free She already has a bachelor's degree in history and wants to become a nurse. H and r block file free In August 2013, Toni paid $5,000 of qualified education expenses for her fall 2013 semester. H and r block file free Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2013 joint tax return. H and r block file free Form 1098-T. H and r block file free   To help you figure your lifetime learning credit, the student should receive Form 1098-T. H and r block file free 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. H and r block file free An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. H and r block file free However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you paid. H and r block file free When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. H and r block file free   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. H and r block file free    The eligible educational institution may ask for a completed Form W-9S, or similar statement to obtain the student's name, address, and taxpayer identification number. H and r block file free Effect of the Amount of Your Income on the Amount of Your Credit The amount of your lifetime learning credit is phased out (gradually reduced) if your MAGI is between $53,000 and $63,000 ($107,000 and $127,000 if you file a joint return). H and r block file free You cannot claim a lifetime learning credit if your MAGI is $63,000 or more ($127,000 or more if you file a joint return). H and r block file free Modified adjusted gross income (MAGI). H and r block file free   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. H and r block file free MAGI when using Form 1040A. H and r block file free   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. H and r block file free MAGI when using Form 1040. H and r block file free   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. H and r block file free You can use Worksheet 3-1 to figure your MAGI. H and r block file free Worksheet 3-1. H and r block file free MAGI for the Lifetime Learning Credit 1. H and r block file free Enter your adjusted gross income  (Form 1040, line 38)   1. H and r block file free   2. H and r block file free Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. H and r block file free       3. H and r block file free Enter your foreign housing deduction (Form 2555, line 50)   3. H and r block file free       4. H and r block file free Enter the amount of income from Puerto Rico you are excluding   4. H and r block file free       5. H and r block file free Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. H and r block file free       6. H and r block file free Add the amounts on lines 2, 3, 4, and 5   6. H and r block file free   7. H and r block file free Add the amounts on lines 1 and 6. H and r block file free  This is your modified adjusted  gross income. H and r block file free Enter this amount  on Form 8863, line 14   7. H and r block file free   Phaseout. H and r block file free   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 10-18 of Form 8863. H and r block file free The same method is shown in the following example. H and r block file free Example. H and r block file free You are filing a joint return with a MAGI of $112,000. H and r block file free In 2013, you paid $6,600 of qualified education expenses. H and r block file free You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). H and r block file free The result is a $1,320 (20% x $6,600) tentative credit. H and r block file free Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. H and r block file free The numerator of the fraction is $127,000 (the upper limit for those filing a joint return) minus your MAGI. H and r block file free The denominator is $20,000, the range of incomes for the phaseout ($107,000 to $127,000). H and r block file free The result is the amount of your phased out (reduced) lifetime learning credit ($990). H and r block file free   $1,320 × $127,000 − $112,000  $20,000 = $990   Claiming the Credit You claim the lifetime learning credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. H and r block file free Enter the credit on Form 1040, line 49, or Form 1040A, line 31. H and r block file free Note. H and r block file free In Appendix A, Illustrated Example of Education Credits 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. 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The H And R Block File Free

H and r block file free Index A Additional Medicare Tax, What's New for 2013, What's New, Employment Taxes, Additional Medicare Tax. H and r block file free Advertising, Advertising expenses. H and r block file free Amortization Anti-abuse rule, Anti-abuse rule. H and r block file free Anti-churning rules, Anti-Churning Rules Atmospheric pollution control facilities, Pollution Control Facilities Corporate organization costs, Costs of Organizing a Corporation Dispositions of section 197 intangibles, Disposition of Section 197 Intangibles Experimental costs, Research and Experimental Costs Geological and geophysical costs, Geological and Geophysical Costs How to deduct, How To Deduct Amortization Incorrect amount deducted, Incorrect Amount of Amortization Deducted Partnership organization costs, Costs of Organizing a Partnership Pollution control facilities, Pollution Control Facilities Reforestation costs, Reforestation Costs Reforestation expenses, Reforestation Costs Related person, Related person. H and r block file free Research costs, Research and Experimental Costs Section 197 intangibles defined, Section 197 Intangibles Defined Start-up costs, Business Start-Up Costs Starting a businesscosts, Starting a Business Anticipated liabilities, Anticipated liabilities. H and r block file free Assessments, local, Taxes for local benefits. H and r block file free Assistance (see Tax help) At-risk limits, At-risk limits. H and r block file free Attorney fees, Legal and professional fees. H and r block file free Awards, Achievement awards. H and r block file free , Length-of-service award. H and r block file free , Safety achievement award. H and r block file free B Bad debts Defined, Definition of Business Bad Debt How to treat, How To Claim a Business Bad Debt Recovery, Recovery of a Bad Debt Types of, Types of Business Bad Debts When worthless, When a Debt Becomes Worthless Bonuses Employee, Bonuses Royalties, Bonuses and advanced royalties. H and r block file free Bribes, Bribes and kickbacks. H and r block file free Business Assets, Business Assets Books and records, Business books and records, etc. H and r block file free Meal expenses, Meals and Entertainment Use of car, Business use of your car. H and r block file free , Car and truck expenses. H and r block file free Use of home, Business use of your home. H and r block file free C Campaign contribution, Political contributions. H and r block file free Capital expenses, Capital Expenses, Capital versus Deductible Expenses Capitalization of interest, Capitalization of Interest Car allowance, Car allowance. H and r block file free Car and truck expenses, Car and truck expenses. H and r block file free Carrying charges, Carrying Charges Charitable contributions, Charitable contributions. H and r block file free Circulation costs, newspapers and periodicals, Circulation Costs Club dues, Club dues and membership fees. H and r block file free Comments on publication, Comments and suggestions. H and r block file free Commitment fees, Commitment fees or standby charges. H and r block file free Computer software, Computer software. H and r block file free Constant-yield method, OID, Constant-yield method. H and r block file free Contested liability, Contested liability. H and r block file free Contributions Charitable, Charitable contributions. H and r block file free Political, Political contributions. H and r block file free Copyrights, Patents, copyrights, etc. H and r block file free Cost depletion, Cost Depletion Cost of getting lease, Cost of Getting a Lease, Getting a Lease Cost of goods sold, Cost of Goods Sold Cost recovery, Cost recovery. H and r block file free Covenant not to compete, Covenant not to compete. H and r block file free Credit card convenience fees, Credit card convenience fees. H and r block file free D De minimis OID, De minimis OID. H and r block file free Debt-financed distributions, Debt-financed distribution. H and r block file free Definitions Business bad debt, Definition of Business Bad Debt Necessary expense, What Can I Deduct? Ordinary expense, What Can I Deduct? Section 197 intangibles, Section 197 Intangibles Defined Demolition expenses, Demolition expenses or losses. H and r block file free Depletion Mineral property, Mineral Property Oil and gas wells, Oil and Gas Wells Percentage table, Mines and other natural deposits. H and r block file free Timber, Timber Who can claim, Who Can Claim Depletion? Depreciation (see Cost recovery) Development costs, miners, Development Costs Disabled, improvements for, Barrier Removal Costs Drilling and development costs, Intangible Drilling Costs Dues, membership, Club dues and membership fees. H and r block file free E Economic interest, Who Can Claim Depletion? Economic performance, Economic performance. H and r block file free Education expenses, Education Expenses, Education expenses. H and r block file free Elderly, improvements for, Barrier Removal Costs Employee benefit programs, Employee benefit programs. H and r block file free Employment taxes, Employment Taxes Entertainment, Reimbursement of Travel, Meals, and Entertainment Excise taxes, Excise taxes. H and r block file free Experimentation costs, Research and Experimental Costs, Research and Experimental Costs Exploration costs, Exploration Costs F Fees Commitment, Commitment fees or standby charges. H and r block file free Legal and professional, Legal and professional fees. H and r block file free Regulatory, Licenses and regulatory fees. H and r block file free Tax return preparation, Tax preparation fees. H and r block file free Fines, Penalties and fines. H and r block file free Forgone, Forgone interest. H and r block file free Forgone interest, Forgone interest. H and r block file free Form 3115, Form 3115. H and r block file free , Changing Your Accounting Method 4562, How To Deduct Amortization 5213, Using the presumption later. H and r block file free 8826, Disabled access credit. H and r block file free 8885, Health coverage tax credit. H and r block file free T, Form T. H and r block file free Franchise, Franchise, trademark, or trade name. H and r block file free , Franchise, trademark, trade name. H and r block file free Franchise taxes, Franchise taxes. H and r block file free Free tax services, Free help with your tax return. H and r block file free Fringe benefits, Fringe Benefits Fuel taxes, Fuel taxes. H and r block file free G Gas wells, Natural Gas Wells Geological and geophysical costs Development, oil and gas, Geological and Geophysical Costs Exploration, oil and gas, Geological and Geophysical Costs Geothermal wells, Intangible Drilling Costs, Mines and Geothermal Deposits Gifts, nominal value, Gifts of nominal value. H and r block file free Going into business, Going Into Business, Starting a Business Goodwill, Goodwill. H and r block file free Gross income, not-for-profit activity, Gross Income H Health insurance, deduction for self-employed, Self-Employed Health Insurance Deduction Heating equipment, Heating equipment. H and r block file free Help (see Tax help) Home, business use of, Business use of your home. H and r block file free I Impairment-related expenses, Impairment-related expenses. H and r block file free Improvements, Improvements By lessee, Improvements by Lessee For disabled and elderly, Barrier Removal Costs Income taxes, Income Taxes Incorrect amount of amortization deducted, Incorrect Amount of Amortization Deducted Insurance Capitalized premiums, Capitalized Premiums Deductible premiums, Deductible Premiums Nondeductible premiums, Nondeductible Premiums Self-employed individuals, Self-Employed Health Insurance Deduction Intangible drilling costs, Intangible Drilling Costs Intangibles, amortization, Section 197 Intangibles Interest, Forgone interest. H and r block file free Allocation of, Allocation of Interest Below-market, Below-Market Loans Business expense for, Interest Capitalized, Capitalized interest. H and r block file free , Capitalization of Interest Carrying charge, Carrying Charges Deductible, Interest You Can Deduct Life insurance policies, Interest on loans with respect to life insurance policies. H and r block file free Not deductible, Interest You Cannot Deduct Refunds of, Refunds of interest. H and r block file free When to deduct, When To Deduct Interest Internet-related expenses, Internet-related expenses. H and r block file free Interview expenses, Interview expense allowances. H and r block file free K Key person, Who is a key person? Kickbacks, Bribes and kickbacks. H and r block file free L Leases Canceling, Canceling a lease. H and r block file free Cost of getting, Cost of Getting a Lease, Getting a Lease Improvements by lessee, Improvements by Lessee Leveraged, Leveraged leases. H and r block file free Mineral, Bonuses and advanced royalties. H and r block file free Oil and gas, Bonuses and advanced royalties. H and r block file free Sales distinguished, Lease or purchase. H and r block file free Taxes on, Taxes on Leased Property Legal and professional fees, Legal and professional fees. H and r block file free Licenses, Government-granted license, permit, etc. H and r block file free , Licenses and regulatory fees. H and r block file free Life insurance coverage, Life insurance coverage. H and r block file free Limit on deductions, Not-for-Profit Activities Line of credit, Line of credit (continuous borrowings). H and r block file free Loans Below-market interestrate, Below-Market Loans Discounted, Discounted loan. H and r block file free Loans or Advances, Loans or Advances Lobbying expenses, Lobbying expenses. H and r block file free Long-term care insurance, Qualified long-term care insurance. H and r block file free Losses, Limits on losses. H and r block file free , Not-for-Profit Activities At-risk limits, At-risk limits. H and r block file free Net operating, Net operating loss. H and r block file free Passive activities, Passive activities. H and r block file free M Machinery parts, Machinery parts. H and r block file free Meals, Reimbursement of Travel, Meals, and Entertainment Meals and entertainment, Meals and Entertainment Meals and lodging, Meals and lodging. H and r block file free Methods of accounting, When Can I Deduct an Expense? Mining Depletion, Mines and Geothermal Deposits Development costs, Development Costs Exploration costs, Exploration Costs Mortgage, Mortgage. H and r block file free , Expenses paid to obtain a mortgage. H and r block file free Moving expenses, machinery, Moving machinery. H and r block file free N Natural gas, Natural Gas Wells Nonqualifying intangibles, Assets That Are Not Section 197 Intangibles Not-for-profit activities, Not-for-Profit Activities Not-for-profit activity, gross income, Gross Income O Office in home, Business use of your home. H and r block file free Oil and gas wells Depletion, Oil and Gas Wells Drilling costs, Intangible Drilling Costs Partnerships, Partnerships and S Corporations S corporations, Partnerships and S Corporations Optional safe harbor method, Optional safe harbor method. H and r block file free Optional write-off method Circulation costs, Optional Write-off of Certain Tax Preferences Experimental costs, Optional Write-off of Certain Tax Preferences Intangible drilling and development costs, Optional Write-off of Certain Tax Preferences Mining exploration and development costs, Optional Write-off of Certain Tax Preferences Research costs, Optional Write-off of Certain Tax Preferences Organization costs Corporate, Costs of Organizing a Corporation Partnership, Costs of Organizing a Partnership Organizational costs, Business Start-Up and Organizational Costs Original issue discount, Original issue discount (OID). H and r block file free Outplacement services, Outplacement services. H and r block file free P Passive activities, Passive activities. H and r block file free Payments in kind, Payments in kind. H and r block file free Penalties, Prepayment penalty. H and r block file free Deductible, Penalties and fines. H and r block file free Nondeductible, Penalties and fines. H and r block file free Prepayment, Prepayment penalty. H and r block file free Per diem and car allowances, Per Diem and Car Allowances Percentage depletion, Percentage Depletion Personal property tax, Personal property tax. H and r block file free Political contributions, Political contributions. H and r block file free Pollution control facilities, Pollution Control Facilities Prepaid expense, Prepayment. H and r block file free Extends useful life, Prepayment. H and r block file free Interest, Prepaid interest. H and r block file free , Prepaid interest. H and r block file free Rent, Rent paid in advance. H and r block file free Prepayment penalty, Prepayment penalty. H and r block file free Presumption of profit, Not-for-Profit Activities Publications (see Tax help) R Real estate taxes, Real Estate Taxes Recapture Exploration expenses, Recapture of exploration expenses. H and r block file free Timber property, Recapture. H and r block file free Recordkeeping, Partnerships and S Corporations Recovery of amount deducted, Recovery of amount deducted (tax benefit rule). H and r block file free Refiners who cannot claim percentage depletion, Refiners who cannot claim percentage depletion. H and r block file free Reforestation costs, Reforestation Costs, Reforestation Costs Regulatory fees, Licenses and regulatory fees. H and r block file free Reimbursements, Reimbursements Business expenses, Reimbursements for Business Expenses Mileage, Per Diem and Car Allowances Nonaccountable plan, Nonaccountable Plans Per diem , Per Diem and Car Allowances Related persons Anti-churning rules, Related person. H and r block file free Coal or iron ore, Disposal to related person. H and r block file free Payments to, Related person. H and r block file free , Related person. H and r block file free Refiners, Related person. H and r block file free Unreasonable rent, Unreasonable rent. H and r block file free Removal, Retired Asset Removal Costs, Barrier Removal Costs Rent expense, capitalizing, Capitalizing Rent Expenses Repairs, Repairs. H and r block file free Repayments (claim of right), Repayments. H and r block file free Research costs, Research and Experimental Costs, Research and Experimental Costs Retiree drug subsidy, What's New for 2013, What's New S Sales taxes, Sales tax. H and r block file free Section 179 expense deduction (see Cost recovery) Self-employed health insurance deduction, Self-Employed Health Insurance Deduction Self-employment tax, Self-employment tax. H and r block file free Self-insurance, reserve for, Nondeductible Premiums Sick pay, Sick and Vacation Pay Standard meal allowance, Standard meal allowance. H and r block file free Standard mileage rate, Car allowance. H and r block file free (see Business use of your car) Standby charges, Commitment fees or standby charges. H and r block file free Start-up costs, Business Start-Up and Organizational Costs, Business Start-Up Costs Subscriptions, Subscriptions. H and r block file free Suggestions for publication, Comments and suggestions. H and r block file free Supplies and materials, Supplies and materials. H and r block file free T Tax help, How To Get Tax Help Tax preparation fees, Tax preparation fees. H and r block file free Taxes, Taxes on Leased Property Carrying charge, Carrying Charges Employment, Employment Taxes Excise, Excise taxes. H and r block file free Franchise, Franchise taxes. H and r block file free Fuel, Fuel taxes. H and r block file free Income, Income Taxes Leased property, Taxes on Leased Property Personal property, Personal property tax. H and r block file free Real estate, Real Estate Taxes Sales, Sales tax. H and r block file free Unemployment fund, Unemployment fund taxes. H and r block file free Telephone, Telephone. H and r block file free Timber, Reforestation Costs, Timber Tools, Tools. H and r block file free Trademark, trade name, Franchise, trademark, or trade name. H and r block file free , Franchise, trademark, trade name. H and r block file free Travel, Reimbursement of Travel, Meals, and Entertainment TTY/TDD information, How To Get Tax Help U Unemployment fund taxes, Unemployment fund taxes. H and r block file free Unpaid expenses, related person, Related person. H and r block file free Utilities, Utilities. H and r block file free V Vacation pay, Sick and Vacation Pay W Wages Property, Property Tests for deducting pay, Tests for Deducting Pay Welfare benefit funds, Welfare benefit funds. H and r block file free Prev  Up     Home   More Online Publications