Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

H&r Block Taxes

Filing A 1040x OnlineWhere To File My 2011 Tax ReturnTax Act Online 2011Amended Tax Form 2012Free Tax Filing Online1099x2013 Irs 1040ezIrs1040ez FormAmend 2012 Tax Return1040ez Online FreeFiling State Taxes For FreeHow To File A Amended Tax ReturnFiling A 1040 EzHow To Amend A State Tax Return1040x TaxactFree State Tax File Online1040x FreeTax Extension Online FreeIrs 2012 Tax Forms 1040ezState Taxes Free FileE File 2012 Taxes LateHow To File 2011 Taxes For FreeEz Federal Tax FormFile Prior Year Taxes Online2012 Turbotax Free1040ez State Tax FormHow Soon Can I File My 2012 Taxes In 2013How To File 2012 Taxes OnlineFile Free State TaxIrs 2012 Tax Forms 1040 EzFree 1040xE File State Taxes FreeFile 2011 State Taxes Online FreeTurbo Tax 1040nrI Need To Amend My 2012 TaxesIrs 1040ez FormFree State Tax Returns OnlineDo Active Military Pay TaxesH&r Block Tax FreeAmend Tax Return

H&r Block Taxes

H&r block taxes Publication 584 - Main Content Table of Contents LossesCost or other basis. H&r block taxes Fair market value. H&r block taxes Exception for personal-use real property. H&r block taxes More information. H&r block taxes Comments and SuggestionsOrdering forms and publications. H&r block taxes Tax questions. H&r block taxes How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). H&r block taxes Losses Generally, you may deduct losses to your home, household goods, and motor vehicles on your federal income tax return. H&r block taxes However, you may not deduct a casualty or theft loss that is covered by insurance unless you filed a timely insurance claim for reimbursement. H&r block taxes Any reimbursement you receive will reduce the loss. H&r block taxes If you did not file an insurance claim, you may deduct only the part of the loss that was not covered by insurance. H&r block taxes Amount of loss. H&r block taxes   You figure the amount of your loss using the following steps. H&r block taxes Determine your cost or other basis in the property before the casualty or theft. H&r block taxes Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. H&r block taxes (The decrease in FMV is the difference between the property's value immediately before and immediately after the casualty or theft. H&r block taxes ) From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. H&r block taxes Apply the deduction limits, discussed later, to determine the amount of your deductible loss. H&r block taxes Cost or other basis. H&r block taxes   Cost or other basis usually means original cost plus improvements. H&r block taxes If you did not acquire the property by purchasing it, your basis is determined as discussed in Publication 551, Basis of Assets. H&r block taxes If you inherited the property from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. H&r block taxes Fair market value. H&r block taxes   FMV is the price for which you could sell your property to a willing buyer, when neither of you has to sell or buy and both of you know all the relevant facts. H&r block taxes When filling out Schedules 1 through 20, you need to know the FMV of the property immediately before and immediately after the disaster, casualty, or theft. H&r block taxes Separate computations. H&r block taxes   Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. H&r block taxes Then combine the losses to determine the total loss from that casualty or theft. H&r block taxes Exception for personal-use real property. H&r block taxes   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. H&r block taxes Figure the loss using the smaller of the following. H&r block taxes The decrease in FMV of the entire property. H&r block taxes The adjusted basis of the entire property. H&r block taxes Deduction limits. H&r block taxes   After you have figured the amount of your loss, as discussed earlier, you must figure how much of the loss you can deduct. H&r block taxes You do this on Form 4684, section A. H&r block taxes If the loss was to property for your personal use or your family's, there are two limits on the amount you can deduct for your casualty or theft loss. H&r block taxes You must reduce each casualty or theft loss by $100 ($100 rule). H&r block taxes You must further reduce the total of all your losses by 10% of your adjusted gross income (10% rule). H&r block taxes More information. H&r block taxes   For more information about the deduction limits, see Publication 547. H&r block taxes When your loss is deductible. H&r block taxes   You can generally deduct a casualty or disaster area loss only in the tax year in which the casualty or disaster occurred. H&r block taxes You can generally deduct a theft loss only in the year you discovered your property was stolen. H&r block taxes However, you can choose to deduct disaster area losses on your return for the year immediately before the year of the disaster if the President has declared your area a federal disaster area. H&r block taxes For details, see Disaster Area Losses in Publication 547. H&r block taxes Comments and Suggestions We welcome your comments about this publication and your suggestions for future editions. H&r block taxes You can write to us at the following address: Internal Revenue Service Individual Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. H&r block taxes NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. H&r block taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block taxes You can email us at taxforms@irs. H&r block taxes gov. H&r block taxes Please put “Publications Comment” on the subject line. H&r block taxes You can also send us comments from www. H&r block taxes irs. H&r block taxes gov/formspubs. H&r block taxes Select “Comment on Tax Forms and Publications” under “Information about. H&r block taxes ” 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. H&r block taxes Ordering forms and publications. H&r block taxes   Visit www. H&r block taxes irs. H&r block taxes gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. H&r block taxes Internal Revenue Service 1201 N. H&r block taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block taxes   If you have a tax question, check the information available on IRS. H&r block taxes gov or call 1-800-829-1040. H&r block taxes We cannot answer tax questions sent to either of the above addresses. H&r block taxes How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. H&r block taxes By selecting the method that is best for you, you will have quick and easy access to tax help. H&r block taxes Free help with your return. H&r block taxes   Free help in preparing your return is available nationwide from IRS-certified volunteers. H&r block taxes The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. H&r block taxes Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. H&r block taxes To find the nearest VITA or TCE site, visit IRS. H&r block taxes gov or call 1-800-906-9887 or 1-800-829-1040. H&r block taxes   As part of the TCE program, AARP offers the Tax-Aide counseling program. H&r block taxes To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at www. H&r block taxes aarp. H&r block taxes org/money/taxaide. H&r block taxes   For more information on these programs, go to IRS. H&r block taxes gov and enter keyword “VITA” in the upper right-hand corner. H&r block taxes Internet. H&r block taxes You can access the IRS website at IRS. H&r block taxes gov 24 hours a day, 7 days a week to: E-file your return. H&r block taxes Find out about commercial tax preparation and e-file services available free to eligible taxpayers. H&r block taxes Check the status of your 2011 refund. H&r block taxes Go to IRS. H&r block taxes gov and click on Where's My Refund. H&r block taxes Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. H&r block taxes If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). H&r block taxes Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. H&r block taxes Download forms, including talking tax forms, instructions, and publications. H&r block taxes Order IRS products online. H&r block taxes Research your tax questions online. H&r block taxes Search publications online by topic or keyword. H&r block taxes Use the online Internal Revenue Code, regulations, or other official guidance. H&r block taxes View Internal Revenue Bulletins (IRBs) published in the last few years. H&r block taxes Figure your withholding allowances using the withholding calculator online at www. H&r block taxes irs. H&r block taxes gov/individuals. H&r block taxes Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant available online at www. H&r block taxes irs. H&r block taxes gov/individuals. H&r block taxes Sign up to receive local and national tax news by email. H&r block taxes Get information on starting and operating a small business. H&r block taxes Phone. H&r block taxes Many services are available by phone. H&r block taxes   Ordering forms, instructions, and publications. H&r block taxes Call 1-800-TAX -FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. H&r block taxes You should receive your order within 10 days. H&r block taxes Asking tax questions. H&r block taxes Call the IRS with your tax questions at 1-800-829-1040. H&r block taxes Solving problems. H&r block taxes You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. H&r block taxes An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. H&r block taxes Call your local Taxpayer Assistance Center for an appointment. H&r block taxes To find the number, go to www. H&r block taxes irs. H&r block taxes gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. H&r block taxes TTY/TDD equipment. H&r block taxes If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. H&r block taxes TeleTax topics. H&r block taxes Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. H&r block taxes Refund information. H&r block taxes To check the status of your 2011 refund, call 1-800-829-1954 or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). H&r block taxes Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. H&r block taxes If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). H&r block taxes Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. H&r block taxes If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. H&r block taxes Other refund information. H&r block taxes To check the status of a prior-year refund or amended return refund, call 1-800-829-1040. H&r block taxes Evaluating the quality of our telephone services. H&r block taxes To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. H&r block taxes One method is for a second IRS representative to listen in on or record random telephone calls. H&r block taxes Another is to ask some callers to complete a short survey at the end of the call. H&r block taxes Walk-in. H&r block taxes Many products and services are available on a walk-in basis. H&r block taxes   Products. H&r block taxes You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. H&r block taxes Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. H&r block taxes Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. H&r block taxes Services. H&r block taxes You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. H&r block taxes An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. H&r block taxes If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. H&r block taxes No appointment is necessary—just walk in. H&r block taxes If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. H&r block taxes A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. H&r block taxes If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. H&r block taxes All other issues will be handled without an appointment. H&r block taxes To find the number of your local office, go to  www. H&r block taxes irs. H&r block taxes gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. H&r block taxes Mail. H&r block taxes You can send your order for forms, instructions, and publications to the address below. H&r block taxes You should receive a response within 10 days after your request is received. H&r block taxes  Internal Revenue Service 1201 N. H&r block taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. H&r block taxes   The Taxpayer Advocate Service (TAS) is your voice at the IRS. H&r block taxes Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. H&r block taxes We offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. H&r block taxes Remember, the worst thing you can do is nothing at all. H&r block taxes   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. H&r block taxes You face (or your business is facing) an immediate threat of adverse action. H&r block taxes You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. H&r block taxes   If you qualify for our help, we’ll do everything we can to get your problem resolved. H&r block taxes You will be assigned to one advocate who will be with you at every turn. H&r block taxes We have offices in every state, the District of Columbia, and Puerto Rico. H&r block taxes Although TAS is independent within the IRS, our advocates know how to work with the IRS to get your problems resolved. H&r block taxes And our services are always free. H&r block taxes   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. H&r block taxes Our tax toolkit at www. H&r block taxes TaxpayerAdvocate. H&r block taxes irs. H&r block taxes gov can help you understand these rights. H&r block taxes   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. H&r block taxes irs. H&r block taxes gov/advocate. H&r block taxes You can also call our toll-free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059. H&r block taxes   TAS also handles large-scale or systemic problems that affect many taxpayers. H&r block taxes If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. H&r block taxes irs. H&r block taxes gov/advocate. H&r block taxes Low Income Taxpayer Clinics (LITCs). H&r block taxes   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. H&r block taxes Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. H&r block taxes These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. H&r block taxes Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. H&r block taxes For more information and to find a clinic near you, see the LITC page on www. H&r block taxes irs. H&r block taxes gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. H&r block taxes This publication is also available by calling 1-800-829-3676 or at your local IRS office. H&r block taxes Free tax services. H&r block taxes   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. H&r block taxes Learn about free tax information from the IRS, including publications, services, and education and assistance programs. H&r block taxes The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. H&r block taxes The majority of the information and services listed in this publication are available to you free of charge. H&r block taxes If there is a fee associated with a resource or service, it is listed in the publication. H&r block taxes   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. H&r block taxes DVD for tax products. H&r block taxes You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. H&r block taxes Prior-year forms, instructions, and publications. H&r block taxes Tax Map: an electronic research tool and finding aid. H&r block taxes Tax law frequently asked questions. H&r block taxes Tax Topics from the IRS telephone response system. H&r block taxes Internal Revenue Code—Title 26 of the U. H&r block taxes S. H&r block taxes Code. H&r block taxes Links to other Internet based Tax Research Materials. H&r block taxes Fill-in, print, and save features for most tax forms. H&r block taxes Internal Revenue Bulletins. H&r block taxes Toll-free and email technical support. H&r block taxes Two releases during the year. H&r block taxes  – The first release will ship the beginning of January 2012. H&r block taxes  – The final release will ship the beginning of March 2012. H&r block taxes Purchase the DVD from National Technical Information Service (NTIS) at www. H&r block taxes irs. H&r block taxes gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). H&r block taxes Prev  Up  Next   Home   More Online Publications
Español

Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Nebraska Office of the Attorney General

Website: Nebraska Office of the Attorney General

Address: Nebraska Office of the Attorney General
Consumer Protection Division
2115 State Capitol
Lincoln, NE 68509

Phone Number: 402-471-2682

Toll-free: 1-800-727-6432 (NE) 1-888-850-7555 (in Spanish)

Back to Top

Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Banking and Finance

Website: Department of Banking and Finance

Address: Department of Banking and Finance
PO Box 95006
Lincoln, NE 68509-5006

Phone Number: 402-471-2171

Toll-free: 1-877-471-3445

Back to Top

Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
PO Box 82089
Lincoln, NE 68501-2089

Phone Number: 402-471-2201

Toll-free: 1-877-564-7323 (NE)

TTY: 1-800-833-7352

Back to Top

Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Banking and Finance

Website: Department of Banking and Finance

Address: Department of Banking and Finance
Bureau of Securities
PO Box 95006
Lincoln, NE 68509-5006

Phone Number: 402-471-3445

Toll-free: 1-877-471-3445

Back to Top

Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
1200 N St., Suite 300
Lincoln, NE 68508

Phone Number: 402-471-3101

Toll-free: 1-800-526-0017 (NE)

TTY: 402-471-0213

Back to Top

The H&r Block Taxes

H&r block taxes 7. H&r block taxes   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. H&r block taxes For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. H&r block taxes There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. H&r block taxes However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. H&r block taxes See Contributions , later. H&r block taxes This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. H&r block taxes What is the tax benefit of the Coverdell ESA. H&r block taxes   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. H&r block taxes   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. H&r block taxes See Tax-Free Distributions , later. H&r block taxes    Table 7-1 summarizes the main features of the Coverdell ESA. H&r block taxes Table 7-1. H&r block taxes Coverdell ESA at a Glance Do not rely on this table alone. H&r block taxes It provides only general highlights. H&r block taxes See the text for definitions of terms in bold type and for more complete explanations. H&r block taxes Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. H&r block taxes Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. H&r block taxes Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. H&r block taxes Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). H&r block taxes Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. H&r block taxes What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. H&r block taxes When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. H&r block taxes To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. H&r block taxes The document creating and governing the account must be in writing and must satisfy the following requirements. H&r block taxes The trustee or custodian must be a bank or an entity approved by the IRS. H&r block taxes The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. H&r block taxes The contribution is in cash. H&r block taxes The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block taxes The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. H&r block taxes Money in the account cannot be invested in life insurance contracts. H&r block taxes Money in the account cannot be combined with other property except in a common trust fund or common investment fund. H&r block taxes The balance in the account generally must be distributed within 30 days after the earlier of the following events. H&r block taxes The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. H&r block taxes The beneficiary's death. H&r block taxes Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. H&r block taxes For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. H&r block taxes Designated beneficiary. H&r block taxes   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. H&r block taxes Contributions to a qualified tuition program (QTP). H&r block taxes   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. H&r block taxes In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. H&r block taxes See chapter 8, Qualified Tuition Program . H&r block taxes Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. H&r block taxes Eligible postsecondary school. H&r block taxes   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. H&r block taxes S. H&r block taxes Department of Education. H&r block taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. H&r block taxes The educational institution should be able to tell you if it is an eligible educational institution. H&r block taxes   Certain educational institutions located outside the United States also participate in the U. H&r block taxes S. H&r block taxes Department of Education's Federal Student Aid (FSA) programs. H&r block taxes Eligible elementary or secondary school. H&r block taxes   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. H&r block taxes Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. H&r block taxes As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. H&r block taxes The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. H&r block taxes Tuition and fees. H&r block taxes Books, supplies, and equipment. H&r block taxes Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. H&r block taxes Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). H&r block taxes The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. H&r block taxes The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. H&r block taxes The actual amount charged if the student is residing in housing owned or operated by the school. H&r block taxes Half-time student. H&r block taxes   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. H&r block taxes Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. H&r block taxes As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. H&r block taxes There are special rules for computer-related expenses. H&r block taxes The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. H&r block taxes Tuition and fees. H&r block taxes Books, supplies, and equipment. H&r block taxes Academic tutoring. H&r block taxes Special needs services for a special needs beneficiary. H&r block taxes The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. H&r block taxes Room and board. H&r block taxes Uniforms. H&r block taxes Transportation. H&r block taxes Supplementary items and services (including extended day programs). H&r block taxes The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. H&r block taxes (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. H&r block taxes ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. H&r block taxes For individuals filing joint returns, that amount is $220,000. H&r block taxes Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. H&r block taxes There is no requirement that an organization's income be below a certain level. H&r block taxes Contributions must meet all of the following requirements. H&r block taxes They must be in cash. H&r block taxes They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block taxes They must be made by the due date of the contributor's tax return (not including extensions). H&r block taxes Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. H&r block taxes Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. H&r block taxes Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. H&r block taxes When contributions considered made. H&r block taxes   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. H&r block taxes They must be made by the due date (not including extensions) for filing your return for the preceding year. H&r block taxes   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. H&r block taxes Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. H&r block taxes Limit for each designated beneficiary. H&r block taxes   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. H&r block taxes This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. H&r block taxes Rollovers are discussed under Rollovers and Other Transfers , later. H&r block taxes Example. H&r block taxes When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. H&r block taxes In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. H&r block taxes For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. H&r block taxes Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. H&r block taxes These contributions could be put into any of Maria's Coverdell ESA accounts. H&r block taxes Limit for each contributor. H&r block taxes   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. H&r block taxes This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. H&r block taxes Example. H&r block taxes The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. H&r block taxes If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. H&r block taxes Reduced limit. H&r block taxes   Your contribution limit may be reduced. H&r block taxes If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). H&r block taxes If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. H&r block taxes Table 7-2. H&r block taxes Coverdell ESA Contributions at a Glance Do not rely on this table alone. H&r block taxes It provides only general highlights. H&r block taxes See the text for more complete explanations. H&r block taxes Question Answer Are contributions deductible? No. H&r block taxes What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. H&r block taxes What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. H&r block taxes What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. H&r block taxes Can contributions other than cash be made to a Coverdell ESA? No. H&r block taxes When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block taxes Modified adjusted gross income (MAGI). H&r block taxes   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. H&r block taxes MAGI when using Form 1040A. H&r block taxes   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. H&r block taxes MAGI when using Form 1040. H&r block taxes   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&r block taxes MAGI when using Form 1040NR. H&r block taxes   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. H&r block taxes MAGI when using Form 1040NR-EZ. H&r block taxes   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. H&r block taxes   If you have any of these adjustments, you can use Worksheet 7-1. H&r block taxes MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. H&r block taxes Worksheet 7-1. H&r block taxes MAGI for a Coverdell ESA 1. H&r block taxes Enter your adjusted gross income  (Form 1040, line 38)   1. H&r block taxes   2. H&r block taxes Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. H&r block taxes       3. H&r block taxes Enter your foreign housing deduction (Form 2555, line 50)   3. H&r block taxes         4. H&r block taxes Enter the amount of income from Puerto Rico you are excluding   4. H&r block taxes       5. H&r block taxes Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. H&r block taxes       6. H&r block taxes Add lines 2, 3, 4, and 5   6. H&r block taxes   7. H&r block taxes Add lines 1 and 6. H&r block taxes This is your  modified adjusted gross income   7. H&r block taxes   Figuring the limit. H&r block taxes    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. H&r block taxes The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). H&r block taxes The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). H&r block taxes Subtract the result from $2,000. H&r block taxes This is the amount you can contribute for each beneficiary. H&r block taxes You can use Worksheet 7-2. H&r block taxes Coverdell ESA Contribution Limit to figure the limit on contributions. H&r block taxes    Worksheet 7-2. H&r block taxes Coverdell ESA Contribution Limit 1. H&r block taxes Maximum contribution   1. H&r block taxes $2,000 2. H&r block taxes Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. H&r block taxes   3. H&r block taxes Enter $190,000 if married filing jointly; $95,000 for all other filers   3. H&r block taxes   4. H&r block taxes Subtract line 3 from line 2. H&r block taxes If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. H&r block taxes   5. H&r block taxes Enter $30,000 if married filing jointly; $15,000 for all other filers   5. H&r block taxes     Note. H&r block taxes If the amount on line 4 is greater than or equal to the amount on line 5, stop here. H&r block taxes You are not allowed to contribute to a Coverdell ESA for 2013. H&r block taxes       6. H&r block taxes Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. H&r block taxes . H&r block taxes 7. H&r block taxes Multiply line 1 by line 6   7. H&r block taxes   8. H&r block taxes Subtract line 7 from line 1   8. H&r block taxes   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. H&r block taxes Example. H&r block taxes Paul, who is single, had a MAGI of $96,500 for 2013. H&r block taxes Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. H&r block taxes Worksheet 7-2. H&r block taxes Coverdell ESA Contribution Limit—Illustrated 1. H&r block taxes Maximum contribution   1. H&r block taxes $2,000 2. H&r block taxes Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. H&r block taxes 96,500 3. H&r block taxes Enter $190,000 if married filing jointly; $95,000 for all other filers   3. H&r block taxes 95,000 4. H&r block taxes Subtract line 3 from line 2. H&r block taxes If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. H&r block taxes 1,500 5. H&r block taxes Enter $30,000 if married filing jointly; $15,000 for all other filers   5. H&r block taxes 15,000   Note. H&r block taxes If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. H&r block taxes You are not allowed to  contribute to a Coverdell ESA for 2013. H&r block taxes       6. H&r block taxes Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. H&r block taxes . H&r block taxes 100 7. H&r block taxes Multiply line 1 by line 6   7. H&r block taxes 200 8. H&r block taxes Subtract line 7 from line 1   8. H&r block taxes 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. H&r block taxes Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. H&r block taxes Excess contributions are the total of the following two amounts. H&r block taxes Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). H&r block taxes Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. H&r block taxes Exceptions. H&r block taxes   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). H&r block taxes   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. H&r block taxes You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. H&r block taxes Box 2 of that form will show the amount of earnings on your excess contributions. H&r block taxes Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. H&r block taxes See Instructions for Recipient on the back of copy B of your Form 1099-Q. H&r block taxes Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. H&r block taxes For more information, see Taxable Distributions , later. H&r block taxes   The excise tax does not apply to any rollover contribution. H&r block taxes Note. H&r block taxes Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. H&r block taxes Example. H&r block taxes In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. H&r block taxes Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. H&r block taxes In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. H&r block taxes Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. H&r block taxes (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. H&r block taxes Figuring and reporting the additional tax. H&r block taxes   You figure this excise tax in Part V of Form 5329. H&r block taxes Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). H&r block taxes Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. H&r block taxes The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. H&r block taxes Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. H&r block taxes This age limitation does not apply if the new beneficiary is a special needs beneficiary. H&r block taxes An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. H&r block taxes Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. H&r block taxes These are not taxable distributions. H&r block taxes Members of the beneficiary's family. H&r block taxes   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. H&r block taxes Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. H&r block taxes Brother, sister, stepbrother, or stepsister. H&r block taxes Father or mother or ancestor of either. H&r block taxes Stepfather or stepmother. H&r block taxes Son or daughter of a brother or sister. H&r block taxes Brother or sister of father or mother. H&r block taxes Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. H&r block taxes The spouse of any individual listed above. H&r block taxes First cousin. H&r block taxes Example. H&r block taxes When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. H&r block taxes He wanted to give this money to his younger sister, who was still in high school. H&r block taxes In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. H&r block taxes Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. H&r block taxes This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). H&r block taxes Military death gratuity. H&r block taxes   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). H&r block taxes Such payments are made to an eligible survivor upon the death of a member of the armed forces. H&r block taxes The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. H&r block taxes   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . H&r block taxes The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. H&r block taxes   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. H&r block taxes See Distributions , later. H&r block taxes The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. H&r block taxes Changing the Designated Beneficiary The designated beneficiary can be changed. H&r block taxes See Members of the beneficiary's family , earlier. H&r block taxes There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. H&r block taxes Example. H&r block taxes Assume the same situation for Aaron as in the last example (see Rollovers , earlier). H&r block taxes Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. H&r block taxes Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. H&r block taxes After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. H&r block taxes Example. H&r block taxes In their divorce settlement, Peg received her ex-husband's Coverdell ESA. H&r block taxes In this process, the account was transferred into her name. H&r block taxes Peg now treats the funds in this Coverdell ESA as if she were the original owner. H&r block taxes Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. H&r block taxes Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. H&r block taxes See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. H&r block taxes Table 7-3. H&r block taxes Coverdell ESA Distributions at a Glance Do not rely on this table alone. H&r block taxes It provides only general highlights. H&r block taxes See the text for definitions of terms in bold type and for more complete explanations. H&r block taxes Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. H&r block taxes After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. H&r block taxes Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. H&r block taxes Also, certain transfers to members of the beneficiary's family are permitted. H&r block taxes Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. H&r block taxes Adjusted qualified education expenses. H&r block taxes   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. H&r block taxes Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. H&r block taxes The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. H&r block taxes Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. H&r block taxes Do not report tax-free distributions (including qualifying rollovers) on your tax return. H&r block taxes Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. H&r block taxes Excess distribution. H&r block taxes   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. H&r block taxes Earnings and basis. H&r block taxes   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. H&r block taxes The amount of your gross distribution will be shown in box 1. H&r block taxes For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. H&r block taxes This will be shown in the blank box below boxes 5 and 6. H&r block taxes   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. H&r block taxes Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. H&r block taxes Figure the taxable portion for 2013 as shown in the following steps. H&r block taxes Multiply the total amount distributed by a fraction. H&r block taxes The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. H&r block taxes Subtract the amount figured in (1) from the total amount distributed during 2013. H&r block taxes The result is the amount of earnings included in the distribution(s). H&r block taxes Multiply the amount of earnings figured in (2) by a fraction. H&r block taxes The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. H&r block taxes Subtract the amount figured in (3) from the amount figured in (2). H&r block taxes The result is the amount the beneficiary must include in income. H&r block taxes The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. H&r block taxes Example. H&r block taxes You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. H&r block taxes There were no contributions in 2013. H&r block taxes This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. H&r block taxes The value (balance) of your account on December 31, 2013, was $950. H&r block taxes You had $700 of adjusted qualified education expenses (AQEE) for the year. H&r block taxes Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. H&r block taxes   1. H&r block taxes $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. H&r block taxes $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. H&r block taxes $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. H&r block taxes $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. H&r block taxes Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. H&r block taxes Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). H&r block taxes Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. H&r block taxes This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. H&r block taxes Example. H&r block taxes Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. H&r block taxes He paid his college expenses from the following sources. H&r block taxes     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. H&r block taxes Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. H&r block taxes Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. H&r block taxes     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. H&r block taxes The balance in Derek's account was $1,800 on December 31, 2013. H&r block taxes Prior to 2013, $2,100 had been contributed to this account. H&r block taxes Contributions for 2013 totaled $400. H&r block taxes Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. H&r block taxes   1. H&r block taxes $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. H&r block taxes $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. H&r block taxes $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. H&r block taxes $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). H&r block taxes This is the amount of distributed earnings not used for adjusted qualified higher education expenses. H&r block taxes Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. H&r block taxes The following two examples illustrate possible allocations. H&r block taxes Example 1. H&r block taxes In 2013, Beatrice graduated from high school and began her first semester of college. H&r block taxes That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. H&r block taxes To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. H&r block taxes No one claimed Beatrice as a dependent, nor was she eligible for an education credit. H&r block taxes She did not receive any tax-free educational assistance in 2013. H&r block taxes Beatrice must allocate her total qualified education expenses between the two distributions. H&r block taxes Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. H&r block taxes The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. H&r block taxes Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). H&r block taxes She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. H&r block taxes Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. H&r block taxes (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. H&r block taxes ) Example 2. H&r block taxes Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. H&r block taxes In this case, she allocates her qualified education expenses as follows. H&r block taxes Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. H&r block taxes Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). H&r block taxes   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). H&r block taxes See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. H&r block taxes   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). H&r block taxes The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. H&r block taxes However, you do not have to allocate your expenses in the same way. H&r block taxes You can use any reasonable method. H&r block taxes Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. H&r block taxes You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. H&r block taxes Your basis is the total amount of contributions to that Coverdell ESA. H&r block taxes You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. H&r block taxes If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. H&r block taxes ) from all such accounts in order to determine your taxable earnings for the year. H&r block taxes By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. H&r block taxes For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. H&r block taxes Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. H&r block taxes Exceptions. H&r block taxes   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. H&r block taxes Made because the designated beneficiary is disabled. H&r block taxes A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. H&r block taxes A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. H&r block taxes Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. H&r block taxes Made on account of the attendance of the designated beneficiary at a U. H&r block taxes S. H&r block taxes military academy (such as the USMA at West Point). H&r block taxes This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. H&r block taxes S. H&r block taxes Code) attributable to such attendance. H&r block taxes Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier). H&r block taxes Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). H&r block taxes The distributed earnings must be included in gross income for the year in which the excess contribution was made. H&r block taxes Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. H&r block taxes Figuring the additional tax. H&r block taxes    Use Part II of Form 5329, to figure any additional tax. H&r block taxes Report the amount on Form 1040, line 58, or Form 1040NR, line 56. H&r block taxes When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. H&r block taxes The designated beneficiary reaches age 30. H&r block taxes In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. H&r block taxes However, this rule does not apply if the beneficiary is a special needs beneficiary. H&r block taxes The designated beneficiary dies before reaching age 30. H&r block taxes In this case, the remaining assets must generally be distributed within 30 days after the date of death. H&r block taxes Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. H&r block taxes (“Family member” was defined earlier under Rollovers . H&r block taxes ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. H&r block taxes This age limitation does not apply if the new beneficiary is a special needs beneficiary. H&r block taxes There are no tax consequences as a result of the transfer. H&r block taxes How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. H&r block taxes You determine these earnings as shown in the following two steps. H&r block taxes Multiply the amount distributed by a fraction. H&r block taxes The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. H&r block taxes Subtract the amount figured in (1) from the total amount distributed during 2013. H&r block taxes The result is the amount of earnings included in the distribution. H&r block taxes For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. H&r block taxes The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. H&r block taxes Worksheet 7-3 Instructions. H&r block taxes Coverdell ESA—Taxable Distributions and Basis Line G. H&r block taxes Enter the total distributions received from all Coverdell ESAs during 2013. H&r block taxes Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). H&r block taxes Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. H&r block taxes Line 2. H&r block taxes Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. H&r block taxes   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. H&r block taxes For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. H&r block taxes For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. H&r block taxes You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. H&r block taxes Line 4. H&r block taxes Enter the total distributions received from this Coverdell ESA in 2013. H&r block taxes Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). H&r block taxes   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. H&r block taxes Line 7. H&r block taxes Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. H&r block taxes A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. H&r block taxes   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. H&r block taxes An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. H&r block taxes Worksheet 7-3. H&r block taxes Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. H&r block taxes • • • Complete Part I, lines A through H, on only one worksheet. H&r block taxes  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. H&r block taxes  Complete Part III, the Summary (line 16), on only one worksheet. H&r block taxes Part I. H&r block taxes Qualified Education Expenses (Complete for total expenses)       A. H&r block taxes Enter your total qualified education expenses for 2013   A. H&r block taxes   B. H&r block taxes Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. H&r block taxes         C. H&r block taxes Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). H&r block taxes Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. H&r block taxes         D. H&r block taxes Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. H&r block taxes         E. H&r block taxes Add lines B, C, and D   D. H&r block taxes   F. H&r block taxes Subtract line E from line A. H&r block taxes This is your adjusted qualified education expense for 2013   E. H&r block taxes   G. H&r block taxes Enter your total distributions from all Coverdell ESAs during 2013. H&r block taxes Do not include rollovers  or the return of excess contributions (see instructions)   F. H&r block taxes   H. H&r block taxes Divide line F by line G. H&r block taxes Enter the result as a decimal (rounded to at least 3 places). H&r block taxes If the  result is 1. H&r block taxes 000 or more, enter 1. H&r block taxes 000   G. H&r block taxes . H&r block taxes Part II. H&r block taxes Taxable Distributions and Basis (Complete separately for each account) 1. H&r block taxes Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. H&r block taxes Do not include rollovers or the return of excess contributions   1. H&r block taxes   2. H&r block taxes Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. H&r block taxes   3. H&r block taxes Add lines 1 and 2   3. H&r block taxes   4. H&r block taxes Enter the total distributions from this Coverdell ESA during 2013. H&r block taxes Do not include rollovers  or the return of excess contributions (see instructions)   4. H&r block taxes   5. H&r block taxes Multiply line 4 by line H. H&r block taxes This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. H&r block taxes         6. H&r block taxes Subtract line 5 from line 4   6. H&r block taxes         7. H&r block taxes Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. H&r block taxes         8. H&r block taxes Add lines 4 and 7   8. H&r block taxes         9. H&r block taxes Divide line 3 by line 8. H&r block taxes Enter the result as a decimal (rounded to  at least 3 places). H&r block taxes If the result is 1. H&r block taxes 000 or more, enter 1. H&r block taxes 000   9. H&r block taxes . H&r block taxes       10. H&r block taxes Multiply line 4 by line 9. H&r block taxes This is the amount of basis allocated to your  distributions, and is tax free   10. H&r block taxes     Note. H&r block taxes If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. H&r block taxes       11. H&r block taxes Subtract line 10 from line 4   11. H&r block taxes   12. H&r block taxes Divide line 5 by line 4. H&r block taxes Enter the result as a decimal (rounded to  at least 3 places). H&r block taxes If the result is 1. H&r block taxes 000 or more, enter 1. H&r block taxes 000   12. H&r block taxes . H&r block taxes       13. H&r block taxes Multiply line 11 by line 12. H&r block taxes This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. H&r block taxes   14. H&r block taxes Subtract line 13 from line 11. H&r block taxes This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. H&r block taxes   15. H&r block taxes Subtract line 10 from line 3. H&r block taxes This is your basis in this Coverdell ESA as of December 31, 2013   15. H&r block taxes   Part III. H&r block taxes Summary (Complete only once)       16. H&r block taxes Taxable amount. H&r block taxes Add together all amounts on line 14 for all your Coverdell ESAs. H&r block taxes Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. H&r block taxes   Prev  Up  Next   Home   More Online Publications