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Irs Form 1040ez

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Irs Form 1040ez

Irs form 1040ez Publication 559 - Main Content Table of Contents Personal RepresentativeDuties Fees Received by Personal Representatives Final Income Tax Return for Decedent—Form 1040Name, Address, and Signature When and Where To File Filing Requirements Income To Include Exemptions and Deductions Credits, Other Taxes, and Payments Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Filing Reminders Other Tax InformationTax Benefits for Survivors Income in Respect of a Decedent Deductions in Respect of a Decedent Estate Tax Deduction Gifts, Insurance, and Inheritances Other Items of Income Income Tax Return of an Estate— Form 1041Filing Requirements Income To Include Exemption and Deductions Credits, Tax, and Payments Name, Address, and Signature When and Where To File Distributions to BeneficiariesIncome That Must Be Distributed Currently Other Amounts Distributed Discharge of a Legal Obligation Character of Distributions How and When To Report Bequest Termination of Estate Estate and Gift TaxesApplicable Credit Amount Gift Tax Estate Tax Generation-Skipping Transfer Tax Comprehensive ExampleFinal Return for Decedent—Form 1040 Income Tax Return of an Estate—Form 1041 How To Get Tax HelpLow Income Taxpayer Clinics Personal Representative A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. Irs form 1040ez Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. Irs form 1040ez An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve. Irs form 1040ez In general, an executor and an administrator perform the same duties and have the same responsibilities. Irs form 1040ez For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term “executor” includes anyone in actual or constructive possession of any property of the decedent. Irs form 1040ez It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country. Irs form 1040ez Duties The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. Irs form 1040ez The personal representative also must perform the following duties. Irs form 1040ez Apply for an employer identification number (EIN) for the estate. Irs form 1040ez File all tax returns, including income, estate and gift tax returns, when due. Irs form 1040ez Pay the tax determined up to the date of discharge from duties. Irs form 1040ez Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. Irs form 1040ez If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent. Irs form 1040ez Penalty. Irs form 1040ez   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. Irs form 1040ez Reliance on an agent (attorney, accountant, etc. Irs form 1040ez ) is not reasonable cause for late filing. Irs form 1040ez It is the personal representative's duty to file the returns for the decedent and the estate when due. Irs form 1040ez Identification number. Irs form 1040ez   The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. Irs form 1040ez You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents you file concerning the estate. Irs form 1040ez You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. Irs form 1040ez   You can get an EIN by applying online at www. Irs form 1040ez irs. Irs form 1040ez gov (click on "Apply for an EIN Online" under the Tools heading). Irs form 1040ez Generally, if you apply online, you will receive your EIN immediately upon completing the application. Irs form 1040ez You can also apply using Form SS-4, Application for Employer Identification Number. Irs form 1040ez Generally, if you apply by mail, it takes about 4 weeks to get your EIN. Irs form 1040ez See the form instructions for other ways to apply. Irs form 1040ez   Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. Irs form 1040ez After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. Irs form 1040ez As the personal representative handling the estate, you must furnish this identification number to the payer. Irs form 1040ez For example, if interest is payable to the estate, the estate's EIN must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. Irs form 1040ez If the interest is payable to a surviving joint owner, the survivor's identification number, such as an SSN or ITIN, must be provided to the payer and used to report the interest. Irs form 1040ez   If the estate or a survivor may receive interest or dividends after you inform the payer of the decedent's death, the payer should give you (or the survivor) a Form W-9, Request for Taxpayer Identification Number and Certification (or a similar substitute form). Irs form 1040ez Complete this form to inform the payer of the estate's (or if completed by the survivor, the survivor's) identification number and return it to the payer. Irs form 1040ez    Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. Irs form 1040ez Also do not use it to make estimated tax payments for a tax year after the year of death. Irs form 1040ez Penalty. Irs form 1040ez   If you do not include the EIN or the taxpayer identification number of another person where it is required on a return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. Irs form 1040ez You also are liable for a penalty if you do not give the taxpayer identification number of another person when required on a return, statement, or other document. Irs form 1040ez Notice of fiduciary relationship. Irs form 1040ez   The term fiduciary means any person acting for another person. Irs form 1040ez It applies to persons who have positions of trust on behalf of others. Irs form 1040ez A personal representative for a decedent's estate is a fiduciary. Irs form 1040ez Form 56. Irs form 1040ez   If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. Irs form 1040ez Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. Irs form 1040ez See the Instructions for Form 56 for filing requirements and other information. Irs form 1040ez   File Form 56 as soon as all the necessary information (including the EIN) is available. Irs form 1040ez It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. Irs form 1040ez The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. Irs form 1040ez Termination of fiduciary relationship. Irs form 1040ez   Form 56 should also be filed to notify the IRS if your fiduciary relationship is terminated or when a successor fiduciary is appointed if the estate has not been terminated. Irs form 1040ez See Form 56 and its instructions for more information. Irs form 1040ez   At the time of termination of the fiduciary relationship, you may want to file Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), and Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905, to wind up your duties as fiduciary. Irs form 1040ez See below for a discussion of these forms. Irs form 1040ez Request for prompt assessment (charge) of tax. Irs form 1040ez   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax due. Irs form 1040ez However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. Irs form 1040ez This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. Irs form 1040ez This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. Irs form 1040ez This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. Irs form 1040ez Form 4810. Irs form 1040ez   Form 4810 can be used for making this request. Irs form 1040ez It must be filed separately from any other document. Irs form 1040ez   As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. Irs form 1040ez You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. Irs form 1040ez This applies even though the returns were filed before the decedent's death. Irs form 1040ez Failure to report income. Irs form 1040ez   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. Irs form 1040ez However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. Irs form 1040ez Request for discharge from personal liability for tax. Irs form 1040ez   An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. Irs form 1040ez The request must be made after the returns for those taxes are filed. Irs form 1040ez To make the request, file Form 5495. Irs form 1040ez For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. Irs form 1040ez   Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. Irs form 1040ez If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. Irs form 1040ez If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period. Irs form 1040ez    Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent he or she still has any of the decedent's property. Irs form 1040ez Insolvent estate. Irs form 1040ez   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due to the United States must be paid first. Irs form 1040ez Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due to the United States. Irs form 1040ez The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. Irs form 1040ez The extent of such personal responsibility is the amount of any other payments made before paying the debts due to the United States, except where such other debt paid has priority over the debts due to the United States. Irs form 1040ez Income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence. Irs form 1040ez Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. Irs form 1040ez If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Form 1040, line 21. Irs form 1040ez If you are in the trade or business of being an executor, report fees received from the estate as self-employment income on Schedule C or Schedule C-EZ of your Form 1040. Irs form 1040ez If the estate operates a trade or business and you, as executor, actively participate in the trade or business while fulfilling your duties, any fees you receive related to the operation of the trade or business must be reported as self-employment income on Schedule C (or Schedule C-EZ) of your Form 1040. Irs form 1040ez Final Income Tax Return for Decedent—Form 1040 The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. Irs form 1040ez A surviving spouse, under certain circumstances, may have to file the returns for the decedent. Irs form 1040ez See Joint Return, later. Irs form 1040ez Return for preceding year. Irs form 1040ez   If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. Irs form 1040ez The return for that year will be a regular return and the personal representative must file it. Irs form 1040ez Example. Irs form 1040ez Samantha Smith died on March 21, 2013, before filing her 2012 tax return. Irs form 1040ez Her personal representative must file her 2012 return by April 15, 2013. Irs form 1040ez Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. Irs form 1040ez Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Irs form 1040ez If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. Irs form 1040ez If a joint return is not being filed, write the decedent's name in the name field and the personal representative's name and address in the address field. Irs form 1040ez Third party designee. Irs form 1040ez   You can check the “Yes” box in the Third Party Designee area on page 2 of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. Irs form 1040ez This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. Irs form 1040ez It also allows the designee to perform certain actions. Irs form 1040ez See the Instructions for Form 1040 for details. Irs form 1040ez Signature. Irs form 1040ez   If a personal representative has been appointed, that person must sign the return. Irs form 1040ez If it is a joint return, the surviving spouse must also sign it. Irs form 1040ez If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area “Filing as surviving spouse. Irs form 1040ez ” If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Irs form 1040ez ” Paid preparer. Irs form 1040ez   If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return. Irs form 1040ez See the Form 1040 instructions for details. Irs form 1040ez When and Where To File The final income tax return is due at the same time the decedent's return would have been due had death not occurred. Irs form 1040ez A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. Irs form 1040ez However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day. Irs form 1040ez The tax return must be prepared for the year of death regardless of when during the year death occurred. Irs form 1040ez Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. Irs form 1040ez A tax return for a decedent can be electronically filed. Irs form 1040ez A personal representative may also obtain an income tax filing extension on behalf of a decedent. Irs form 1040ez Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. Irs form 1040ez Gross income is all income received by an individual from any source in the form of money, goods, property, and services that is not tax-exempt. Irs form 1040ez It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. Irs form 1040ez In general, filing status depends on whether the decedent was considered single or married at the time of death. Irs form 1040ez See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. Irs form 1040ez Refund A return must be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not otherwise required to be filed. Irs form 1040ez Also, the decedent may be entitled to other credits that result in a refund. Irs form 1040ez These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. Irs form 1040ez Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Irs form 1040ez   Form 1310 does not have to be filed if you are claiming a refund and you are: A surviving spouse filing an original or amended joint return with the decedent, or A court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return. Irs form 1040ez   If the personal representative is filing a claim for refund on Form 1040X, Amended U. Irs form 1040ez S. Irs form 1040ez Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write “Certificate Previously Filed” at the bottom of the form. Irs form 1040ez Example. Irs form 1040ez Edward Green died before filing his tax return. Irs form 1040ez You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. Irs form 1040ez You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative. Irs form 1040ez    If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. Irs form 1040ez Return the joint-name check marked “VOID” to your local IRS office or the service center where you mailed your return, along with a written request for reissuance of the refund check. Irs form 1040ez A new check will be issued in your name and mailed to you. Irs form 1040ez Death certificate. Irs form 1040ez   When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. Irs form 1040ez Instead, keep it for your records and provide it if requested. Irs form 1040ez Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. Irs form 1040ez S. Irs form 1040ez Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. Irs form 1040ez See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. Irs form 1040ez Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. Irs form 1040ez However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. Irs form 1040ez This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. Irs form 1040ez The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return. Irs form 1040ez A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. Irs form 1040ez The filing status of the decedent in this instance is married filing a separate return. Irs form 1040ez For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. Irs form 1040ez Personal representative may revoke joint return election. Irs form 1040ez   A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. Irs form 1040ez This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). Irs form 1040ez The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. Irs form 1040ez Relief from joint liability. Irs form 1040ez   In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. Irs form 1040ez If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. Irs form 1040ez For information on requesting this relief, see Publication 971, Innocent Spouse Relief. Irs form 1040ez Income To Include The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. Irs form 1040ez The method of accounting regularly used by the decedent before death also determines the income includible on the final return. Irs form 1040ez This section explains how some types of income are reported on the final return. Irs form 1040ez For more information about accounting methods, see Publication 538, Accounting Periods and Methods. Irs form 1040ez Cash Method If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return. Irs form 1040ez Constructive receipt of income. Irs form 1040ez   Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. Irs form 1040ez Include the interest income on the final return. Irs form 1040ez   Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. Irs form 1040ez If the corporation customarily mailed its dividend checks, the dividend was includible when received. Irs form 1040ez If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. Irs form 1040ez Do not include the dividend in the final return. Irs form 1040ez Accrual Method Generally, under an accrual method of accounting, income is reported when earned. Irs form 1040ez If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. Irs form 1040ez Interest and Dividend Income (Forms 1099) Form(s) 1099 reporting interest and dividends earned by the decedent before death should be received and the amounts included on the decedent's final return. Irs form 1040ez A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. Irs form 1040ez You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. Irs form 1040ez For example, a Form 1099-INT, reporting interest payable to the decedent, may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). Irs form 1040ez For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. Irs form 1040ez If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report. Irs form 1040ez See U. Irs form 1040ez S. Irs form 1040ez savings bonds acquired from decedent under Income in Respect of a Decedent, later, for information on savings bond interest that may have to be reported on the final return. Irs form 1040ez How to report. Irs form 1040ez   If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Irs form 1040ez Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. Irs form 1040ez Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. Irs form 1040ez Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. Irs form 1040ez   Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. Irs form 1040ez    Note. Irs form 1040ez If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. Irs form 1040ez See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. Irs form 1040ez Partnership Income The death of a partner closes the partnership's tax year for that partner. Irs form 1040ez Generally, it does not close the partnership's tax year for the remaining partners. Irs form 1040ez The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. Irs form 1040ez To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year. Irs form 1040ez On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. Irs form 1040ez The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Irs form 1040ez The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. Irs form 1040ez Example. Irs form 1040ez Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. Irs form 1040ez The partnership uses a tax year ending June 30. Irs form 1040ez Mary died August 31, 2013, and her estate established its tax year through August 31. Irs form 1040ez The distributive share of partnership items based on the decedent's partnership interest is reported as follows. Irs form 1040ez Final Return for the Decedent—January 1 through August 31, 2013, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2013, and (b) the partnership tax year beginning July 1, 2013, and ending August 31, 2013 (the date of death). Irs form 1040ez Income Tax Return of the Estate—September 1, 2013, through August 31, 2014, includes XYZ partnership items for the period September 1, 2013, through June 30, 2014. Irs form 1040ez S Corporation Income If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods. Irs form 1040ez The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Irs form 1040ez The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. Irs form 1040ez Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. Irs form 1040ez For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. Irs form 1040ez For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. Irs form 1040ez Community Income If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. Irs form 1040ez For more information, see Publication 555, Community Property. Irs form 1040ez HSA, Archer MSA, or Medicare Advantage MSA The treatment of an HSA (health savings account), an Archer MSA (medical savings account), or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. Irs form 1040ez If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. Irs form 1040ez The estate tax deduction, discussed later, does not apply to this amount. Irs form 1040ez If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Irs form 1040ez For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Irs form 1040ez Coverdell Education Savings Account (ESA) Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. Irs form 1040ez The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. Irs form 1040ez If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. Irs form 1040ez The estate tax deduction, discussed later, does not apply to this amount. Irs form 1040ez If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Irs form 1040ez The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. Irs form 1040ez This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education. Irs form 1040ez For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. Irs form 1040ez Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. Irs form 1040ez These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. Irs form 1040ez Generally, if the decedent received accelerated death benefits on the life of a terminally or chronically ill individual, whether on his or her own life or on the life of another person, those benefits are not included in the decedent's income. Irs form 1040ez For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. Irs form 1040ez Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. Irs form 1040ez Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. Irs form 1040ez This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. Irs form 1040ez See Medical Expenses, later. Irs form 1040ez Exemptions You can claim the decedent's personal exemption on the final income tax return. Irs form 1040ez If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. Irs form 1040ez Standard Deduction If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. Irs form 1040ez For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. Irs form 1040ez Medical Expenses Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. Irs form 1040ez This includes expenses for the decedent, as well as for the decedent's spouse and dependents. Irs form 1040ez Beginning in 2013, medical expenses exceeding 10% of adjusted gross income (AGI) may be deducted, unless the decedent or their spouse is age 65 or older. Irs form 1040ez In that case medical expenses exceeding 7. Irs form 1040ez 5% of AGI may be deducted. Irs form 1040ez Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. Irs form 1040ez Election for decedent's expenses. Irs form 1040ez   Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). Irs form 1040ez However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred. Irs form 1040ez   If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). Irs form 1040ez You can deduct expenses incurred in the year of death on the final income tax return. Irs form 1040ez You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired. Irs form 1040ez   The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. Irs form 1040ez 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). Irs form 1040ez Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. Irs form 1040ez Making the election. Irs form 1040ez   You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. Irs form 1040ez The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. Irs form 1040ez This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. Irs form 1040ez Example. Irs form 1040ez Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. Irs form 1040ez Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. Irs form 1040ez Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. Irs form 1040ez Richard itemized his deductions when he filed his 2012 income tax return. Irs form 1040ez The personal representative of the estate paid the entire $800 liability in August 2013. Irs form 1040ez The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. Irs form 1040ez 5% limit. Irs form 1040ez The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. Irs form 1040ez 5% limit. Irs form 1040ez The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. Irs form 1040ez Medical expenses not paid by estate. Irs form 1040ez   If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. Irs form 1040ez If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. Irs form 1040ez Insurance reimbursements. Irs form 1040ez   Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. Irs form 1040ez The reimbursements are also includible in the decedent's gross estate. Irs form 1040ez No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. Irs form 1040ez These expenses may be deductible for estate tax purposes on Form 706. Irs form 1040ez Deduction for Losses A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. Irs form 1040ez A net operating loss on the decedent's final income tax return can be carried back to prior years. Irs form 1040ez (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Irs form 1040ez ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. Irs form 1040ez At-risk loss limits. Irs form 1040ez   Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. Irs form 1040ez   These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. Irs form 1040ez An individual generally will be considered at-risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. Irs form 1040ez An individual will be considered at-risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. Irs form 1040ez The individual is not considered at-risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. Irs form 1040ez For more information, see Publication 925, Passive Activity and At-Risk Rules. Irs form 1040ez Passive activity rules. Irs form 1040ez   A passive activity is any trade or business activity in which the taxpayer does not materially participate. Irs form 1040ez To determine material participation, see Publication 925. Irs form 1040ez Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. Irs form 1040ez   Individuals, estates, and trusts can offset passive activity losses only against passive activity income. Irs form 1040ez Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. Irs form 1040ez   If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. Irs form 1040ez Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. Irs form 1040ez The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. Irs form 1040ez   Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. Irs form 1040ez For more information, see Publication 925. Irs form 1040ez Credits, Other Taxes, and Payments Discussed below are some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments reported on the final return of a decedent. Irs form 1040ez Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. Irs form 1040ez Some of these credits are discussed next. Irs form 1040ez Earned income credit. Irs form 1040ez   If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. Irs form 1040ez If the allowable credit is more than the tax liability for the year, the excess is refunded. Irs form 1040ez   For more information, see Publication 596, Earned Income Credit (EIC). Irs form 1040ez Credit for the elderly or the disabled. Irs form 1040ez   This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. Irs form 1040ez The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. Irs form 1040ez   For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. Irs form 1040ez Child tax credit. Irs form 1040ez   If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. Irs form 1040ez You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. Irs form 1040ez For more information, see the Instructions for Form 1040. Irs form 1040ez Adoption credit. Irs form 1040ez   Depending upon when the adoption was finalized, this credit may be taken on a decedent's final income tax return if the decedent: Adopted an eligible child and paid qualified adoption expenses, or Has a carryforward of an adoption credit from a prior year. Irs form 1040ez   Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. Irs form 1040ez See Form 8839, Qualified Adoption Expenses, and its instructions for more details. Irs form 1040ez General business tax credit. Irs form 1040ez   The general business credit available to a taxpayer is limited. Irs form 1040ez Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. Irs form 1040ez Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. Irs form 1040ez   After the carryforward period, a deduction may be allowed for any unused business credit. Irs form 1040ez If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. Irs form 1040ez   For more information on the general business credit, see Publication 334, Tax Guide for Small Business. Irs form 1040ez Other Taxes Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040. Irs form 1040ez Self-employment tax. Irs form 1040ez   Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death: Net earnings from self-employment (excluding income described in (2)) were $400 or more; or Wages from services performed as a church employee were $108. Irs form 1040ez 28 or more. Irs form 1040ez Alternative minimum tax (AMT). Irs form 1040ez   The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. Irs form 1040ez The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. Irs form 1040ez In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. Irs form 1040ez Form 6251. Irs form 1040ez    Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. Irs form 1040ez See the form instructions for information on when you must attach Form 6251 to Form 1040. Irs form 1040ez Form 8801. Irs form 1040ez   If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. Irs form 1040ez See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. Irs form 1040ez Payments of Tax The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax are credits (advance payments of tax) that must be claimed on the final return. Irs form 1040ez Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut. Irs form 1040ez Combat Zone If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. Irs form 1040ez For this purpose, a qualified hazardous duty area is treated as a combat zone. Irs form 1040ez If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. Irs form 1040ez If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. Irs form 1040ez Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. Irs form 1040ez If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. Irs form 1040ez Also, if any tax was collected after the date of death, that amount will be credited or refunded. Irs form 1040ez The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. Irs form 1040ez This is true even if death actually occurred earlier. Irs form 1040ez For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. Irs form 1040ez Military or Terrorist Actions The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred: While a U. Irs form 1040ez S. Irs form 1040ez employee, and In a military or terrorist action. Irs form 1040ez The forgiveness applies to the tax year in which death occurred and for any earlier tax year, beginning with the year before the year in which the wounds or injury occurred. Irs form 1040ez Example. Irs form 1040ez The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. Irs form 1040ez S. Irs form 1040ez employee in a terrorist attack that occurred in 2008 will be forgiven for 2013 and for all prior tax years in the period 2007 through 2012. Irs form 1040ez Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. Irs form 1040ez Military or terrorist action defined. Irs form 1040ez   A military or terrorist action means the following. Irs form 1040ez Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. Irs form 1040ez Any military action involving the U. Irs form 1040ez S. Irs form 1040ez Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression. Irs form 1040ez   Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. Irs form 1040ez Military action does not include training exercises. Irs form 1040ez Any multinational force in which the United States is participating is treated as an ally of the United States. Irs form 1040ez Determining if a terrorist activity or military action has occurred. Irs form 1040ez   You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. Irs form 1040ez Specified Terrorist Victim The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. Irs form 1040ez Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. Irs form 1040ez The April 19, 1995, terrorist attack on the Alfred P. Irs form 1040ez Murrah Federal Building (Oklahoma City). Irs form 1040ez The September 11, 2001, terrorist attacks. Irs form 1040ez The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. Irs form 1040ez The Act also exempts from federal income tax the following types of income. Irs form 1040ez Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. Irs form 1040ez Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. Irs form 1040ez Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. Irs form 1040ez Payments from the September 11th Victim Compensation Fund 2001. Irs form 1040ez The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. Irs form 1040ez See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. Irs form 1040ez Astronauts Legislation extended the tax relief available under the Victims of Terrorism Tax Relief Act of 2001 (the Act) to astronauts who died in the line of duty after December 31, 2002. Irs form 1040ez The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. Irs form 1040ez For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. Irs form 1040ez However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut instead of September 11, 2001). Irs form 1040ez For more information on the Act, see Publication 3920. Irs form 1040ez Claim for Credit or Refund If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. Irs form 1040ez If any tax is still due, it will be canceled. Irs form 1040ez The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later. Irs form 1040ez If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by: The amount of time served in the combat zone (including any period in which the individual was in missing status), plus The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus The next 180 days. Irs form 1040ez Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. Irs form 1040ez This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation. Irs form 1040ez Filing a claim. Irs form 1040ez   Use the following procedures to file a claim. Irs form 1040ez If a U. Irs form 1040ez S. Irs form 1040ez individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. Irs form 1040ez Form W-2, Wage and Tax Statement, must accompany all returns. Irs form 1040ez If a U. Irs form 1040ez S. Irs form 1040ez individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. Irs form 1040ez You must file a separate Form 1040X for each year in question. Irs form 1040ez   You must file these returns and claims at the following address for regular mail (U. Irs form 1040ez S. Irs form 1040ez Postal Service). Irs form 1040ez    Internal Revenue Service 333 W. Irs form 1040ez Pershing, P5–6503 Kansas City, MO 64108   Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. Irs form 1040ez On the applicable return, write the same phrase on the line for total tax. Irs form 1040ez If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. Irs form 1040ez   Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. Irs form 1040ez On joint returns, make an allocation of the tax as described below under Joint returns. Irs form 1040ez If you cannot make a proper allocation, attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. Irs form 1040ez   You must attach Form 1310 to all returns and claims for refund. Irs form 1040ez However, for exceptions to filing Form 1310, see Form 1310. Irs form 1040ez Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. Irs form 1040ez   You must also attach proof of death that includes a statement that the individual was a U. Irs form 1040ez S. Irs form 1040ez employee on the date of injury and on the date of death and died as the result of a military or terrorist action. Irs form 1040ez For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. Irs form 1040ez For other U. Irs form 1040ez S. Irs form 1040ez civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. Irs form 1040ez For other U. Irs form 1040ez S. Irs form 1040ez civilian employees killed overseas, attach a certification from the Department of State. Irs form 1040ez   If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. Irs form 1040ez Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information. Irs form 1040ez Joint returns. Irs form 1040ez   If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. Irs form 1040ez Determine the decedent's tax liability as follows. Irs form 1040ez Figure the income tax for which the decedent would have been liable if a separate return had been filed. Irs form 1040ez Figure the income tax for which the spouse would have been liable if a separate return had been filed. Irs form 1040ez Multiply the joint tax liability by a fraction. Irs form 1040ez The numerator of the fraction is the amount in (1), above. Irs form 1040ez The denominator of the fraction is the total of (1) and (2). Irs form 1040ez   The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. Irs form 1040ez Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. Irs form 1040ez Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Irs form 1040ez If a personal representative has been appointed, the personal representative must sign the return. Irs form 1040ez If it is a joint return, the surviving spouse must also sign it. Irs form 1040ez If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return. Irs form 1040ez If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Irs form 1040ez ” To claim a refund for the decedent, do the following. Irs form 1040ez If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. Irs form 1040ez If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. Irs form 1040ez (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. Irs form 1040ez ) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310). Irs form 1040ez If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310. Irs form 1040ez Other Tax Information Discussed below is information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate. Irs form 1040ez Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. Irs form 1040ez Joint return by surviving spouse. Irs form 1040ez   A surviving spouse can file a joint return for the year of death and may qualify for special tax rates for the following 2 years, as explained under Qualifying widows and widowers, later. Irs form 1040ez Decedent as your dependent. Irs form 1040ez   If the decedent qualified as your dependent for a part of the year before death, you can claim the exemption for the dependent on your tax return, regardless of when death occurred during the year. Irs form 1040ez   If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. Irs form 1040ez To determine if you qualify for the child tax credit, see the instructions for Form 1040, line 51; Form 1040A, line 33; or Form 1040NR, line 48. Irs form 1040ez To determine if you qualify for the earned income credit, see the instructions for Form 1040, lines 64a and 64b or Form 1040A, lines 38a and 38b. Irs form 1040ez Qualifying widows and widowers. Irs form 1040ez   If your spouse died within the 2 tax years preceding the year for which your return is being filed, you may be eligible to claim the filing status of qualifying widow(er) with dependent child and qualify to use the married-filing-jointly tax rates. Irs form 1040ez Requirements. Irs form 1040ez   Generally, you qualify for this special benefit if you meet all of the following requirements. Irs form 1040ez You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. Irs form 1040ez You did not remarry before the end of the current tax year. Irs form 1040ez You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. Irs form 1040ez You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences. Irs form 1040ez Example. Irs form 1040ez William Burns' wife died in 2010. Irs form 1040ez William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. Irs form 1040ez For 2010, he was entitled to file a joint return for himself and his deceased wife. Irs form 1040ez For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. Irs form 1040ez For later years, he may qualify to file as a head of household. Irs form 1040ez Figuring your tax. Irs form 1040ez   Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. Irs form 1040ez Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. Irs form 1040ez   The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. Irs form 1040ez Joint return filing rules. Irs form 1040ez   If you are the surviving spouse and a personal representative is handling the estate for the decedent, you should coordinate filing your return for the year of death with this personal representative. Irs form 1040ez See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. Irs form 1040ez Income in Respect of a Decedent All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent. Irs form 1040ez If the decedent is a specified terrorist victim (see Specified Terrorist Victim, earlier), income received after the date of death and before the end of the decedent's tax year (determined without regard to death) is excluded from the recipient's gross income. Irs form 1040ez This exclusion does not apply to certain income. Irs form 1040ez For more information, see Publication 3920. Irs form 1040ez How To Report Income in respect of a decedent must be included in the income of one of the following. Irs form 1040ez The decedent's estate, if the estate receives it. Irs form 1040ez The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. Irs form 1040ez Any person to whom the estate properly distributes the right to receive it. Irs form 1040ez If you have to include income in respect of a decedent in your gross income and an estate tax return (Form 706) was filed for the decedent, you may be able to claim a deduction for the estate tax paid on that income. Irs form 1040ez See Estate Tax Deduction, later. Irs form 1040ez Example 1. Irs form 1040ez Frank Johnson owned and operated an apple orchard. Irs form 1040ez He used the cash method of accounting. Irs form 1040ez He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. Irs form 1040ez The proceeds from the sale are income in respect of a decedent. Irs form 1040ez When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. Irs form 1040ez When Frank's widow collects the $2,000, she must include that amount in her return. Irs form 1040ez It is not reported on the final return of the decedent or on the return of the estate. Irs form 1040ez Example 2. Irs form 1040ez Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. Irs form 1040ez The amount accrued from the sale of the apples would be included on his final return. Irs form 1040ez Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. Irs form 1040ez Example 3. Irs form 1040ez On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. Irs form 1040ez His adjusted basis in the tractor was $2,000. Irs form 1040ez George died on February 15, before receiving payment. Irs form 1040ez The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. Irs form 1040ez In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. Irs form 1040ez Example 4. Irs form 1040ez Cathy O'Neil was entitled to a large salary payment at the date of her death. Irs form 1040ez The amount was to be paid in five annual installments. Irs form 1040ez The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. Irs form 1040ez The payments are income in respect of a decedent. Irs form 1040ez None of the payments were includible on Cathy's final return. Irs form 1040ez The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them. Irs form 1040ez Example 5. Irs form 1040ez You inherited the right to receive renewal commissions on life insurance sold by your father before his death. Irs form 1040ez You inherited the right from your mother, who acquired it by bequest from your father. Irs form 1040ez Your mother died before she received all the commissions she had the right to receive, so you received the rest. Irs form 1040ez The commissions are income in respect of a decedent. Irs form 1040ez None of these commissions were includible in your father's final return. Irs form 1040ez The commissions received by your mother were included in her income. Irs form 1040ez The commissions you received are not includible in your mother's income, even on her final return. Irs form 1040ez You must include them in your income. Irs form 1040ez Character of income. Irs form 1040ez   The character of the income you receive in respect of a decedent remains the same as it would have been to the decedent if he or she were alive. Irs form 1040ez If the income would have been a capital gain to the decedent, it will be a capital gain to you. Irs form 1040ez Transfer of right to income. Irs form 1040ez   If you transfer your right to income in respect of a decedent, you must include in your income the greater of: The amount you receive for the right, or The fair market value of the right you transfer. Irs form 1040ez   If you make a gift of such a right, you must include in your income the fair market value of the right at the time of the gift. Irs form 1040ez   If the right to income from an installment obligation is transferred, the amount you must include in income is reduced by the basis of the obligation. Irs form 1040ez See Installment obligations, later. Irs form 1040ez Transfer defined. Irs form 1040ez   A transfer for this purpose includes a sale, exchange, or other disposition, the satisfaction of an installment obligation at other than face value, or the cancellation of an installment obligation. Irs form 1040ez Installment obligations. Irs form 1040ez   If the decedent sold property using the installment method and you are collecting payments on an installment obligation acquired from the decedent, use the same gross profit percentage the decedent used to figure the part of each payment that represents profit. Irs form 1040ez Include in your income the same profit the decedent would have included had death not occurred. Irs form 1040ez For more information, see Publication 537, Installment Sales. Irs form 1040ez   If you dispose of an installment obligation acquired from a decedent (other than by transfer to the obligor), the rules explained in Publication 537 for figuring gain or loss on the disposition apply to you. Irs form 1040ez Transfer to obligor. Irs form 1040ez   A transfer of a right to income, discussed earlier, has occurred if the decedent (seller) sold property using the installment method and the installment obligation was transferred to the obligor (buyer or person legally obligated to pay the installments). Irs form 1040ez A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. Irs form 1040ez An obligation that becomes unenforceable is treated as having been canceled. Irs form 1040ez   If such a transfer occurs, the amount included in the income of the transferor (the estate or beneficiary) is the greater of the amount received or the fair market value of the installment obligation at the time of transfer, reduced by the basis of the obligation. Irs form 1040ez The basis of the obligation is the decedent's basis, adjusted for all installment payments received after the decedent's death and before the transfer. Irs form 1040ez   If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. Irs form 1040ez Specific Types of Income in Respect of a Decedent This section explains and provides examples of some specific types of income in respect of a decedent. Irs form 1040ez Wages. Irs form 1040ez   The entire amount of wages or other employee compensation earned by the decedent but unpaid at the time of death is income in respect of a decedent. Irs form 1040ez The income is not reduced by any amounts withheld by the employer. Irs form 1040ez If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement. Irs form 1040ez   Wages paid as income in respect of a decedent are not subject to federal income tax withholding. Irs form 1040ez However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. Irs form 1040ez These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. Irs form 1040ez These wages are not included in box 1 of Form W-2. Irs form 1040ez   Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe
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The Irs Form 1040ez

Irs form 1040ez 4. Irs form 1040ez   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. Irs form 1040ez However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Irs form 1040ez For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. Irs form 1040ez This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Irs form 1040ez The student loan interest deduction is taken as an adjustment to income. Irs form 1040ez This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). Irs form 1040ez This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. Irs form 1040ez Table 4-1. Irs form 1040ez Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. Irs form 1040ez Do not rely on this table alone. Irs form 1040ez Refer to the text for complete details. Irs form 1040ez Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. Irs form 1040ez Loan qualifications   Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. Irs form 1040ez Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. Irs form 1040ez Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. Irs form 1040ez Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). Irs form 1040ez Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Irs form 1040ez It includes both required and voluntary interest payments. Irs form 1040ez Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. Irs form 1040ez Loans from the following sources are not qualified student loans. Irs form 1040ez A related person. Irs form 1040ez A qualified employer plan. Irs form 1040ez Your dependent. Irs form 1040ez   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. Irs form 1040ez You can find more information about dependents in Publication 501. Irs form 1040ez Exceptions. Irs form 1040ez   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. Irs form 1040ez An individual can be your dependent even if you are the dependent of another taxpayer. Irs form 1040ez An individual can be your dependent even if the individual files a joint return with a spouse. Irs form 1040ez An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). Irs form 1040ez Reasonable period of time. Irs form 1040ez   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. Irs form 1040ez   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. Irs form 1040ez The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. Irs form 1040ez   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. Irs form 1040ez Academic period. Irs form 1040ez   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. Irs form 1040ez 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. Irs form 1040ez Eligible student. Irs form 1040ez   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Irs form 1040ez Enrolled at least half-time. Irs form 1040ez   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. Irs form 1040ez   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Irs form 1040ez However, the standard may not be lower than any of those established by the U. Irs form 1040ez S. Irs form 1040ez Department of Education under the Higher Education Act of 1965. Irs form 1040ez Related person. Irs form 1040ez   You cannot deduct interest on a loan you get from a related person. Irs form 1040ez Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Irs form 1040ez ), Your lineal descendants (children, grandchildren, etc. Irs form 1040ez ), and Certain corporations, partnerships, trusts, and exempt organizations. Irs form 1040ez Qualified employer plan. Irs form 1040ez   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Irs form 1040ez Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. Irs form 1040ez They include amounts paid for the following items. Irs form 1040ez Tuition and fees. Irs form 1040ez Room and board. Irs form 1040ez Books, supplies, and equipment. Irs form 1040ez Other necessary expenses (such as transportation). Irs form 1040ez The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Irs form 1040ez Eligible educational institution. Irs form 1040ez   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. Irs form 1040ez S. Irs form 1040ez Department of Education. Irs form 1040ez It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Irs form 1040ez   Certain educational institutions located outside the United States also participate in the U. Irs form 1040ez S. Irs form 1040ez Department of Education's Federal Student Aid (FSA) programs. Irs form 1040ez   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. Irs form 1040ez   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Irs form 1040ez The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Irs form 1040ez    The educational institution should be able to tell you if it is an eligible educational institution. Irs form 1040ez Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. Irs form 1040ez Employer-provided educational assistance. Irs form 1040ez See chapter 11, Employer-Provided Educational Assistance . Irs form 1040ez Tax-free distribution of earnings from a Coverdell education savings account (ESA). Irs form 1040ez See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. Irs form 1040ez Tax-free distribution of earnings from a qualified tuition program (QTP). Irs form 1040ez See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. Irs form 1040ez U. Irs form 1040ez S. Irs form 1040ez savings bond interest that you exclude from income because it is used to pay qualified education expenses. Irs form 1040ez See chapter 10, Education Savings Bond Program . Irs form 1040ez The tax-free part of scholarships and fellowships. Irs form 1040ez See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Irs form 1040ez Veterans' educational assistance. Irs form 1040ez See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Irs form 1040ez Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs form 1040ez Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. Irs form 1040ez Loan origination fee. Irs form 1040ez   In general, this is a one-time fee charged by the lender when a loan is made. Irs form 1040ez To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. Irs form 1040ez A loan origination fee treated as interest accrues over the term of the loan. Irs form 1040ez   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. Irs form 1040ez If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. Irs form 1040ez The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. Irs form 1040ez A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. Irs form 1040ez Example. Irs form 1040ez In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. Irs form 1040ez The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. Irs form 1040ez Bill began making payments on his student loan in 2013. Irs form 1040ez Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. Irs form 1040ez Bill's loan is payable in 120 equal monthly payments. Irs form 1040ez He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). Irs form 1040ez Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. Irs form 1040ez To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. Irs form 1040ez Capitalized interest. Irs form 1040ez   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Irs form 1040ez Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. Irs form 1040ez No deduction for capitalized interest is allowed in a year in which no loan payments were made. Irs form 1040ez Interest on revolving lines of credit. Irs form 1040ez   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. Irs form 1040ez See Qualified Education Expenses , earlier. Irs form 1040ez Interest on refinanced student loans. Irs form 1040ez   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. Irs form 1040ez    If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. Irs form 1040ez Voluntary interest payments. Irs form 1040ez   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. Irs form 1040ez Example. Irs form 1040ez The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. Irs form 1040ez He began making payments as required. Irs form 1040ez In September 2013, Roger enrolled in graduate school on a full-time basis. Irs form 1040ez He applied for and was granted deferment of his loan payments while in graduate school. Irs form 1040ez Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. Irs form 1040ez Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. Irs form 1040ez Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. Irs form 1040ez To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. Irs form 1040ez Example. Irs form 1040ez In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. Irs form 1040ez The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. Irs form 1040ez The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. Irs form 1040ez At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. Irs form 1040ez The loan is payable over 60 months, with a payment of $200. Irs form 1040ez 51 due on the first of each month, beginning November 2013. Irs form 1040ez Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. Irs form 1040ez However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). Irs form 1040ez Payment Date   Payment   Stated Interest   Principal November 2013   $200. Irs form 1040ez 51   $44. Irs form 1040ez 27   $156. Irs form 1040ez 24 December 2013   $200. Irs form 1040ez 51   $43. Irs form 1040ez 62   $156. Irs form 1040ez 89 Totals   $401. Irs form 1040ez 02   $87. Irs form 1040ez 89   $313. Irs form 1040ez 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. Irs form 1040ez 89. Irs form 1040ez Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). Irs form 1040ez A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. Irs form 1040ez Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. Irs form 1040ez Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. Irs form 1040ez 02 ($87. Irs form 1040ez 89 + $10 + $303. Irs form 1040ez 13). Irs form 1040ez For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. Irs form 1040ez She also will apply the remaining amount of capitalized interest ($625 − $303. Irs form 1040ez 13 = $321. Irs form 1040ez 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. Irs form 1040ez Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. Irs form 1040ez Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Irs form 1040ez Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Irs form 1040ez Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. Irs form 1040ez For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. Irs form 1040ez When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. Irs form 1040ez Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Irs form 1040ez Your filing status is any filing status except married filing separately. Irs form 1040ez No one else is claiming an exemption for you on his or her tax return. Irs form 1040ez You are legally obligated to pay interest on a qualified student loan. Irs form 1040ez You paid interest on a qualified student loan. Irs form 1040ez Claiming an exemption for you. Irs form 1040ez   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. Irs form 1040ez Example 1. Irs form 1040ez During 2013, Josh paid $600 interest on his qualified student loan. Irs form 1040ez Only he is legally obligated to make the payments. Irs form 1040ez No one claimed an exemption for Josh for 2013. Irs form 1040ez Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. Irs form 1040ez Example 2. Irs form 1040ez During 2013, Jo paid $1,100 interest on her qualified student loan. Irs form 1040ez Only she is legally obligated to make the payments. Irs form 1040ez Jo's parents claimed an exemption for her on their 2013 tax return. Irs form 1040ez In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. Irs form 1040ez Interest paid by others. Irs form 1040ez   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. Irs form 1040ez Example 1. Irs form 1040ez Darla obtained a qualified student loan to attend college. Irs form 1040ez After Darla's graduation from college, she worked as an intern for a nonprofit organization. Irs form 1040ez As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. Irs form 1040ez This payment was treated as additional compensation and reported in box 1 of her Form W-2. Irs form 1040ez Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. Irs form 1040ez Example 2. Irs form 1040ez Ethan obtained a qualified student loan to attend college. Irs form 1040ez After graduating from college, the first monthly payment on his loan was due in December. Irs form 1040ez As a gift, Ethan's mother made this payment for him. Irs form 1040ez No one is claiming a dependency exemption for Ethan on his or her tax return. Irs form 1040ez Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. Irs form 1040ez No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). Irs form 1040ez Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Irs form 1040ez However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. Irs form 1040ez You can use Worksheet 4-1. Irs form 1040ez Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. Irs form 1040ez Form 1098-E. Irs form 1040ez   To help you figure your student loan interest deduction, you should receive Form 1098-E. Irs form 1040ez Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. Irs form 1040ez   For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. Irs form 1040ez Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Irs form 1040ez However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Irs form 1040ez See Allocating Payments Between Interest and Principal , earlier. Irs form 1040ez    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. Irs form 1040ez The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. Irs form 1040ez Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). Irs form 1040ez You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). Irs form 1040ez Modified adjusted gross income (MAGI). Irs form 1040ez   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. Irs form 1040ez However, as discussed below, there may be other modifications. Irs form 1040ez Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. Irs form 1040ez Table 4-2. Irs form 1040ez Effect of MAGI on Student Loan Interest Deduction IF your filing status is. Irs form 1040ez . Irs form 1040ez . Irs form 1040ez AND your MAGI is. Irs form 1040ez . Irs form 1040ez . Irs form 1040ez THEN your student loan interest deduction is. Irs form 1040ez . Irs form 1040ez . Irs form 1040ez single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. Irs form 1040ez more than $60,000  but less than $75,000 reduced because of the phaseout. Irs form 1040ez $75,000 or more eliminated by the phaseout. Irs form 1040ez married filing joint return not more than $125,000 not affected by the phaseout. Irs form 1040ez more than $125,000 but less than $155,000 reduced because of the phaseout. Irs form 1040ez $155,000 or more eliminated by the phaseout. Irs form 1040ez MAGI when using Form 1040A. Irs form 1040ez   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). Irs form 1040ez MAGI when using Form 1040. Irs form 1040ez   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and 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. Irs form 1040ez MAGI when using Form 1040NR. Irs form 1040ez   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). Irs form 1040ez MAGI when using Form 1040NR-EZ. Irs form 1040ez   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). Irs form 1040ez Phaseout. Irs form 1040ez   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. Irs form 1040ez To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. Irs form 1040ez The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). Irs form 1040ez The denominator is $15,000 ($30,000 in the case of a joint return). Irs form 1040ez Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. Irs form 1040ez Example 1. Irs form 1040ez During 2013 you paid $800 interest on a qualified student loan. Irs form 1040ez Your 2013 MAGI is $145,000 and you are filing a joint return. Irs form 1040ez You must reduce your deduction by $533, figured as follows. Irs form 1040ez   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). Irs form 1040ez Example 2. Irs form 1040ez The facts are the same as in Example 1 except that you paid $2,750 interest. Irs form 1040ez Your maximum deduction for 2013 is $2,500. Irs form 1040ez You must reduce your maximum deduction by $1,667, figured as follows. Irs form 1040ez   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). Irs form 1040ez Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. Irs form 1040ez However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. Irs form 1040ez Student Loan Interest Deduction Worksheet at the end of this chapter. Irs form 1040ez Claiming the Deduction The student loan interest deduction is an adjustment to income. Irs form 1040ez To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). Irs form 1040ez Worksheet 4-1. Irs form 1040ez Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Irs form 1040ez Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. Irs form 1040ez 1. Irs form 1040ez Enter the total interest you paid in 2013 on qualified student loans. Irs form 1040ez Do not enter  more than $2,500 1. Irs form 1040ez   2. Irs form 1040ez Enter the amount from Form 1040, line 22 2. Irs form 1040ez       3. Irs form 1040ez Enter the total of the amounts from Form 1040,  lines 23 through 32 3. Irs form 1040ez           4. Irs form 1040ez Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. Irs form 1040ez           5. Irs form 1040ez Add lines 3 and 4 5. Irs form 1040ez       6. Irs form 1040ez Subtract line 5 from line 2 6. Irs form 1040ez       7. Irs form 1040ez Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. Irs form 1040ez       8. Irs form 1040ez Enter any foreign housing deduction (Form 2555, line 50) 8. Irs form 1040ez       9. Irs form 1040ez Enter the amount of income from Puerto Rico you are excluding 9. Irs form 1040ez       10. Irs form 1040ez Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. Irs form 1040ez       11. Irs form 1040ez Add lines 6 through 10. Irs form 1040ez This is your modified adjusted gross income 11. Irs form 1040ez   12. Irs form 1040ez Enter the amount shown below for your filing status 12. Irs form 1040ez     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. Irs form 1040ez Is the amount on line 11 more than the amount on line 12?       □ No. Irs form 1040ez Skip lines 13 and 14, enter -0- on line 15, and go to line 16. Irs form 1040ez       □ Yes. Irs form 1040ez Subtract line 12 from line 11 13. Irs form 1040ez   14. Irs form 1040ez Divide line 13 by $15,000 ($30,000 if married filing jointly). Irs form 1040ez Enter the result as a decimal  (rounded to at least three places). Irs form 1040ez If the result is 1. Irs form 1040ez 000 or more, enter 1. Irs form 1040ez 000 14. Irs form 1040ez . Irs form 1040ez 15. Irs form 1040ez Multiply line 1 by line 14 15. Irs form 1040ez   16. Irs form 1040ez Student loan interest deduction. Irs form 1040ez Subtract line 15 from line 1. Irs form 1040ez Enter the result here  and on Form 1040, line 33. Irs form 1040ez Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. Irs form 1040ez ) 16. Irs form 1040ez   Prev  Up  Next   Home   More Online Publications