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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Military Tax Filing

File State Income Tax FreeFree Tax ExtensionFree Tax ServicesFree State E File TaxesIrs Gov Forms2012 Income Tax ReturnTax Form 1040nr EzH R Block Online1040ez Tax Form 2013Amending A ReturnState Tax Return FormsHow To Amend Your Tax ReturnIrs Gov Free FileFiling 2007 Taxes Late OnlineIrs Form1040Telefile10 40 Ez OnlineFree Efile For State TaxesFree 2010 Tax Return1040ez Tax FormsHow To File An Amended Tax Return 20131040a Tax TableIrs Form 1040ezFree Tax FilingFile State Taxes Online For FreeHelp Amending Tax Return2009 Tax FormsWhen Can I File An Amended Tax Return For 2013File 2008 Taxes For FreeHow To Amend A Tax ReturnEz 1040Can You File Your State Taxes For FreeFree Federal And State Tax Filing 20141040ez Free File Online1040 Ez 2011File State Return OnlyCan I Efile 1040nrAmend 2009 Tax Return OnlineTurbo Tax 1040nrCan I Efile 2012 Taxes

Military Tax Filing

Military tax filing Part Five -   Deducción Estándar y Deducciones Detalladas Después de calcular su ingreso bruto ajustado, entonces puede restar las deducciones utilizadas para calcular los ingresos tributables. Military tax filing Puede restar la deducción estándar o las deducciones detalladas. Military tax filing Las deducciones detalladas son deducciones por determinados gastos enumerados en el Anexo A (Formulario 1040). Military tax filing Los diez capítulos de esta sección tratan sobre la deducción estándar, cada deducción detallada y el límite sobre algunas de sus deducciones detalladas si su ingreso bruto ajustado es mayor que ciertas cantidades. Military tax filing Vea el capítulo 20 para saber qué factores debe tener en cuenta al decidir si debe restar o no la deducción estándar o las deducciones detalladas. Military tax filing Table of Contents 20. Military tax filing   Deducción EstándarQué Hay de Nuevo Introduction Cantidad de la Deducción Estándar Deducción Estándar para DependientesDefinición del ingreso del trabajo. Military tax filing Quién Debe Detallar las DeduccionesCuándo detallar las deducciones. Military tax filing Personas casadas que presentan la declaración por separado. Military tax filing 21. Military tax filing   Gastos Médicos y DentalesQué Hay de Nuevo Introduction Useful Items - You may want to see: ¿Qué Son Gastos Médicos? ¿Qué Gastos Puede Incluir Este Año?Estados donde rige la ley de los bienes gananciales. Military tax filing ¿Qué Cantidad de los Gastos Puede Deducir? ¿De Qué Personas Puede Incluir Gastos Médicos?Usted Cónyuge Dependiente Difuntos ¿Qué Gastos Médicos se Pueden Incluir?Primas de Seguros Comidas y Alojamiento Transporte Gastos del Cuidado de un Dependiente Incapacitado ¿Cómo se Tratan los Reembolsos?Reembolso de Seguros Indemnizaciones por Lesiones Personales Cómo Calcular y Reclamar la Deducción en su Declaración de Impuestos¿Qué Formulario Debe Usar para la Declaración? Gastos de Trabajo Relacionados con un Impedimento Costos del Seguro Médico para Personas que Trabajan por Cuenta Propia 22. Military tax filing   ImpuestosIntroductionGobierno tribal de indios estadounidenses. Military tax filing Useful Items - You may want to see: Requisitos para Deducir Todo Impuesto Impuestos sobre los IngresosImpuestos Estatales y Locales sobre los Ingresos Impuestos Extranjeros sobre los Ingresos Impuestos Generales sobre las VentasVehículos de motor. Military tax filing Impuestos sobre Bienes RaícesImpuestos sobre bienes raíces de años anteriores. Military tax filing Ejemplos. Military tax filing Formulario 1099-S. Military tax filing Cantidades Relacionadas con Bienes Raíces que no Puede Deducir Impuestos sobre Bienes Muebles Impuestos y Cargos que no Puede Deducir Dónde se Anotan las Deducciones 23. Military tax filing   Gastos de InteresesIntroduction Useful Items - You may want to see: Intereses Hipotecarios de ViviendaCantidad Deducible Puntos Primas de Seguro Hipotecario Formulario 1098, Estado de Cuenta de los Intereses Hipotecarios Intereses Procedentes de InversionesBienes de Inversión Asignación de Gastos de Intereses Límite sobre la Deducción Cantidades que No Puede DeducirIntereses Personales Asignación de Intereses Cómo Hacer la DeclaraciónMás de un prestatario. Military tax filing Fondos procedentes de una hipoteca utilizados para negocios o inversiones. Military tax filing 24. Military tax filing   DonacionesIntroduction Useful Items - You may want to see: Organizaciones que Reúnen los Requisitos para Recibir Donaciones DeduciblesTipos de Organizaciones Calificadas Donaciones que Puede DeducirDonaciones de las Cuales Usted se Beneficia Gastos Pagados a Nombre de un Estudiante que Vive con Usted Gastos de Bolsillo al Prestar Servicios Donaciones que no Puede DeducirDonaciones Hechas a Personas Físicas Donaciones Hechas a Organizaciones no Calificadas Donaciones de las Cuales Usted se Beneficia Valor de Tiempo o Servicios Gastos Personales Cargos de Tasación Donaciones de BienesExcepción. Military tax filing Artículos domésticos. Military tax filing Deducción de más de $500. Military tax filing Formulario 1098-C. Military tax filing Se acerca el plazo para la presentación de la declaración y aún no tiene el Formulario 1098-C. Military tax filing Excepción 1: vehículo usado o mejorado por la organización. Military tax filing Excepción 2: vehículo donado o vendido a una persona necesitada. Military tax filing Deducción de $500 o menos. Military tax filing Derecho al uso de los bienes. Military tax filing Bienes muebles tangibles. Military tax filing Intereses futuros. Military tax filing Determinación del Valor Justo de Mercado Donación de Bienes Cuyo Valor ha Disminuido Donación de Bienes Cuyo Valor ha Aumentado Cuándo Puede Deducir sus DonacionesCheques. Military tax filing Mensaje de texto. Military tax filing Tarjeta de crédito. Military tax filing Pago telefónico. Military tax filing Título de acciones. Military tax filing Pagaré. Military tax filing Opción. Military tax filing Fondos de un préstamo. Military tax filing Límites sobre DeduccionesCantidades Trasladadas al Año Siguiente Documentación que se Debe MantenerDonaciones en Efectivo Donaciones que no Sean en Efectivo Gastos de Bolsillo Cómo Declarar las Donaciones Caritativas 25. Military tax filing   Pérdidas por Hecho Fortuito y Robo no Relacionadas con los NegociosQué Hay de Nuevo Introduction Useful Items - You may want to see: Hecho FortuitoMascota de la familia. Military tax filing Deterioro progresivo. Military tax filing Daños ocasionados por paneles de yeso (drywall) corrosivos. Military tax filing Robo Pérdidas de Depósitos Comprobación de las Pérdidas Cómo Calcular una PérdidaDisminución del Valor Justo de Mercado Base Ajustada Seguro y Otros Reembolsos Un Solo Hecho Fortuito en Bienes Múltiples Límites de la DeducciónRegla de los $100 Regla del 10% Cuándo Declarar Ganancias y PérdidasPérdidas en Zonas de Desastre Cómo Declarar Ganancias y Pérdidas 26. Military tax filing   Gastos de Automóvil y Otros Gastos de Negocio del EmpleadoQué Hay de Nuevo Introduction Useful Items - You may want to see: Gastos de ViajeViajes Lejos de Su Domicilio Domicilio Tributario Trabajo o Asignación Temporal ¿Qué Gastos de Viaje se Pueden Deducir? Viajes en los Estados Unidos Viajes Fuera de los Estados Unidos Convenciones Gastos de EntretenimientoLímite del 50% ¿Qué Gastos de Entretenimiento se Pueden Deducir? ¿Qué Gastos de Entretenimiento no se Pueden Deducir? Gastos por Regalos Gastos de TransportePersonal en Reserva de las Fuerzas Armadas. Military tax filing Cargos de estacionamiento. Military tax filing Publicidad en el automóvil. Military tax filing Uso compartido de automóviles. Military tax filing Transporte de herramientas o instrumentos. Military tax filing Gastos de desplazamiento de sindicalistas desde el centro del sindicato. Military tax filing Gastos de Automóvil Mantenimiento de DocumentaciónCómo Demostrar los Gastos Cuánto Tiempo Tiene que Guardar Documentación y Recibos Cómo Hacer la DeclaraciónRegalos. Military tax filing Empleados estatutarios. Military tax filing Reembolsos Cómo Llenar los Formularios 2106 y 2106-EZ Reglas Especiales 27. Military tax filing   Beneficios Tributarios para Estudios Relacionados con el TrabajoQué Hay de Nuevo Introduction Useful Items - You may want to see: Estudios Relacionados con el Trabajo que Reúnen los Requisitos de la DeducciónEstudios Requeridos por el Empleador o por Ley Estudios para Mantener o Mejorar Destrezas Estudios para Satisfacer los Requisitos Mínimos Estudios que lo Capacitan para un Nuevo Oficio o Negocio Qué Gastos se Pueden Deducir Reembolso no reclamado. Military tax filing Gastos de Transporte Gastos de Viaje No se Permiten Beneficios Dobles Reembolsos Cómo Deducir Gastos de NegociosPersonas que Trabajan por Cuenta Propia Empleados Artistas del Espectáculo y Funcionarios a los que se les Pagan Honorarios Gastos de Trabajo Relacionados con un Impedimento Documentación 28. Military tax filing   Deducciones MisceláneasQué Hay de Nuevo Introduction Useful Items - You may want to see: Deducciones Sujetas al Límite del 2%Gastos del Empleado no Reembolsados (Línea 21) Costos de la Preparación de la Declaración de Impuestos (Línea 22) Otros Gastos (Línea 23) Deducciones no Sujetas al Límite del 2%Lista de Deducciones Gastos no DeduciblesLista de Gastos no Deducibles 29. Military tax filing   Límite sobre Deducciones DetalladasIntroduction Useful Items - You may want to see: ¿Está Usted Sujeto al Límite? ¿Qué Deducciones Detalladas Están Limitadas? ¿Qué Deducciones Detalladas no Están Limitadas? ¿Cómo se Calcula el Límite?Ejemplo Prev  Up  Next   Home   More Online Publications
Español

The Military Tax Filing

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