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Taxact.com 2012

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Taxact. Taxact.com 2012 com 2012 9. Taxact.com 2012   Tax Treaty Benefits Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Treaty Income Some Typical Tax Treaty BenefitsPersonal Services Teachers, Professors, and Researchers Employees of Foreign Governments Students, Apprentices, and Trainees Capital Gains Resident Aliens Reporting Treaty Benefits Claimed Introduction A nonresident alien (and certain resident aliens) from a country with which the United States has an income tax treaty may qualify for certain benefits. Taxact.com 2012 Most treaties require that the nonresident alien be a resident of the treaty country to qualify. Taxact.com 2012 However, some treaties require that the nonresident alien be a national or a citizen of the treaty country. Taxact.com 2012 See Table 9-1 for a list of tax treaty countries. Taxact.com 2012 You can generally arrange to have withholding tax reduced or eliminated on wages and other income that are eligible for tax treaty benefits. Taxact.com 2012 See Income Entitled to Tax Treaty Benefits in chapter 8. Taxact.com 2012 Topics - This chapter discusses: Typical tax treaty benefits, How to obtain copies of tax treaties, and How to claim tax treaty benefits on your tax return. Taxact.com 2012 Useful Items - You may want to see: Publication 901 U. Taxact.com 2012 S. Taxact.com 2012 Tax Treaties Form (and Instructions) 1040NR U. Taxact.com 2012 S. Taxact.com 2012 Nonresident Alien Income Tax Return 1040NR-EZ U. Taxact.com 2012 S. Taxact.com 2012 Income Tax Return for Certain Nonresident Aliens With No Dependents 8833 Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) See chapter 12 for information about getting these publications and forms. Taxact.com 2012 Treaty Income A nonresident alien's treaty income is the gross income on which the tax is limited by a tax treaty. Taxact.com 2012 Treaty income includes, for example, dividends from sources in the United States that are subject to tax at a tax treaty rate not to exceed 15%. Taxact.com 2012 Nontreaty income is the gross income of a nonresident alien on which the tax is not limited by a tax treaty. Taxact.com 2012 Figure the tax on treaty income on each separate item of income at the reduced rate that applies to that item under the treaty. Taxact.com 2012 To determine tax on nontreaty income, figure the tax at either the flat 30% rate or the graduated rate, depending upon whether or not the income is effectively connected with your trade or business in the United States. Taxact.com 2012 Your tax liability is the sum of the tax on treaty income plus the tax on nontreaty income, but cannot be more than the tax liability figured as if the tax treaty had not come into effect. Taxact.com 2012 Example. Taxact.com 2012 Arthur Banks is a nonresident alien who is single and a resident of a foreign country that has a tax treaty with the United States. Taxact.com 2012 He received gross income of $25,850 during the tax year from sources within the United States, consisting of the following items: Dividends on which the tax is limited to a 15% rate by the tax treaty $1,400 Compensation for personal services on which the tax is not limited by the tax treaty 24,450 Total gross income $25,850 Arthur was engaged in business in the United States during the tax year. Taxact.com 2012 His dividends are not effectively connected with that business. Taxact.com 2012 He has no deductions other than his own personal exemption. Taxact.com 2012 His tax liability, figured as though the tax treaty had not come into effect, is $3,060 determined as follows: Total compensation $24,450 Less: Personal exemption 3,900 Taxable income $20,550 Tax determined by graduated rate (Tax Table column for single taxpayers) $2,640 Plus: Tax on gross dividends ($1,400 × 30%) 420 Tax determined as though treaty had not come into effect $3,060 Arthur's tax liability, figured by taking into account the reduced rate on dividend income as provided by the tax treaty, is $2,850 determined as follows: Tax determined by graduated rate (same as figured above) $2,640 Plus: Tax on gross dividends ($1,400 × 15%) 210 Tax on compensation and dividends $2,850 His tax liability, therefore, is limited to $2,850, the tax liability figured using the tax treaty rate on the dividends. Taxact.com 2012 Some Typical Tax Treaty Benefits The following paragraphs briefly explain the exemptions that are available under tax treaties for personal services income, remittances, scholarships, fellowships, and capital gain income. Taxact.com 2012 The conditions for claiming the exemptions vary under each tax treaty. Taxact.com 2012 For more information about the conditions under a particular tax treaty, see Publication 901. Taxact.com 2012 Or, you may download the complete text of most U. Taxact.com 2012 S. Taxact.com 2012 tax treaties at IRS. Taxact.com 2012 gov. Taxact.com 2012 Technical explanations for many of those treaties are also available at that site. Taxact.com 2012 Tax treaty benefits also cover income such as dividends, interest, rentals, royalties, pensions, and annuities. Taxact.com 2012 These types of income may be exempt from U. Taxact.com 2012 S. Taxact.com 2012 tax or may be subject to a reduced rate of tax. Taxact.com 2012 For more information, see Publication 901 or the applicable tax treaty. Taxact.com 2012 Personal Services Nonresident aliens from treaty countries who are in the United States for a short stay and also meet certain other requirements may be exempt from tax on their compensation received for personal services performed in the United States. Taxact.com 2012 Many tax treaties require that the nonresident alien claiming this exemption be present in the United States for a total of not more than 183 days during the tax year. Taxact.com 2012 Other tax treaties specify different periods of maximum presence in the United States, such as 180 days or 90 days. Taxact.com 2012 Spending part of a day in the United States counts as a day of presence. Taxact.com 2012 Tax treaties may also require that: The compensation cannot be more than a specific amount (frequently $3,000), and The individual have a foreign employer; that is, an individual, corporation, or entity of a foreign country. Taxact.com 2012 Note. Taxact.com 2012 Under most treaties, income received as an employee (generally designated as dependent personal services) and income received as a self-employed person (generally designated as independent personal services or business income) are treated differently. Taxact.com 2012 Teachers, Professors, and Researchers Under many income tax treaties, nonresident alien teachers or professors who temporarily visit the United States for the primary purpose of teaching at a university or other accredited educational institution are not subject to U. Taxact.com 2012 S. Taxact.com 2012 income tax on compensation received for teaching for the first 2 or 3 years after their arrival in the United States. Taxact.com 2012 Many treaties also provide an exemption for engaging in research. Taxact.com 2012 Generally, the teacher or professor must be in the United States primarily to teach, lecture, instruct, or engage in research. Taxact.com 2012 A substantial part of that person's time must be devoted to those duties. Taxact.com 2012 The normal duties of a teacher or professor include not only formal classroom work involving regularly scheduled lectures, demonstrations, or other student-participation activities, but also the less formal method of presenting ideas in seminars or other informal groups and in joint efforts in the laboratory. Taxact.com 2012 If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. Taxact.com 2012 See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens later under Resident Aliens. Taxact.com 2012 Employees of Foreign Governments All treaties have provisions for the exemption of income earned by certain employees of foreign governments. Taxact.com 2012 However, a difference exists among treaties as to who qualifies for this benefit. Taxact.com 2012 Under many treaties, aliens admitted to the United States for permanent residence do not qualify. Taxact.com 2012 Under most treaties, aliens who are not nationals or subjects of the foreign country do not qualify. Taxact.com 2012 Employees of foreign governments should read the pertinent treaty carefully to determine whether they qualify for benefits. Taxact.com 2012 Chapter 10 of this publication also has information for employees of foreign governments. Taxact.com 2012 Students, Apprentices, and Trainees Under some income tax treaties, students, apprentices, and trainees are exempt from tax on remittances received from abroad for study and maintenance. Taxact.com 2012 Also, under some treaties, scholarship and fellowship grants, and a limited amount of compensation received by students, apprentices, and trainees may be exempt from tax. Taxact.com 2012 If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. Taxact.com 2012 See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens , later, under Resident Aliens. Taxact.com 2012 Capital Gains Most treaties provide for the exemption of gains from the sale or exchange of personal property. Taxact.com 2012 Generally, gains from the sale or exchange of real property located in the United States are taxable. Taxact.com 2012 Resident Aliens Resident aliens may qualify for tax treaty benefits in the situations discussed below. Taxact.com 2012 U. Taxact.com 2012 S. Taxact.com 2012 Residency Under Tax Treaty “Tie-Breaker” Rule In certain circumstances, individuals who are treated as residents of the United States under an income tax treaty (after application of the so-called “tie-breaker” rule) will be entitled to treaty benefits. Taxact.com 2012 (The “tie-breaker” rule is explained in chapter 1 under Effect of Tax Treaties. Taxact.com 2012 ) If this applies to you, you generally will not need to file a Form 8833 for the income for which treaty benefits are claimed. Taxact.com 2012 This is because the income will typically be of a category for which disclosure on a Form 8833 is waived. Taxact.com 2012 See Reporting Treaty Benefits Claimed . Taxact.com 2012 In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U. Taxact.com 2012 S. Taxact.com 2012 tax under the treaty. Taxact.com 2012 However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages or salaries). Taxact.com 2012 Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Taxact.com 2012 Next to the amount write “Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. Taxact.com 2012 On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22. Taxact.com 2012 Also follow the above procedure for income that is subject to a reduced rate of tax, instead of an exemption, under the treaty. Taxact.com 2012 Attach a statement to Form 1040 showing a computation of the tax at the reduced rate, the name of the treaty country, and the treaty article that provides for the reduced tax rate. Taxact.com 2012 Include this tax on Form 1040, line 61. Taxact.com 2012 On the dotted line next to line 61, write “Tax from attached statement” and the amount of the tax. Taxact.com 2012 Example. Taxact.com 2012 Jacques Dubois, who is a resident of the United States under Article 4 of the U. Taxact.com 2012 S. Taxact.com 2012 -France income tax treaty, receives French social security benefits. Taxact.com 2012 Under Article 18(1) of the treaty, French social security benefits are not taxable by the United States. Taxact.com 2012 Mr. Taxact.com 2012 Dubois is not required to file a Form 8833 for his French social security benefits or report the benefits on Form 1040. Taxact.com 2012 Special Rule for Canadian and German Social Security Benefits Under income tax treaties with Canada and Germany, if a U. Taxact.com 2012 S. Taxact.com 2012 resident receives social security benefits from Canada or Germany, those benefits are treated for U. Taxact.com 2012 S. Taxact.com 2012 income tax purposes as if they were received under the social security legislation of the United States. Taxact.com 2012 If you receive social security benefits from Canada or Germany, include them on line 1 of your Social Security Benefits Worksheet for purposes of determining the taxable amount to be reported on Form 1040, line 20b or Form 1040A, line 14b. Taxact.com 2012 You are not required to file a Form 8833 for those benefits. Taxact.com 2012 Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens Generally, you must be a nonresident alien student, apprentice, trainee, teacher, professor, or researcher in order to claim a tax treaty exemption for remittances from abroad for study and maintenance in the United States, for scholarship, fellowship, and research grants, and for wages or other personal service compensation. Taxact.com 2012 Once you become a resident alien, you generally can no longer claim a tax treaty exemption for this income. Taxact.com 2012 However, if you entered the United States as a nonresident alien, but you are now a resident alien for U. Taxact.com 2012 S. Taxact.com 2012 tax purposes, the treaty exemption will continue to apply if the tax treaty's saving clause (explained later) provides an exception for it and you otherwise meet the requirements for the treaty exemption (including any time limit, explained later). Taxact.com 2012 This is true even if you are a nonresident alien electing to file a joint return as explained in chapter 1. Taxact.com 2012 Some exceptions to the saving clause apply to all resident aliens (for example, under the U. Taxact.com 2012 S. Taxact.com 2012 -People's Republic of China treaty); others apply only to resident aliens who are not lawful permanent residents of the United States (green card holders). Taxact.com 2012 If you qualify under an exception to the treaty's saving clause, you can avoid income tax withholding by giving the payor a Form W-9 with the statement required by the Form W-9 instructions. Taxact.com 2012 Saving clause. Taxact.com 2012   Most tax treaties have a saving clause. Taxact.com 2012 A saving clause preserves or “saves” the right of each country to tax its own residents as if no tax treaty were in effect. Taxact.com 2012 Thus, once you become a resident alien of the United States, you generally lose any tax treaty benefits that relate to your income. Taxact.com 2012 However, many tax treaties have exceptions to the saving clause, which may allow you to continue to claim certain treaty benefits when you become a resident alien. Taxact.com 2012 Read the treaty to find out if it has a saving clause and an exception to it. Taxact.com 2012 Time limit for claiming treaty exemptions. Taxact.com 2012   Many treaties limit the number of years you can claim a treaty exemption. Taxact.com 2012 For students, apprentices, and trainees, the limit is usually 4–5 years; for teachers, professors, and researchers, the limit is usually 2–3 years. Taxact.com 2012 Once you reach this limit, you can no longer claim the treaty exemption. Taxact.com 2012 See the treaty or Publication 901 for the time limits that apply. Taxact.com 2012 How to report income on your tax return. Taxact.com 2012   In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U. Taxact.com 2012 S. Taxact.com 2012 tax under the treaty. Taxact.com 2012 However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages, salaries, scholarships, or fellowships). Taxact.com 2012 Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Taxact.com 2012 Next to the amount write “Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. Taxact.com 2012 On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22. Taxact.com 2012 Example. Taxact.com 2012 Mr. Taxact.com 2012 Yu, a citizen of the People's Republic of China, entered the United States as a nonresident alien student on January 1, 2009. Taxact.com 2012 He remained a nonresident alien through 2013 and was able to exclude his scholarship from U. Taxact.com 2012 S. Taxact.com 2012 tax in those years under Article 20 of the U. Taxact.com 2012 S. Taxact.com 2012 -People's Republic of China income tax treaty. Taxact.com 2012 On January 1, 2014, he became a resident alien under the substantial presence test because his stay in the United States exceeded 5 years. Taxact.com 2012 Even though Mr. Taxact.com 2012 Yu is now a resident alien, the provisions of Article 20 still apply because of the exception to the saving clause in paragraph 2 of the Protocol to the U. Taxact.com 2012 S. Taxact.com 2012 -People's Republic of China treaty dated April 30, 1984. Taxact.com 2012 Mr. Taxact.com 2012 Yu should submit Form W-9 and the required statement to the payor. Taxact.com 2012 Reporting Treaty Benefits Claimed If you claim treaty benefits that override or modify any provision of the Internal Revenue Code, and by claiming these benefits your tax is, or might be, reduced, you must attach a fully completed Form 8833 to your tax return. Taxact.com 2012 See below, for the situations where you are not required to file Form 8833. Taxact.com 2012 You must file a U. Taxact.com 2012 S. Taxact.com 2012 tax return and Form 8833 if you claim the following treaty benefits. Taxact.com 2012 You claim a reduction or modification in the taxation of gain or loss from the disposition of a U. Taxact.com 2012 S. Taxact.com 2012 real property interest based on a treaty. Taxact.com 2012 You claim a credit for a specific foreign tax for which foreign tax credit would not be allowed by the Internal Revenue Code. Taxact.com 2012 You receive payments or income items totaling more than $100,000 and you determine your country of residence under a treaty and not under the rules for residency discussed in chapter 1. Taxact.com 2012 These are the more common situations for which Form 8833 is required. Taxact.com 2012 Exceptions. Taxact.com 2012   You do not have to file Form 8833 for any of the following situations. Taxact.com 2012 You claim a reduced rate of withholding tax under a treaty on interest, dividends, rent, royalties, or other fixed or determinable annual or periodic income ordinarily subject to the 30% rate. Taxact.com 2012 You claim a treaty reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. Taxact.com 2012 This includes taxable scholarship and fellowship grants. Taxact.com 2012 You claim a reduction or modification of taxation of income under an International Social Security Agreement or a Diplomatic or Consular Agreement. Taxact.com 2012 You are a partner in a partnership or a beneficiary of an estate or trust and the partnership, estate, or trust reports the required information on its return. Taxact.com 2012 The payments or items of income that are otherwise required to be disclosed total no more than $10,000. Taxact.com 2012 You are claiming treaty benefits for amounts that are: Reported to you on Form 1042-S and Received by you: As a related party from a reporting corporation within the meaning of Internal Revenue Code section 6038A (relating to information returns on Form 5472 filed by U. Taxact.com 2012 S. Taxact.com 2012 corporations that are 25-percent owned by a foreign person), or As a beneficial owner that is a direct account holder of a U. Taxact.com 2012 S. Taxact.com 2012 financial institution or qualified intermediary, or a direct partner, beneficiary, or owner of a withholding foreign partnership or trust, from that U. Taxact.com 2012 S. Taxact.com 2012 financial institution, qualified intermediary, or withholding foreign partnership or trust. Taxact.com 2012 The exception described in (6) above does not apply to any amounts for which a treaty-based return disclosure is specifically required by the Form 8833 instructions. Taxact.com 2012 Penalty for failure to provide required information on Form 8833. Taxact.com 2012   If you are required to report the treaty benefits but do not, you may be subject to a penalty of $1,000 for each failure. Taxact.com 2012 Additional information. Taxact.com 2012   For additional information, see section 301. Taxact.com 2012 6114-1(c) of the Income Tax Regulations. Taxact.com 2012 Table 9-1. Taxact.com 2012 Table of Tax Treaties (Updated through December 31, 2013) Country Official Text  Symbol1 General  Effective Date Citation Applicable Treasury Explanations  or Treasury Decision (T. Taxact.com 2012 D. Taxact.com 2012 ) Australia TIAS 10773 Dec. Taxact.com 2012 1, 1983 1986-2 C. Taxact.com 2012 B. Taxact.com 2012 220 1986-2 C. Taxact.com 2012 B. Taxact.com 2012 246 Protocol TIAS Jan. Taxact.com 2012 1, 2004     Austria TIAS Jan. Taxact.com 2012 1, 1999     Bangladesh TIAS Jan. Taxact.com 2012 1, 2007     Barbados TIAS 11090 Jan. Taxact.com 2012 1, 1984 1991-2 C. Taxact.com 2012 B. Taxact.com 2012 436 1991-2 C. Taxact.com 2012 B. Taxact.com 2012 466 Protocol TIAS Jan. Taxact.com 2012 1, 1994     Protocol TIAS Jan. Taxact.com 2012 1, 2005     Belgium TIAS Jan. Taxact.com 2012 1, 2008     Bulgaria TIAS Jan. Taxact.com 2012 1, 2009     Canada2 TIAS 11087 Jan. Taxact.com 2012 1, 1985 1986-2 C. Taxact.com 2012 B. Taxact.com 2012 258 1987-2 C. Taxact.com 2012 B. Taxact.com 2012 298 Protocol TIAS Jan. Taxact.com 2012 1, 1996     Protocol TIAS Dec. Taxact.com 2012 16, 1997     Protocol TIAS Jan. Taxact.com 2012 1, 2009     China, People's Republic of TIAS 12065 Jan. Taxact.com 2012 1, 1987 1988-1 C. Taxact.com 2012 B. Taxact.com 2012 414 1988-1 C. Taxact.com 2012 B. Taxact.com 2012 447 Commonwealth of Independent States3 TIAS 8225 Jan. Taxact.com 2012 1, 1976 1976-2 C. Taxact.com 2012 B. Taxact.com 2012 463 1976-2 C. Taxact.com 2012 B. Taxact.com 2012 475 Cyprus TIAS 10965 Jan. Taxact.com 2012 1, 1986 1989-2 C. Taxact.com 2012 B. Taxact.com 2012 280 1989-2 C. Taxact.com 2012 B. Taxact.com 2012 314 Czech Republic TIAS Jan. Taxact.com 2012 1, 1993     Denmark TIAS Jan. Taxact.com 2012 1, 2001     Protocol TIAS Jan. Taxact.com 2012 1, 2008     Egypt TIAS 10149 Jan. Taxact.com 2012 1, 1982 1982-1 C. Taxact.com 2012 B. Taxact.com 2012 219 1982-1 C. Taxact.com 2012 B. Taxact.com 2012 243 Estonia TIAS Jan. Taxact.com 2012 1, 2000     Finland TIAS 12101 Jan. Taxact.com 2012 1, 1991     Protocol TIAS Jan. Taxact.com 2012 1, 2008     France TIAS Jan. Taxact.com 2012 1, 1996     Protocol TIAS Jan. Taxact.com 2012 1, 2007     Protocol TIAS Jan. Taxact.com 2012 1, 2010     Germany TIAS Jan. Taxact.com 2012 1, 1990     Protocol TIAS Jan. Taxact.com 2012 1, 2008     Greece TIAS 2902 Jan. Taxact.com 2012 1, 1953 1958-2 C. Taxact.com 2012 B. Taxact.com 2012 1054 T. Taxact.com 2012 D. Taxact.com 2012 6109, 1954-2 C. Taxact.com 2012 B. Taxact.com 2012 638 Hungary TIAS 9560 Jan. Taxact.com 2012 1, 1980 1980-1 C. Taxact.com 2012 B. Taxact.com 2012 333 1980-1 C. Taxact.com 2012 B. Taxact.com 2012 354 Iceland TIAS Jan. Taxact.com 2012 1, 2009     India TIAS Jan. Taxact.com 2012 1, 1991     Indonesia TIAS 11593 Jan. Taxact.com 2012 1, 1990     Ireland TIAS Jan. Taxact.com 2012 1, 1998     Israel TIAS Jan. Taxact.com 2012 1, 1995     Italy TIAS Jan. Taxact.com 2012 1, 2010     Jamaica TIAS 10207 Jan. Taxact.com 2012 1, 1982 1982-1 C. Taxact.com 2012 B. Taxact.com 2012 257 1982-1 C. Taxact.com 2012 B. Taxact.com 2012 291 Japan TIAS Jan. Taxact.com 2012 1, 2005     Kazakhstan TIAS Jan. Taxact.com 2012 1, 1996     Korea, South TIAS 9506 Jan. Taxact.com 2012 1, 1980 1979-2 C. Taxact.com 2012 B. Taxact.com 2012 435 1979-2 C. Taxact.com 2012 B. Taxact.com 2012 458 Latvia TIAS Jan. Taxact.com 2012 1, 2000     Lithuania TIAS Jan. Taxact.com 2012 1, 2000     Luxembourg TIAS Jan. Taxact.com 2012 1, 2001     Malta TIAS Jan. Taxact.com 2012 1, 2011     Mexico TIAS Jan. Taxact.com 2012 1, 1994 1994-2 C. Taxact.com 2012 B. Taxact.com 2012 424 1994-2 C. Taxact.com 2012 B. Taxact.com 2012 489 Protocol TIAS Oct. Taxact.com 2012 26, 1995     Protocol TIAS Jan. Taxact.com 2012 1, 2004     Morocco TIAS 10195 Jan. Taxact.com 2012 1, 1981 1982-2 C. Taxact.com 2012 B. Taxact.com 2012 405 1982-2 C. Taxact.com 2012 B. Taxact.com 2012 427 Netherlands TIAS Jan. Taxact.com 2012 1, 1994     Protocol TIAS Jan. Taxact.com 2012 1, 2005     New Zealand TIAS 10772 Nov. Taxact.com 2012 2, 1983 1990-2 C. Taxact.com 2012 B. Taxact.com 2012 274 1990-2 C. Taxact.com 2012 B. Taxact.com 2012 303 Protocol TIAS Jan. Taxact.com 2012 1, 2011     Norway TIAS 7474 Jan. Taxact.com 2012 1, 1971 1973-1 C. Taxact.com 2012 B. Taxact.com 2012 669 1973-1 C. Taxact.com 2012 B. Taxact.com 2012 693 Protocol TIAS 10205 Jan. Taxact.com 2012 1, 1982 1982-2 C. Taxact.com 2012 B. Taxact.com 2012 440 1982-2 C. Taxact.com 2012 B. Taxact.com 2012 454 Pakistan TIAS 4232 Jan. Taxact.com 2012 1, 1959 1960-2 C. Taxact.com 2012 B. Taxact.com 2012 646 T. Taxact.com 2012 D. Taxact.com 2012 6431, 1960-1 C. Taxact.com 2012 B. Taxact.com 2012 755 Philippines TIAS 10417 Jan. Taxact.com 2012 1, 1983 1984-2 C. Taxact.com 2012 B. Taxact.com 2012 384 1984-2 C. Taxact.com 2012 B. Taxact.com 2012 412 Poland TIAS 8486 Jan. Taxact.com 2012 1, 1974 1977-1 C. Taxact.com 2012 B. Taxact.com 2012 416 1977-1 C. Taxact.com 2012 B. Taxact.com 2012 427 Portugal TIAS Jan. Taxact.com 2012 1, 1996     Romania TIAS 8228 Jan. Taxact.com 2012 1, 1974 1976-2 C. Taxact.com 2012 B. Taxact.com 2012 492 1976-2 C. Taxact.com 2012 B. Taxact.com 2012 504 Russia TIAS Jan. Taxact.com 2012 1, 1994     Slovak Republic TIAS Jan. Taxact.com 2012 1, 1993     Slovenia TIAS Jan. Taxact.com 2012 1, 2002     South Africa TIAS Jan. Taxact.com 2012 1, 1998     Spain TIAS Jan. Taxact.com 2012 1, 1991     Sri Lanka TIAS Jan. Taxact.com 2012 1, 2004     Sweden TIAS Jan. Taxact.com 2012 1, 1996     Protocol TIAS Jan. Taxact.com 2012 1, 2007     Switzerland TIAS Jan. Taxact.com 2012 1, 1998     Thailand TIAS Jan. Taxact.com 2012 1, 1998     Trinidad and Tobago TIAS 7047 Jan. Taxact.com 2012 1, 1970 1971-2 C. Taxact.com 2012 B. Taxact.com 2012 479   Tunisia TIAS Jan. Taxact.com 2012 1, 1990     Turkey TIAS Jan. Taxact.com 2012 1, 1998     Ukraine TIAS Jan. Taxact.com 2012 1, 2001     United Kingdom TIAS Jan. Taxact.com 2012 1, 2004     Venezuela TIAS Jan. Taxact.com 2012 1, 2000     1(TIAS) Treaties and Other International Act Series 2Information on the treaty can be found in Publication 597, Information on the United States-Canada Income Tax Treaty. Taxact.com 2012 3The U. Taxact.com 2012 S. Taxact.com 2012 -U. Taxact.com 2012 S. Taxact.com 2012 S. Taxact.com 2012 R. Taxact.com 2012 income tax treaty applies to the countries of Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan. Taxact.com 2012 Prev  Up  Next   Home   More Online Publications
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Taxact. Taxact.com 2012 com 2012 Publication 970 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionComparison table. Taxact.com 2012 Ordering forms and publications. Taxact.com 2012 Tax questions. Taxact.com 2012 Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 970, such as legislation enacted after it was published, go to www. Taxact.com 2012 irs. Taxact.com 2012 gov/pub970. Taxact.com 2012 What's New Lifetime learning credit. Taxact.com 2012  For 2013, the amount of your lifetime learning credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $53,000 and $63,000 ($107,000 and $127,000 if you file a joint return). Taxact.com 2012 You cannot claim a credit if your MAGI is $63,000 or more ($127,000 or more if you file a joint return). Taxact.com 2012 This is an increase from the 2012 limits of $52,000 and $62,000 ($104,000 and $124,000 if filing a joint return). Taxact.com 2012 For more information, see chapter 3, Lifetime Learning Credit . Taxact.com 2012 Business deduction for work-related education. Taxact.com 2012  For 2013, if you drive your car to and from school and qualify to deduct transportation expenses, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013 is 56. Taxact.com 2012 5 cents per mile. Taxact.com 2012 See chapter 12, Business Deduction for Work-Related Education , for more information. Taxact.com 2012 Reminders Form 1098-T, Tuition Statement. Taxact.com 2012  When figuring an education credit or the tuition and fees deduction, use only the amounts you paid and are deemed to have paid during the tax year for qualified education expenses. Taxact.com 2012 In most cases, the student should receive Form 1098-T from the eligible educational institution by January 31, 2014. Taxact.com 2012 An institution my choose to report either payments received during calendar year 2013 (box 1), or amounts billed during the calendar year 2013 (box 2), for qualified education expenses. Taxact.com 2012 However, the amounts in boxes 1 and 2 of Form 1098-T might be different than the amount you actually paid and are deemed to have paid. Taxact.com 2012 In addition, the Form 1098-T should give you other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements, or refunds, and whether the student was enrolled at least half-time or was a graduate student. Taxact.com 2012 The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. Taxact.com 2012 Hope Scholarship Credit. Taxact.com 2012  For 2013, the Hope Scholarship Credit is not available. Taxact.com 2012 However, you may be able to claim an American opportunity or lifetime learning credit. Taxact.com 2012 See chapter 2, American Opportunity Credit , and chapter 3, Lifetime Learning Credit , for more information. Taxact.com 2012 Estimated tax payments. Taxact.com 2012  If you have taxable income from any of your education benefits and the payer does not withhold enough income tax, you may need to make estimated tax payments. Taxact.com 2012 For more information, see Publication 505, Tax Withholding and Estimated Tax. Taxact.com 2012 Photographs of missing children. Taxact.com 2012  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Taxact.com 2012 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Taxact.com 2012 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Taxact.com 2012 Introduction This publication explains tax benefits that may be available to you if you are saving for or paying education costs for yourself or, in many cases, another student who is a member of your immediate family. Taxact.com 2012 Most benefits apply only to higher education. Taxact.com 2012 What is in this publication. Taxact.com 2012    Chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions , explains the tax treatment of various types of educational assistance, including scholarships, fellowships, and tuition reductions. Taxact.com 2012   Two tax credits for which you may be eligible are explained in chapter 2, American Opportunity Credit , and chapter 3, Lifetime Learning Credit . Taxact.com 2012 These benefits, which reduce the amount of income tax you may have to pay, are: The American opportunity credit, and The lifetime learning credit. Taxact.com 2012    Ten other types of benefits are explained in chapters 4 through 12. Taxact.com 2012 These benefits, which reduce the amount of income tax you may have to pay, are: Deduct student loan interest; Receive tax-free treatment of a canceled student loan; Receive tax-free student loan repayment assistance; Deduct tuition and fees for education; Establish and contribute to a Coverdell education savings account (ESA), which features tax-free earnings; Participate in a qualified tuition program (QTP), which features tax-free earnings; Take early distributions from any type of individual retirement arrangement (IRA) for education costs without paying the 10% additional tax on early distributions; Cash in savings bonds for education costs without having to pay tax on the interest; Receive tax-free educational benefits from your employer; and Take a business deduction for work-related education. Taxact.com 2012 Note. Taxact.com 2012 You generally cannot claim more than one of the benefits described in the list above for the same qualifying education expense. Taxact.com 2012 Comparison table. Taxact.com 2012   Some of the features of these benefits are highlighted in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 , later, in this publication. Taxact.com 2012 This general comparison table may guide you in determining which benefits you may be eligible for and which chapters you may want to read. Taxact.com 2012 When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that gives you the lowest tax liability. Taxact.com 2012 If you qualify, you may find that a combination of credit(s) and deduction(s) gives you the lowest tax. Taxact.com 2012 Analyzing your tax withholding. Taxact.com 2012   After you estimate your education tax benefits for the year, you may be able to reduce the amount of your federal income tax withholding. Taxact.com 2012 Also, you may want to recheck your withholding during the year if your personal or financial situation changes. Taxact.com 2012 See Publication 919, How Do I Adjust My Tax Withholding, for more information. Taxact.com 2012 Glossary. Taxact.com 2012   In this publication, wherever appropriate, we have tried to use the same or similar terminology when referring to the basic components of each education benefit. Taxact.com 2012 Some of the terms used are: Qualified education expenses, Eligible educational institution, and Modified adjusted gross income. Taxact.com 2012   Even though the same term, such as qualified education expenses, is used to label a basic component of many of the education benefits, the same expenses are not necessarily allowed for each benefit. Taxact.com 2012 For example, the cost of room and board is a qualified education expense for the qualified tuition program, but not for the education savings bond program. Taxact.com 2012   Many of the terms used in the publication are defined in the glossary near the end of the publication. Taxact.com 2012 The glossary is not intended to be a substitute for reading the chapter on a particular education benefit, but it will give you an overview of how certain terms are used in discussing the different benefits. Taxact.com 2012 Comments and suggestions. Taxact.com 2012   We welcome your comments about this publication and your suggestions for future editions. Taxact.com 2012   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Taxact.com 2012 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxact.com 2012 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxact.com 2012   You can send your comments from www. Taxact.com 2012 irs. Taxact.com 2012 gov/formspubs/. Taxact.com 2012 Click on “More Information” and then on “Comment on Tax Forms and Publications”. Taxact.com 2012   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Taxact.com 2012 Ordering forms and publications. Taxact.com 2012   Visit www. Taxact.com 2012 irs. Taxact.com 2012 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Taxact.com 2012 Internal Revenue Service 1201 N. Taxact.com 2012 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Taxact.com 2012   If you have a tax question, check the information available on IRS. Taxact.com 2012 gov or call 1-800-829-1040. Taxact.com 2012 We cannot answer tax questions sent to either of the above addresses. Taxact.com 2012 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1040 U. Taxact.com 2012 S. Taxact.com 2012 Individual Income Tax Return 1040A U. Taxact.com 2012 S. Taxact.com 2012 Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1040NR U. Taxact.com 2012 S. Taxact.com 2012 Nonresident Alien Income Tax Return 1040NR-EZ U. Taxact.com 2012 S. Taxact.com 2012 Income Tax Return for Certain Nonresident Aliens With No Dependents 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 5329 Additional Taxes on Qualified Plans and Other Tax-Favored Accounts 8815 Exclusion of Interest From Series EE and I U. Taxact.com 2012 S. Taxact.com 2012 Savings Bonds Issued After 1989 8863 Education Credits 8917 Tuition and Fees Deduction Schedule A (Form 1040) Itemized Deductions  See chapter 13, How To Get Tax Help , for information about getting these publications and forms. Taxact.com 2012 Prev  Up  Next   Home   More Online Publications