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Taxes For 2010

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Taxes For 2010

Taxes for 2010 Publication 517 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Taxes for 2010 Tax questions. Taxes for 2010 Useful Items - You may want to see: What's New SE tax rate. Taxes for 2010  For 2013 and 2014, the Old Age, Survivors, and Disability Insurance (OASDI) portion of the SE tax is 12. Taxes for 2010 4%. Taxes for 2010 The Medicare (HI) portion of the SE tax remains 2. Taxes for 2010 9%. Taxes for 2010 As a result, the SE tax rate returns to 15. Taxes for 2010 3%. Taxes for 2010 For more information, see the Instructions for Schedule SE (Form 1040). Taxes for 2010 Earnings subject to social security. Taxes for 2010  For 2013, the maximum wages and self-employment income subject to social security tax increases from $110,100 to $113,700. Taxes for 2010 For 2014, the maximum wages and self-employment income subject to social security tax is $117,000. Taxes for 2010 Additional Medicare Tax. Taxes for 2010  Beginning in 2013, a 0. Taxes for 2010 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Taxes for 2010 For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Taxes for 2010 Modified AGI limit for traditional IRA contributions increased. Taxes for 2010  For 2013, you may be able to take an IRA deduction if you were covered by a retirement plan at work and your modified AGI is: Less than $115,000 if married filing jointly or qualifying widow(er), Less than $69,000 if single or head of household, or Less than $10,000 if married filing separately. Taxes for 2010 If you file a joint return and either you or your spouse was not covered by a retirement plan at work, you may be able to take an IRA deduction if your modified AGI is less than $188,000. Taxes for 2010 Modified AGI limit for Roth IRA contributions increased. Taxes for 2010  For 2013, you may be able to contribute to your Roth IRA if your modified AGI is: Less than $188,000 if married filing jointly or qualifying widow(er), Less than $127,000 if single, head of household, or married filing separately and you did not live with your spouse at any time during the year, or Less than $10,000 if married filing separately and you lived with your spouse at any time during the year. Taxes for 2010 Earned income credit (EIC). Taxes for 2010  For 2013, the maximum amount of income you can earn and still claim the EIC has increased. Taxes for 2010 You may be able to take the EIC if you earned less than $46,227 ($51,567 for married filing jointly) and you have three or more qualifying children; $43,038 ($48,378 for married filing jointly) and you have two qualifying children; $37,870 ($43,210 for married filing jointly) and you have one qualifying child; and $14,340 ($19,680 for married filing jointly) and you do not have any qualifying children. Taxes for 2010 Reminders Future developments. Taxes for 2010 . Taxes for 2010   For the latest information about developments related to Publication 517, such as legislation enacted after it was published, go to www. Taxes for 2010 irs. Taxes for 2010 gov/pub517. Taxes for 2010 Photographs of missing children. Taxes for 2010  The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Taxes for 2010 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Taxes for 2010 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. Taxes for 2010 Introduction Three federal taxes are paid on wages and self-employment income—income tax, social security tax, and Medicare tax. Taxes for 2010 Social security and Medicare taxes are collected under one of two systems. Taxes for 2010 Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Taxes for 2010 Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the social security and Medicare taxes. Taxes for 2010 No earnings are subject to both systems. Taxes for 2010 Table 1. Taxes for 2010 Are Your Ministerial Earnings* Covered Under FICA or SECA? Find the class to which you belong in the left column and read across the table to find if you are covered under FICA or SECA. Taxes for 2010 Do not rely on this table alone. Taxes for 2010 Also read the discussion for the class in the following pages. Taxes for 2010 Class Covered under FICA? Covered under SECA? Minister NO. Taxes for 2010 Your ministerial earnings are exempt. Taxes for 2010 YES, if you do not have an approved exemption from the IRS. Taxes for 2010   NO, if you have an approved exemption. Taxes for 2010 Member of a religious order who has not taken a vow of poverty NO. Taxes for 2010 Your ministerial earnings are exempt. Taxes for 2010 YES, if you do not have an approved exemption from the IRS. Taxes for 2010   NO, if you have an approved exemption. Taxes for 2010 Member of a religious order who has taken a vow of poverty YES, if: Your order elected FICA coverage for its members, or You worked outside the order and the work was not required by, or done on behalf of, the order. Taxes for 2010   NO, if neither of the above applies. Taxes for 2010 NO. Taxes for 2010 Your ministerial earnings are exempt. Taxes for 2010 Christian Science practitioner or reader NO. Taxes for 2010 Your ministerial earnings are exempt. Taxes for 2010 YES, if you do not have an approved exemption from the IRS. Taxes for 2010   NO, if you have an approved exemption. Taxes for 2010 Religious worker (church employee) YES, if your employer did not elect to exclude you. Taxes for 2010    NO, if your employer elected to exclude you. Taxes for 2010 YES, if your employer elected to exclude you from FICA. Taxes for 2010   NO, if you are covered under FICA. Taxes for 2010 Member of a recognized religious sect YES, if you are an employee and do not have an approved exemption from the IRS. Taxes for 2010    NO, if you have an approved exemption. Taxes for 2010 YES, if you are self-employed and do not have an approved exemption from the IRS. Taxes for 2010   NO, if you have an approved exemption. Taxes for 2010 * Ministerial earnings are the self-employment earnings that result from ministerial services, defined and discussed later. Taxes for 2010 In addition, all wages and self-employment income that are subject to Medicare tax are subject to a 0. Taxes for 2010 9% Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. Taxes for 2010 Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Taxes for 2010 Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Taxes for 2010 A self-employment loss is not considered for purposes of this tax. Taxes for 2010 RRTA compensation is separately compared to the threshold. Taxes for 2010 There is no employer match for Additional Medicare Tax. Taxes for 2010 For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Taxes for 2010 This publication contains information for the following classes of taxpayers. Taxes for 2010 Ministers. Taxes for 2010 Members of a religious order. Taxes for 2010 Christian Science practitioners and readers. Taxes for 2010 Religious workers (church employees). Taxes for 2010 Members of a recognized religious sect. Taxes for 2010 Note. Taxes for 2010 Unless otherwise noted, in this publication references to members of the clergy include ministers, members of a religious order (but not members of a recognized religious sect), and Christian Science practitioners and readers. Taxes for 2010 This publication covers the following topics about the collection of social security and Medicare taxes from members of the clergy, religious workers, and members of a recognized religious sect. Taxes for 2010 Which earnings are taxed under FICA and which under SECA. Taxes for 2010 See Table 1 above. Taxes for 2010 How a member of the clergy can apply for an exemption from self-employment tax. Taxes for 2010 How a member of a recognized religious sect can apply for an exemption from both self-employment tax and FICA taxes. Taxes for 2010 How a member of the clergy or religious worker figures net earnings from self-employment. Taxes for 2010 This publication also covers certain income tax rules of interest to ministers and members of a religious order. Taxes for 2010 A Comprehensive Example shows filled-in forms for a minister who has income taxed under SECA, other income taxed under FICA, and income tax reporting of items specific to a minister. Taxes for 2010 In the back of Publication 517 is a set of worksheets that you can use to figure the amount of your taxable ministerial income and allowable deductions. Taxes for 2010 You will find these worksheets right after the Comprehensive Example . Taxes for 2010 Note. Taxes for 2010 In this publication, the term “church” is generally used in its generic sense and not in reference to any particular religion. Taxes for 2010 Comments and suggestions. Taxes for 2010   We welcome your comments about this publication and your suggestions for future editions. Taxes for 2010   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Taxes for 2010 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxes for 2010 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxes for 2010   You can send your comments from www. Taxes for 2010 irs. Taxes for 2010 gov/formspubs/. Taxes for 2010 Click on “More Information” and then on “Give us feedback”. Taxes for 2010   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. Taxes for 2010 Ordering forms and publications. Taxes for 2010   Visit www. Taxes for 2010 irs. Taxes for 2010 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. Taxes for 2010 Internal Revenue Service 1201 N. Taxes for 2010 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Taxes for 2010   If you have a tax question, check the information available on IRS. Taxes for 2010 gov or call 1-800-829-1040. Taxes for 2010 We cannot answer tax questions sent to either of the above addresses. Taxes for 2010 Useful Items - You may want to see: Publication 54 Tax Guide for U. Taxes for 2010 S. Taxes for 2010 Citizens and Resident Aliens Abroad 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 590 Individual Retirement Arrangements (IRAs) 596 Earned Income Credit (EIC) Form (and Instructions) SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding SS-16 Certificate of Election of Coverage Under the Federal Insurance Contributions Act Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship) Schedule C-EZ (Form 1040) Net Profit From Business (Sole Proprietorship) Schedule SE (Form 1040) Self-Employment Tax 1040-ES Estimated Tax for Individuals 1040X Amended U. Taxes for 2010 S. Taxes for 2010 Individual Income Tax Return 4029 Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes 8959 Additional Medicare Tax Ordering publications and forms. Taxes for 2010   See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Taxes for 2010 Prev  Up  Next   Home   More Online Publications
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The Taxes For 2010

Taxes for 2010 1. Taxes for 2010   Scholarships, Fellowships, Grants, and Tuition Reductions Table of Contents Reminder Introduction Scholarships and FellowshipsTax-Free Scholarships and Fellowships Taxable Scholarships and Fellowships Reporting Scholarships and Fellowships Other Types of Educational AssistanceFulbright Grants Pell Grants and Other Title IV Need-Based Education Grants Payment to Service Academy Cadets Veterans' Benefits Qualified Tuition Reduction Reminder Individual retirement arrangements (IRAs). Taxes for 2010  You can set up and make contributions to an IRA if you receive taxable compensation. Taxes for 2010 Under this rule, a taxable scholarship or fellowship is compensation only if it is shown in box 1 of your Form W-2, Wage and Tax Statement. Taxes for 2010 For more information about IRAs, see Publication 590. Taxes for 2010 Introduction This chapter discusses the income tax treatment of various types of educational assistance you may receive if you are studying, teaching, or researching in the United States. Taxes for 2010 The educational assistance can be for a primary or secondary school, a college or university, or a vocational school. Taxes for 2010 Included are discussions of: Scholarships, Fellowships, Need-based education grants, such as a Pell Grant, and Qualified tuition reductions. Taxes for 2010 Many types of educational assistance are tax free if they meet the requirements discussed here. Taxes for 2010 Special rules apply to U. Taxes for 2010 S. Taxes for 2010 citizens and resident aliens who have received scholarships or fellowships for studying, teaching, or researching abroad. Taxes for 2010 For information about these rules, see Publication 54, Tax Guide for U. Taxes for 2010 S. Taxes for 2010 Citizens and Resident Aliens Abroad. Taxes for 2010 Scholarships and Fellowships A scholarship is generally an amount paid or allowed to, or for the benefit of, a student (whether an undergraduate or a graduate) at an educational institution to aid in the pursuit of his or her studies. Taxes for 2010 A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research. Taxes for 2010 Amount of scholarship or fellowship. Taxes for 2010   The amount of a scholarship or fellowship includes the following: The value of contributed services and accommodations. Taxes for 2010 This includes such services and accommodations as room (lodging), board (meals), laundry service, and similar services or accommodations that are received by an individual as a part of a scholarship or fellowship. Taxes for 2010 The amount of tuition, matriculation, and other fees that are paid or remitted to the student to aid the student in pursuing study or research. Taxes for 2010 Any amount received in the nature of a family allowance as a part of a scholarship or fellowship. Taxes for 2010 Tax-Free Scholarships and Fellowships A scholarship or fellowship is tax free (excludable from gross income) only if you are a candidate for a degree at an eligible educational institution. Taxes for 2010 A scholarship or fellowship is tax free only to the extent: It does not exceed your expenses; It is not designated or earmarked for other purposes (such as room and board), and does not require (by its terms) that it cannot be used for qualified education expenses; and It does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship. Taxes for 2010 (But for exceptions, see Payment for services,later. Taxes for 2010 Use Worksheet 1–1 to figure the amount of a scholarship or fellowship you can exclude from gross income. Taxes for 2010 Candidate for a degree. Taxes for 2010   You are a candidate for a degree if you: Attend a primary or secondary school or are pursuing a degree at a college or university, or Attend an educational institution that: Provides a program that is acceptable for full credit toward a bachelor's or higher degree, or offers a program of training to prepare students for gainful employment in a recognized occupation; and Is authorized under federal or state law to provide such a program and is accredited by a nationally recognized accreditation agency. Taxes for 2010 Eligible educational institution. Taxes for 2010   An eligible educational institution is one whose primary function is the presentation of formal instruction and that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. Taxes for 2010 Qualified education expenses. Taxes for 2010   For purposes of tax-free scholarships and fellowships, these are expenses for: Tuition and fees required to enroll at or attend an eligible educational institution, and Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Taxes for 2010 These items must be required of all students in your course of instruction. Taxes for 2010 Expenses that do not qualify. Taxes for 2010   Qualified education expenses do not include the cost of: Room and board, Travel, Research, Clerical help, or Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution. Taxes for 2010 Payment for services. Taxes for 2010   Generally, you cannot exclude from your gross income the part of any scholarship or fellowship that represents payment for teaching, research, or other services required as a condition for receiving the scholarship. Taxes for 2010 This applies even if all candidates for a degree must perform the services to receive the degree. Taxes for 2010 (See exceptions next. Taxes for 2010 ) Exceptions. Taxes for 2010   You do not have to treat as payment for services the part of any scholarship or fellowship that represents payment for teaching, research, or other services if you receive the amount under: The National Health Service Corps Scholarship Program, or The Armed Forces Health Professions Scholarship and Financial Assistance Program. Taxes for 2010 Example 1. Taxes for 2010 You received a scholarship of $2,500. Taxes for 2010 The scholarship was not received under either of the exceptions mentioned above. Taxes for 2010 As a condition for receiving the scholarship, you must serve as a part-time teaching assistant. Taxes for 2010 Of the $2,500 scholarship, $1,000 represents payment for teaching. Taxes for 2010 The provider of your scholarship gives you a Form W-2 showing $1,000 as income. Taxes for 2010 Your qualified education expenses were at least $1,500. Taxes for 2010 Assuming that all other conditions are met, $1,500 of your scholarship is tax free. Taxes for 2010 The $1,000 you received for teaching is taxable. Taxes for 2010 Example 2. Taxes for 2010 You are a candidate for a degree at a medical school. Taxes for 2010 You receive a scholarship (not under either of the exceptions mentioned above) for your medical education and training. Taxes for 2010 The terms of your scholarship require you to perform future services. Taxes for 2010 A substantial penalty applies if you do not comply. Taxes for 2010 The entire amount of your grant is taxable as payment for services in the year it is received. Taxes for 2010 Athletic Scholarships An athletic scholarship is tax free only if and to the extent it meets the requirements discussed later. Taxes for 2010 Worksheet 1-1. Taxes for 2010    You can use Worksheet 1-1, Taxable Scholarship and Fellowship Income , later, to figure the tax-free and taxable parts of your athletic scholarship. Taxes for 2010    Worksheet 1-1. Taxes for 2010 Taxable Scholarship and Fellowship Income 1. Taxes for 2010 Enter the total amount of any scholarship or fellowship for 2013. Taxes for 2010 See Amount of scholarship or fellowship, earlier. Taxes for 2010 1. Taxes for 2010       If you are a degree candidate at an eligible educational institution, go to line 2. Taxes for 2010 If you are not a degree candidate at an eligible educational institution, stop here. Taxes for 2010 The entire amount is taxable. Taxes for 2010 For information on how to report this amount on your tax return, see Reporting Scholarships and Fellowships , earlier, in this chapter. Taxes for 2010       2. Taxes for 2010 Enter the amount from line 1 that was for teaching, research, or any other services required as a condition for receiving the scholarship. Taxes for 2010 (Do not include amounts received for these items under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program. Taxes for 2010 ) 2. Taxes for 2010     3. Taxes for 2010 Subtract line 2 from line 1 3. Taxes for 2010     4. Taxes for 2010 Enter the amount from line 3 that your scholarship or fellowship required you to use for other than qualified education expenses 4. Taxes for 2010     5. Taxes for 2010 Subtract line 4 from line 3 5. Taxes for 2010     6. Taxes for 2010 Enter the amount of your qualified education expenses 6. Taxes for 2010     7. Taxes for 2010 Enter the smaller of line 5 or line 6. Taxes for 2010 This amount is the most you can exclude from your gross income (the tax-free part of the scholarship or fellowship) 7. Taxes for 2010     8. Taxes for 2010 Subtract line 7 from line 5 8. Taxes for 2010     9. Taxes for 2010 Taxable part. Taxes for 2010 Add lines 2, 4, and 8. Taxes for 2010 See Reporting Scholarships and Fellowships , earlier, for how to report this amount on your tax return 9. Taxes for 2010     Taxable Scholarships and Fellowships If and to the extent your scholarship or fellowship does not meet the requirements described earlier, it is taxable and must be included in gross income. Taxes for 2010 You can use Worksheet 1–1, Taxable Scholarship and Fellowship Income, later, to figure the tax-free and taxable parts of your scholarship or fellowship. Taxes for 2010 Reporting Scholarships and Fellowships Whether you must report your scholarship or fellowship depends on whether you must file a return and whether any part of your scholarship or fellowship is taxable. Taxes for 2010 If your only income is a completely tax-free scholarship or fellowship, you do not have to file a tax return and no reporting is necessary. Taxes for 2010 If all or part of your scholarship or fellowship is taxable and you are required to file a tax return, report the taxable amount as explained below. Taxes for 2010 You must report the taxable amount whether or not you received a Form W-2. Taxes for 2010 If you receive an incorrect Form W-2, ask the payer for a corrected one. Taxes for 2010 For information on whether you must file a return, see Publication 501, Exemptions, Standard Deduction, and Filing Information, or your income tax form instructions. Taxes for 2010 How To Report How you report any taxable scholarship or fellowship income depends on which return you file. Taxes for 2010 Form 1040EZ. Taxes for 2010   If you file Form 1040EZ, include the taxable amount in the total on line 1. Taxes for 2010 If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount in the space to the left of line 1. Taxes for 2010 Form 1040A. Taxes for 2010   If you file Form 1040A, include the taxable amount in the total on line 7. Taxes for 2010 If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount in the space to the left of line 7. Taxes for 2010 Form 1040. Taxes for 2010   If you file Form 1040, include the taxable amount in the total on line 7. Taxes for 2010 If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount on the dotted line next to line 7. Taxes for 2010 Schedule SE (Form 1040). Taxes for 2010   To determine your net earnings from self-employment, include amounts you receive under a scholarship as pay for your services that are reported to you on Form 1099-MISC, Miscellaneous Income. Taxes for 2010 If your net earnings are $400 or more, you must pay self-employment tax. Taxes for 2010 Use Schedule SE, Self-Employment Tax, to figure this tax. Taxes for 2010 Form 1040NR. Taxes for 2010   If you file Form 1040NR, report the taxable amount on line 12. Taxes for 2010 Generally, you must report the amount shown in box 2 of Form(s) 1042-S, Foreign Person's U. Taxes for 2010 S. Taxes for 2010 Source Income Subject to Withholding. Taxes for 2010 See the Instructions for Form 1040NR for more information. Taxes for 2010 Form 1040NR-EZ. Taxes for 2010   If you file Form 1040NR-EZ, report the taxable amount on line 5. Taxes for 2010 Generally, you must report the amount shown in box 2 of Form(s) 1042-S. Taxes for 2010 See the Instructions for Form 1040NR-EZ for more information. Taxes for 2010 Other Types of Educational Assistance The following discussions deal with other common types of educational assistance. Taxes for 2010 Fulbright Grants A Fulbright grant is generally treated as a scholarship or fellowship in figuring how much of the grant is tax free. Taxes for 2010 Pell Grants and Other Title IV Need-Based Education Grants These need-based grants are treated as scholarships for purposes of determining their tax treatment. Taxes for 2010 They are tax free to the extent used for qualified education expenses during the period for which a grant is awarded. Taxes for 2010 Payment to Service Academy Cadets An appointment to a United States military academy is not a scholarship or fellowship. Taxes for 2010 Payment you receive as a cadet or midshipman at an armed services academy is pay for personal services and will be reported to you in box 1 of Form W-2. Taxes for 2010 Include this pay in your income in the year you receive it unless one of the exceptions, discussed earlier under Payment for services , applies. Taxes for 2010 Veterans' Benefits Payments you receive for education, training, or subsistence under any law administered by the Department of Veterans Affairs (VA) are tax free. Taxes for 2010 Do not include these payments as income on your federal tax return. Taxes for 2010 If you qualify for one or more of the education benefits discussed in chapters 2 through 12, you may have to reduce the amount of education expenses qualifying for a specific benefit by part or all of your VA payments. Taxes for 2010 This applies only to the part of your VA payments that is required to be used for education expenses. Taxes for 2010 You may want to visit the Veteran's Administration website at www. Taxes for 2010 gibill. Taxes for 2010 va. Taxes for 2010 gov for specific information about the various VA benefits for education. Taxes for 2010 Example. Taxes for 2010 You have returned to college and are receiving two education benefits under the latest GI Bill: (1) a $1,534 monthly basic housing allowance (BHA) that is directly deposited to your checking account, and (2) $3,840 paid directly to your college for tuition. Taxes for 2010 Neither of these benefits is taxable and you do not report them on your tax return. Taxes for 2010 You also want to claim an American opportunity credit on your return. Taxes for 2010 You paid $5,000 in qualified education expenses (see chapter 2, American Opportunity Credit , later). Taxes for 2010 To figure the amount of credit, you must first subtract the $3,840 from your qualified education expenses because this payment under the GI Bill was required to be used for education expenses. Taxes for 2010 You do not subtract any amount of the BHA because it was paid to you and its use was not restricted. Taxes for 2010 Qualified Tuition Reduction If you are allowed to study tuition free or for a reduced rate of tuition, you may not have to pay tax on this benefit. Taxes for 2010 This is called a “tuition reduction. Taxes for 2010 ” You do not have to include a qualified tuition reduction in your income. Taxes for 2010 A tuition reduction is qualified only if you receive it from, and use it at, an eligible educational institution. Taxes for 2010 You do not have to use the tuition reduction at the eligible educational institution from which you received it. Taxes for 2010 In other words, if you work for an eligible educational institution and the institution arranges for you to take courses at another eligible educational institution without paying any tuition, you may not have to include the value of the free courses in your income. Taxes for 2010 The rules for determining if a tuition reduction is qualified, and therefore tax free, are different if the education provided is below the graduate level or is graduate education. Taxes for 2010 You must include in your income any tuition reduction you receive that is payment for your services. Taxes for 2010 Eligible educational institution. Taxes for 2010   An eligible educational institution is one that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. Taxes for 2010 Officers, owners, and highly compensated employees. Taxes for 2010   Qualified tuition reductions apply to officers, owners, or highly compensated employees only if benefits are available to employees on a nondiscriminatory basis. Taxes for 2010 This means that the tuition reduction benefits must be available on substantially the same basis to each member of a group of employees. Taxes for 2010 The group must be defined under a reasonable classification set up by the employer. Taxes for 2010 The classification must not discriminate in favor of owners, officers, or highly compensated employees. Taxes for 2010 Payment for services. Taxes for 2010   Generally, you must include in income the part of any qualified tuition reduction that represents payment for teaching, research, or other services by the student required as a condition of receiving the qualified tuition reduction. Taxes for 2010 This applies even if all candidates for a degree must perform the services to receive the degree. Taxes for 2010 (See below for exceptions. Taxes for 2010 ) Exceptions. Taxes for 2010   You do not have to include in income the part of any scholarship or fellowship that represents payment for teaching, research, or other services if you receive the amount under: The National Health Service Corps Scholarship Program, or The Armed Forces Health Professions Scholarship and Financial Assistance Program. Taxes for 2010 Education Below the Graduate Level If you receive a tuition reduction for education below the graduate level (including primary, secondary, or high school), it is a qualified tuition reduction, and therefore tax free, only if your relationship to the educational institution providing the benefit is described below. Taxes for 2010 You are an employee of the eligible educational institution. Taxes for 2010 You were an employee of the eligible educational institution, but you retired or left on disability. Taxes for 2010 You are a widow or widower of an individual who died while an employee of the eligible educational institution or who retired or left on disability. Taxes for 2010 You are the dependent child or spouse of an individual described in (1) through (3), above. Taxes for 2010 Child of deceased parents. Taxes for 2010   For purposes of the qualified tuition reduction, a child is a dependent child if the child is under age 25 and both parents have died. Taxes for 2010 Child of divorced parents. Taxes for 2010   For purposes of the qualified tuition reduction, a dependent child of divorced parents is treated as the dependent of both parents. Taxes for 2010 Graduate Education A tuition reduction you receive for graduate education is qualified, and therefore tax free, if both of the following requirements are met. Taxes for 2010 It is provided by an eligible educational institution. Taxes for 2010 You are a graduate student who performs teaching or research activities for the educational institution. Taxes for 2010 You must include in income any other tuition reductions for graduate education that you receive. Taxes for 2010 How To Report Any tuition reduction that is taxable should be included as wages in box 1 of your Form W-2. Taxes for 2010 Report the amount from Form W-2, box 1, on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). Taxes for 2010 Prev  Up  Next   Home   More Online Publications