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Tax Law Changes Related to National Disaster Relief

FS-2009-8, January 2009

(Updated June 21, 2010 — For information regarding the filing of 2009 income tax returns, refer to the last section of this document, "Reporting Losses from a Federally Declared Disaster Occurring in 2010.")

The National Disaster Relief Act of 2008, Subtitle B or Title VII of the Emergency Economic Stabilization Act of 2008, signed into law on Oct. 3, 2008, as Public Law 110-343, provides tax relief for victims of federally declared disasters occurring after
Dec. 31, 2007, and before Jan. 1, 2010.

Prior to enactment of the National Disaster Relief Act, when a major disaster struck, Congress would draft legislation providing targeted tax benefits for taxpayers affected by the disaster that were specific to that particular disaster.

The National Disaster Relief Act, which provides a broad package of tax benefits that may be used by anyone who is affected by a federally declared disaster, effectively replaces the strategy of providing targeted benefits for disaster victims in the weeks or months following the incident. Certain provisions of the National Disaster Relief Act of 2008 do not apply to the Midwestern disaster areas –– disasters affecting the Midwest that were declared from May 20, 2008 through July 31, 2008 –– because the Heartland and Hurricane Ike Disaster Relief Act, part of the same legislation that resulted in the National Disaster Relief Act, provides other tax benefits. See Publication 4492-B for detailed information on the tax benefits that apply to the Midwestern disaster areas. 

The National Disaster Relief Act provides the following tax benefits: 

  • Allows all taxpayers, not just those who itemize, to claim the casualty loss deduction regardless of the taxpayer’s adjusted gross income level;
  • Increases the amount by which all individual taxpayers must reduce their personal casualty losses from each casualty from $100 to $500 for taxable years beginning after Dec. 31, 2008. The reduction amount returns to $100 for taxable years beginning after Dec. 31, 2009;   
  • Removes the requirement that the net casualty loss deduction be allowed only if the casualty loss exceeds 10 percent of the taxpayer’s adjusted gross income;
  • Provides a five-year net operating loss (NOL) carryback for qualified natural disaster losses.
  • Waives certain mortgage revenue bond requirements for affected taxpayers and allows the bond proceeds to be used for rebuilding.

For business taxpayers, the Act also:   

  • Allows an affected business taxpayer to deduct certain qualified disaster cleanup expenses;
  • Allows an affected business taxpayer to deduct 50 percent of the cost of qualifying property in addition to the regular depreciation allowance that is normally available; and
  • Increases the limits that an affected business taxpayer can expense for qualifying section 179 property.

Major portions of the National Disaster Relief Act are highlighted below.

See Publication 547, Casualties, Disasters, and Thefts, for information necessary in preparing 2008 tax returns. 

Section 706: Losses Attributable to Federally Declared Disasters

Section 706 of the National Disaster Relief Act provides relief to individual taxpayers whose personal-use property was damaged or destroyed by a casualty in a federally declared disaster area. 

Under prior law, individuals who suffered casualty losses as a result of a Presidentially-declared disaster –– the term was redefined as “federally declared disaster” in the legislation –– were required to reduce the loss from each casualty event by $100 and reduce the total of their casualty losses for the tax year by 10 percent of their adjusted gross income. In addition, these individuals were required to claim their casualty losses as an itemized deduction. 

The new law removes the 10 percent of adjusted gross income limitation for net disaster losses and allows individuals to claim the net disaster losses even if they do not itemize their deductions. 

To qualify, a loss must be attributable to a federally declared disaster and occur in an area determined by the President to warrant federal assistance. A federally declared disaster is any disaster subsequently determined by the President to warrant assistance by the federal government under the Stafford Act. The deduction is limited to the “net disaster loss” which consists of the excess of personal casualty losses attributable to a federally declared disaster over personal casualty gains. The new law is effective for disasters declared in taxable years beginning after Dec. 31, 2007, and occurring before Jan. 1, 2010. Information on disaster declarations and the areas they encompass may be found at the Federal Emergency Management Agency (FEMA) Web site.

The new law also changes the amount by which all individual taxpayers must reduce their personal casualty losses from each casualty from $100 to $500. This change is effective for taxable years beginning after Dec. 31, 2008. The reduction amount returns to $100 for taxable years beginning after Dec. 31, 2009.   

For more information on these tax law changes, see Publication 547, Casualties, Disasters, and Thefts.

Section 712 provides that these changes to the law do not apply to the casualty losses in the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008. See Publication 4492-B for more information on the Midwestern disaster areas.

Section 707: Expensing of Qualified Disaster Expenses

Section 707 of the National Disaster Relief Act allows taxpayers to elect to currently deduct qualified disaster expenses in the tax year paid or incurred. Qualified disaster expenses consist of expenditures paid or incurred in connection with a trade or business or with business-related property that otherwise must be capitalized and that are:

  • For the abatement or control of hazardous substances that were released on account of a federally declared disaster;
  • Debris removal or demolition of structures on real property damaged or destroyed by a federally declared disaster; or
  • For the repair of business-related property damaged by a federally declared disaster. 

As previously explained, a federally declared disaster is any disaster subsequently determined by the President to warrant assistance by the federal government under the Stafford Act. This provision is effective for amounts paid or incurred after Dec. 31, 2007, in connection with disasters declared after that date and federally declared disasters occurring before Jan. 1, 2010. 

Section 712 provides that these changes to the law do not apply to the casualty losses in the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008

Section 708: Net Operating Losses Attributable to Federally Declared Disasters

In general, a net operating loss is carried back two years and carried forward 20. Section 708 of the National Disaster Relief Act allows taxpayers to carry back a qualified disaster loss five years. A qualified disaster loss is the lesser of the taxpayer’s net operating loss for the taxable year or the sum of the following:

  • The taxpayer’s losses allowable under section 165 of the Internal Revenue Code for the taxable year attributable to a federally declared disaster occurring before Jan. 1, 2010, and occurring in a disaster area; and
  • The taxpayer’s deduction for the taxable year for qualified disaster expenses allowable under section 198A(a) of the Internal Revenue Code (or the amount that would have been allowable if the taxpayer deducted qualified disaster expenses). 

A qualified disaster loss is treated a net operating loss that is separate from the taxpayer’s regular NOL. 

Section 708 also includes a provision that allows taxpayers to elect to disregard the five-year carryback rule for their qualified disaster loss. . 

Finally, Section 708 provides an exception to the general rule that a taxpayer may use an alternative minimum tax (AMT) net operating loss deduction to offset only 90 percent of the taxpayer’s alternative minimum taxable income. Section 708 provides that the 90-percent limit does not apply to the portion of the AMT net operating loss deduction attributable to a qualified disaster loss. 

These rules apply to disasters declared in taxable years beginning after Dec. 31, 2007.  

Section 712 provides that these changes to the law do not apply to the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008.

Section 709: Waiver of Certain Mortgage Revenue Bond Requirements Following Federally Declared Disasters

Section 709 of the National Disaster Relief Act adds new paragraph 12 to section 143(k) of the Internal Revenue Code, which waives certain mortgage revenue bond requirements otherwise applicable where an affected taxpayer’s principal residence is destroyed or damaged as a result of a federally declared disaster. An earlier law, the Housing Assistance Tax Act of 2008 enacted on June 30, 2008, also added a different §143(k)(12) to the Code. So currently there are two §143(k)(12)s in the Code.

New Code section 143(k)(12)(A) provides that, at the election of the taxpayer, if a person’s principal residence is destroyed –– the home is rendered unsafe for use as a result of a federally declared disaster occurring between Dec. 31, 2007 and Jan. 1, 2010, or the home is demolished or relocated because of an order issued as a result of such federally declared disaster occurring during such timeframe –– then for two years following the date of such disaster, the three-year requirement of section 143(d)(1) does not apply and the purchase price requirement is relaxed. Accordingly, such person may receive a mortgage loan financed with the proceeds of tax exempt qualified mortgage bonds regardless of whether he owned his principal residence within three years of receiving such mortgage loan, and such mortgage loan may be for the acquisition of a home which costs 110 percent of the average area purchase price. 

New Code section 143(k)(12)(B) provides that, at the election of the taxpayer, if a person’s principal residence is damaged as a result of a federally declared disaster occurring after Dec. 31, 2007, and before Jan. 1, 2010, any loan taken by such person to repair or reconstruct such residence in an amount equal to the lesser of the cost of such repair or reconstruction or $150,000 may be treated as a qualified rehabilitation loan and thus may be financed using the proceeds of tax-exempt qualified mortgage bonds. An election, once made, cannot be revoked unless permission is granted by the Secretary. 

Section 709 further provides that a taxpayer who makes a section 143(k)(12) election  may not also elect to apply the special rules for residences located in disaster areas found in Code section 143(k)(11). The special rules found in Code section 143(k)(11) allow taxpayers to use the proceeds of tax exempt qualified mortgage bonds issued between May 1, 2008, and Jan. 1, 2010, to finance mortgage loans for residences located in disaster areas for two years from the date of the applicable disaster declaration without regard to the three-year requirement by treating the residence as if it were a targeted area residence for purposes of the purchase price requirement and the income requirements. This provision, unlike § 143(k)(12), does not limit the financing only to those taxpayers whose homes were damaged by the disaster.

Section 712 provides that these changes to the law do not apply to the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008.

Section 710: Special Depreciation Allowance for Qualified Disaster Property

Section 710 of the National Disaster Relief Act provides a special 50 percent depreciation allowance for purchases of qualified disaster assistance property. It allows taxpayers to deduct 50 percent of the cost of qualified disaster assistance property in addition to the regular depreciation allowance that is normally available.

This new special “bonus depreciation” allowance applies to most types of tangible personal property and computer software acquired on or after the date on which the federally declared disaster occurs, and placed in service on or before Dec. 31 of the third year following the date on which the federally declared disaster occurs. In addition, the new bonus depreciation allowance applies to most nonresidential real property and residential rental property acquired on or after the date on which the federally declared disaster occurs, and placed in service on or before Dec. 31 of the fourth year following the date on which the federally declared disaster occurs.

To qualify for the new bonus depreciation allowance, 80 percent or more of the use of the property must be in the disaster area and in the active conduct of a trade or business by the taxpayer in that disaster area. Also, the property owner must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the federally declared disaster and must be similar in nature to, and located in the same county as, the property being rehabilitated or replaced.

Section 711: Increased Expensing for Qualified Disaster Assistance Property

In general, a taxpayer may elect to expense up to a certain amount or dollar limit of section 179 property placed in service during the tax year. However, this dollar limit is reduced, but not below zero, if the cost of section 179 property placed in service during that year exceeds a certain amount, or reduced dollar limit. For 2008, the dollar limit is $250,000 and the reduced dollar limit is $800,000.

Section 711 of the National Disaster Relief Act increases the limits that businesses can expense for qualified section 179 disaster assistance property. Generally, the new law increases the dollar limit that is normally available for a particular tax year by the lesser of $100,000, or the cost of qualified section 179 disaster assistance property placed in service during that year. Also, the new law generally increases the reduced dollar limit that is normally available for a particular year by the lesser of $600,000, or the cost of qualified section 179 disaster assistance property placed in service during that year.    

Qualified section 179 disaster assistance property is section 179 property that is qualified disaster assistance property for purposes of the new bonus depreciation allowance provided under section 710 of the National Disaster Relief Act. Section 179 property is most types of tangible personal property and off-the-shelf computer software.

The new law did not change the amount that a taxpayer can elect to expense for certain sport utility vehicles and certain other vehicles placed in service during the tax year.  Accordingly, a taxpayer cannot elect to expense more than $25,000 of the cost of these types of vehicles.

Section 712: Coordination with Heartland Disaster Relief

Section 712 of the National Disaster Relief Act explains that certain provisions contained in the National Disaster Relief Act do not apply to the Midwestern Disaster Areas. For information specific to the Midwestern Disaster Areas, see Publication 4492-B.

Reporting Losses from a Federally Declared Disaster Occurring in 2010

The National Disaster Relief Act of 2008, Subtitle B or Title VII of the Emergency Economic Stabilization Act of 2008, provided enhanced tax relief for victims of federally declared disasters occurring after Dec. 31, 2007, and before Jan. 1, 2010. Those provisions are not effective for disasters occurring after Dec. 31, 2009. Legislation extending the provisions to disasters occurring before Jan. 1, 2011, has been proposed but has not yet been signed into law.

Because the enhanced casualty loss provisions are not effective for federally declared disasters occurring after Dec. 31, 2009, taxpayers affected by federally declared disasters in 2010 may take the loss into account for tax year 2009. See Page 12 of the 2009 version of Publication 547 for information on elections to deduct disaster losses in the year preceding the disaster year, including the time limits on making such elections.

This means, if you are an affected taxpayer with respect to a federally declared disaster occurring after Dec. 31, 2009, you may claim the loss on your 2009 income tax return. Claiming a loss on your 2009 return will allow you to take advantage of the National Disaster Relief Act provisions effective for tax year 2009. 

Page Last Reviewed or Updated: 20-Mar-2014

The 1040 Ez Form Online

1040 ez form online 19. 1040 ez form online   Education- Related Adjustments Table of Contents Introduction Useful Items - You may want to see: Student Loan Interest DeductionStudent Loan Interest Defined Can You Claim the Deduction How Much Can You Deduct How Do You Figure the Deduction Tuition and Fees DeductionCan You Claim the Deduction What Expenses Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses How Much Can You Deduct Educator Expenses Introduction This chapter discusses the education-related adjustment you can deduct in figuring your adjusted gross income. 1040 ez form online This chapter covers the student loan interest deduction, tuition and fees deduction, and the deduction for educator expenses. 1040 ez form online Useful Items - You may want to see: Publication 970 Tax Benefits for Education Student Loan Interest Deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. 1040 ez form online However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. 1040 ez form online For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. 1040 ez form online This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. 1040 ez form online Table 19-1 summarizes the features of the student loan interest deduction. 1040 ez form online Table 19-1. 1040 ez form online Student Loan Interest Deduction at a Glance Do not rely on this table alone. 1040 ez form online Refer to the text for more details. 1040 ez form online Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. 1040 ez form online Loan qualifications Your student loan: •  must have been taken out solely to pay qualified education expenses, and   • cannot be from a related person or made under a qualified employer plan. 1040 ez form online Student qualifications The student must be: • you, your spouse, or your dependent, and   • enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. 1040 ez form online Time limit on deduction You can deduct interest paid during the remaining period of your student loan. 1040 ez form online Phaseout The amount of your deduction depends on your income level. 1040 ez form online Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. 1040 ez form online It includes both required and voluntary interest payments. 1040 ez form online Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent (defined in chapter 3) when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period when the student is an eligible student. 1040 ez form online Loans from the following sources are not qualified student loans. 1040 ez form online A related person. 1040 ez form online A qualified employer plan. 1040 ez form online Exceptions. 1040 ez form online   For purposes of the student loan interest deduction, the following are exceptions to the general rules for dependents. 1040 ez form online An individual can be your dependent even if you are the dependent of another taxpayer. 1040 ez form online An individual can be your dependent even if the individual files a joint return with a spouse. 1040 ez form online An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). 1040 ez form online    Reasonable period of time. 1040 ez form online   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. 1040 ez form online   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. 1040 ez form online The expenses relate to a specific academic period. 1040 ez form online The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. 1040 ez form online   If neither of the above situations applies, the reasonable period of time is determined based on all the relevant facts and circumstances. 1040 ez form online Academic period. 1040 ez form online   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. 1040 ez form online In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. 1040 ez form online Eligible student. 1040 ez form online   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. 1040 ez form online Enrolled at least half-time. 1040 ez form online   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. 1040 ez form online   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 1040 ez form online However, the standard may not be lower than any of those established by the U. 1040 ez form online S. 1040 ez form online Department of Education under the Higher Education Act of 1965. 1040 ez form online Related person. 1040 ez form online   You cannot deduct interest on a loan you get from a related person. 1040 ez form online Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. 1040 ez form online ), Your lineal descendants (children, grandchildren, etc. 1040 ez form online ), and Certain corporations, partnerships, trusts, and exempt organizations. 1040 ez form online Qualified employer plan. 1040 ez form online   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. 1040 ez form online Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. 1040 ez form online They include amounts paid for the following items. 1040 ez form online Tuition and fees. 1040 ez form online Room and board. 1040 ez form online Books, supplies, and equipment. 1040 ez form online Other necessary expenses (such as transportation). 1040 ez form online The cost of room and board qualifies only to the extent that it is not more than: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 1040 ez form online Eligible educational institution. 1040 ez form online   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 1040 ez form online S. 1040 ez form online Department of Education. 1040 ez form online It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 1040 ez form online   Certain educational institutions located outside the United States also participate in the U. 1040 ez form online S. 1040 ez form online Department of Education's Federal Student Aid (FSA) programs. 1040 ez form online   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. 1040 ez form online   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. 1040 ez form online The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. 1040 ez form online    The educational institution should be able to tell you if it is an eligible educational institution. 1040 ez form online Adjustments to qualified education expenses. 1040 ez form online   You must reduce your qualified education expenses by certain tax-free items (such as the tax-free part of scholarships and fellowships). 1040 ez form online See chapter 4 of Publication 970 for details. 1040 ez form online Include as Interest In addition to simple interest on the loan, certain loan origination fees, capitalized interest, interest on revolving lines of credit, and interest on refinanced student loans can be student loan interest if all other requirements are met. 1040 ez form online Loan origination fee. 1040 ez form online   In general, this is a one-time fee charged by the lender when a loan is made. 1040 ez form online To be deductible as interest, the fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. 1040 ez form online A loan origination fee treated as interest accrues over the life of the loan. 1040 ez form online Capitalized interest. 1040 ez form online    This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. 1040 ez form online Interest on revolving lines of credit. 1040 ez form online   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. 1040 ez form online See Qualified Education Expenses , earlier. 1040 ez form online Interest on refinanced student loans. 1040 ez form online   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. 1040 ez form online If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. 1040 ez form online Voluntary interest payments. 1040 ez form online   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. 1040 ez form online Do Not Include as Interest You cannot claim a student loan interest deduction for any of the following items. 1040 ez form online Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. 1040 ez form online Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. 1040 ez form online Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. 1040 ez form online For more information, see Student Loan Repayment Assistance in chapter 5 of Publication 970. 1040 ez form online Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. 1040 ez form online Your filing status is any filing status except married filing separately. 1040 ez form online No one else is claiming an exemption for you on his or her tax return. 1040 ez form online You are legally obligated to pay interest on a qualified student loan. 1040 ez form online You paid interest on a qualified student loan. 1040 ez form online Interest paid by others. 1040 ez form online   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. 1040 ez form online See chapter 4 of Publication 970 for more information. 1040 ez form online No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, home mortgage interest). 1040 ez form online How Much Can You Deduct Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. 1040 ez form online However, the amount determined above is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). 1040 ez form online You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). 1040 ez form online For details on figuring your MAGI, see chapter 4 of Publication 970. 1040 ez form online How Do You Figure the Deduction Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the Form 1040 or Form 1040A instructions. 1040 ez form online However, if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1 in chapter 4 of Publication 970. 1040 ez form online To help you figure your student loan interest deduction, you should receive Form 1098-E, Student Loan Interest Statement. 1040 ez form online Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. 1040 ez form online For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. 1040 ez form online Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. 1040 ez form online However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. 1040 ez form online For information on allocating payments between interest and principal, see chapter 4 of Publication 970. 1040 ez form online To claim the deduction, enter the allowable amount on Form 1040, line 33, or Form 1040A, line 18. 1040 ez form online Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). 1040 ez form online You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. 1040 ez form online The qualified expenses must be for higher education, as explained later under What Expenses Qualify . 1040 ez form online The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. 1040 ez form online Table 19-2 summarizes the features of the tuition and fees deduction. 1040 ez form online You may be able to take a credit for your education expenses instead of a deduction. 1040 ez form online You can choose the one that will give you the lower tax. 1040 ez form online See chapter 35, Education Credits, for details about the credits. 1040 ez form online Can You Claim the Deduction The following rules will help you determine if you can claim the tuition and fees deduction. 1040 ez form online Who Can Claim the Deduction Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. 1040 ez form online You paid qualified education expenses of higher education in 2013 for academic periods beginning in 2013 and those beginning in the first three months of 2014. 1040 ez form online You paid the education expenses for an eligible student. 1040 ez form online The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption (defined in chapter 3) on your tax return. 1040 ez form online Qualified education expenses are defined under What Expenses Qualify . 1040 ez form online Eligible students are defined later under Who Is an Eligible Student . 1040 ez form online Who Cannot Claim the Deduction You cannot claim the tuition and fees deduction if any of the following apply. 1040 ez form online Your filing status is married filing separately. 1040 ez form online Another person can claim an exemption for you as a dependent on his or her tax return. 1040 ez form online You cannot take the deduction even if the other person does not actually claim that exemption. 1040 ez form online Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). 1040 ez form online You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. 1040 ez form online More information on nonresident aliens can be found in Publication 519, U. 1040 ez form online S. 1040 ez form online Tax Guide for Aliens. 1040 ez form online You or anyone else claims an American opportunity or lifetime learning credit in 2013 with respect to expenses of the student for whom the qualified education expenses were paid. 1040 ez form online However, a state tax credit will not disqualify you from claiming a tuition and fees deduction. 1040 ez form online Table 19-2. 1040 ez form online Tuition and Fees Deduction at a Glance Do not rely on this table alone. 1040 ez form online Refer to the text for more details. 1040 ez form online Question   Answer What is the maximum benefit?   You can reduce your income subject to tax by up to $4,000. 1040 ez form online Where is the deduction taken?   As an adjustment to income on Form 1040, line 34, or Form 1040A, line 19. 1040 ez form online For whom must the expenses be paid?   A student enrolled in an eligible educational institution who is either: you, your spouse, or your dependent for whom you claim an exemption. 1040 ez form online What tuition and fees are deductible?   Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. 1040 ez form online What Expenses Qualify The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 1040 ez form online Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period (defined earlier under Student Loan Interest Deduction ) beginning in 2013 or in the first 3 months of 2014. 1040 ez form online Payments with borrowed funds. 1040 ez form online   You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. 1040 ez form online Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. 1040 ez form online Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. 1040 ez form online Student withdraws from class(es). 1040 ez form online   You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws. 1040 ez form online Qualified Education Expenses For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. 1040 ez form online Eligible educational institution. 1040 ez form online   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 1040 ez form online S. 1040 ez form online Department of Education. 1040 ez form online It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 1040 ez form online The educational institution should be able to tell you if it is an eligible educational institution. 1040 ez form online   Certain educational institutions located outside the United States also participate in the U. 1040 ez form online S. 1040 ez form online Department of Education's Federal Student Aid (FSA) programs. 1040 ez form online Academic period. 1040 ez form online    An academic period is any quarter, semester, trimester, or any other period of study as reasonably determined by an eligible educational institution. 1040 ez form online If an eligible educational institution uses credit hours and does not have academic terms, each payment period may be treated as an academic period. 1040 ez form online Related expenses. 1040 ez form online   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses for the tuition and fees deduction only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. 1040 ez form online Prepaid expenses. 1040 ez form online   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring the tuition and fees deduction. 1040 ez form online See Academic period, earlier. 1040 ez form online For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring the tuition and fees deduction for 2013 only if you meet all the other requirements. 1040 ez form online    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 tuition and fees deduction. 1040 ez form online No Double Benefit Allowed You cannot do any of the following. 1040 ez form online Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense. 1040 ez form online Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year. 1040 ez form online Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). 1040 ez form online For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. 1040 ez form online See Figuring the Taxable Portion of a Distribution in chapter 7 (Coverdell ESA) and chapter 8 (QTP) of Publication 970. 1040 ez form online Deduct qualified education expenses that have been paid with tax-free interest on U. 1040 ez form online S. 1040 ez form online savings bonds (Form 8815). 1040 ez form online See Figuring the Tax-Free Amount in chapter 10 of Publication 970. 1040 ez form online Deduct qualified education expenses that have been paid with tax-free educational assistance such as a scholarship, grant, or employer-provided educational assistance. 1040 ez form online See Adjustments to qualified education expenses, later. 1040 ez form online Adjustments to qualified education expenses. 1040 ez form online   For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. 1040 ez form online The result is the amount of adjusted qualified education expenses for each student. 1040 ez form online Tax-free educational assistance. 1040 ez form online   For tax-free educational assistance you received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance to that academic period. 1040 ez form online See Academic period, earlier. 1040 ez form online   This includes: The tax-free part of scholarships and fellowships, including Pell grants (see chapter 1 of Publication 970), The tax-free part of any employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 1040 ez form online Generally, any scholarship or fellowship you receive is treated as tax-free educational assistance. 1040 ez form online However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent you include it in gross income (if you are required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 1040 ez form online 970, chapter 1. 1040 ez form online The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 1040 ez form online 970, chapter 1. 1040 ez form online You may be able to increase the combined value of your tuition and fees deduction and certain educational assistance if you include some or all of the educational assistance in income in the year it is received. 1040 ez form online For details, see Adjustments to Qualified Education Expenses in chapter 6 of Pub. 1040 ez form online 970. 1040 ez form online Some tax-free educational assistance received in 2013 may be treated as a refund of qualified education expenses paid in 2013. 1040 ez form online This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). 1040 ez form online If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. 1040 ez form online If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. 1040 ez form online Refunds. 1040 ez form online   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or may require you to include some or all of the refund in your gross income for the year the refund is received. 1040 ez form online See chapter 6 of Pub. 1040 ez form online 970 for more information. 1040 ez form online Some tax-free educational assistance received after 2013 may be treated as a refund. 1040 ez form online See Tax-free educational assistance, earlier. 1040 ez form online Refunds received in 2013. 1040 ez form online    For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. 1040 ez form online Refunds received after 2013 but before your income tax return is filed. 1040 ez form online   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. 1040 ez form online Refunds received after 2013 and after your income tax return is filed. 1040 ez form online   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received after you file your 2013 income tax return, you may need to include some or all of the refund in your gross income for the year the refund is received. 1040 ez form online See chapter 6 of Pub. 1040 ez form online 970 for more information. 1040 ez form online Coordination with Coverdell education savings accounts and qualified tuition programs. 1040 ez form online    Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). 1040 ez form online For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. 1040 ez form online Amounts that do not reduce qualified education expenses. 1040 ez form online   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 1040 ez form online   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. 1040 ez form online The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses. 1040 ez form online The use of the money is not restricted. 1040 ez form online Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. 1040 ez form online This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. 1040 ez form online Sports, games, hobbies, and noncredit courses. 1040 ez form online   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. 1040 ez form online However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. 1040 ez form online Comprehensive or bundled fees. 1040 ez form online   Some eligible educational institutions combine all of their fees for an academic period into one amount. 1040 ez form online If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. 1040 ez form online The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. 1040 ez form online See How Do You Figure the Deduction , later, for more information about Form 1098-T. 1040 ez form online Who Is an Eligible Student For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (defined earlier). 1040 ez form online Who Can Claim a Dependent's Expenses Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must: Have paid the expenses, and Claim an exemption for the student as a dependent. 1040 ez form online Table 19-3 summarizes who can claim the deduction. 1040 ez form online How Much Can You Deduct The maximum tuition and fees deduction in 2013 is $4,000, $2,000, or $0, depending on the amount of your MAGI. 1040 ez form online For details on figuring your MAGI, see chapter 6 of Publication 970. 1040 ez form online How Do You Figure the Deduction Figure the deduction using Form 8917. 1040 ez form online To help you figure your tuition and fees deduction, you should receive Form 1098-T, Tuition Statement. 1040 ez form online Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. 1040 ez form online To claim the deduction, enter the allowable amount on Form 1040, line 34, or Form 1040A, line 19, and attach your completed Form 8917. 1040 ez form online Table 19-3. 1040 ez form online Who Can Claim a Dependent's Expenses Do not rely on this table alone. 1040 ez form online See Who Can Claim a Dependent's Expenses in chapter 6 of Publication 970. 1040 ez form online IF your dependent is an eligible student and you. 1040 ez form online . 1040 ez form online . 1040 ez form online AND. 1040 ez form online . 1040 ez form online . 1040 ez form online THEN. 1040 ez form online . 1040 ez form online . 1040 ez form online claim an exemption for your dependent you paid all qualified education expenses for your dependent only you can deduct the qualified education expenses that you paid. 1040 ez form online Your dependent cannot take a deduction. 1040 ez form online claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. 1040 ez form online do not claim an exemption for your dependent you paid all qualified education expenses no one is allowed to take a deduction. 1040 ez form online do not claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. 1040 ez form online Educator Expenses If you were an eligible educator in 2013, you can deduct on Form 1040, line 23, or Form 1040A, line 16, up to $250 of qualified expenses you paid in 2013. 1040 ez form online If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. 1040 ez form online However, neither spouse can deduct more than $250 of his or her qualified expenses on Form 1040, line 23, or Form 1040A, line 16. 1040 ez form online You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A (Form 1040), line 21. 1040 ez form online Eligible educator. 1040 ez form online   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. 1040 ez form online Qualified expenses. 1040 ez form online   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. 1040 ez form online An ordinary expense is one that is common and accepted in your educational field. 1040 ez form online A necessary expense is one that is helpful and appropriate for your profession as an educator. 1040 ez form online An expense does not have to be required to be considered necessary. 1040 ez form online   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. 1040 ez form online   You must reduce your qualified expenses by the following amounts. 1040 ez form online Excludable U. 1040 ez form online S. 1040 ez form online series EE and I savings bond interest from Form 8815. 1040 ez form online See Figuring the Tax-Free Amount in chapter 10 of Publication 970. 1040 ez form online Nontaxable qualified tuition program earnings or distributions. 1040 ez form online See Figuring the Taxable Portion of a Distribution in chapter 8 of Publication 970. 1040 ez form online Nontaxable distribution of earnings from a Coverdell education savings account. 1040 ez form online See Figuring the Taxable Portion of a Distribution in chapter 7 of Publication 970. 1040 ez form online Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2. 1040 ez form online Prev  Up  Next   Home   More Online Publications