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File Federal Taxes Online Free 2012

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File Federal Taxes Online Free 2012

File federal taxes online free 2012 Index A Abatement of interest (see Interest, abatement) Appeal rights, Appeal Rights, Appeals to the Courts, Tax Court, District Court and Court of Federal Claims (see also Tax Court) Assistance (see Tax help) Authorization, third party, Third party authorization. File federal taxes online free 2012 B Burden of proof, Burden of proof. File federal taxes online free 2012 C Civil action (see Waivers, tax suits, civil action) Claim for refund, Claims for Refund Disallowance, Explanation of Any Claim for Refund Disallowance Estates on installment method, Claim for refund by estates electing the installment method of payment. File federal taxes online free 2012 Periods of financial disability, Periods of financial disability. File federal taxes online free 2012 Comments on publication, Comments and suggestions. File federal taxes online free 2012 Communications, privileged, Confidentiality privilege. File federal taxes online free 2012 , Confidentiality privilege. File federal taxes online free 2012 Confidentiality, Confidentiality privilege. File federal taxes online free 2012 , Confidentiality privilege. File federal taxes online free 2012 D Disability (see Financial disability, periods of) Disaster areas, abatement of interest, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions E Employment status, Tax Court review of, Jurisdiction for determination of employment status. File federal taxes online free 2012 Estates Claim for refund, Claim for refund by estates electing the installment method of payment. File federal taxes online free 2012 Examination of returns, Examination of Returns F Fast track mediation, Fast track mediation. File federal taxes online free 2012 Financial disability, periods of Claim for refund, Periods of financial disability. File federal taxes online free 2012 Form 8379, Injured spouse exception. File federal taxes online free 2012 8857, Form 8857. File federal taxes online free 2012 Free tax services, Free help with your tax return. File federal taxes online free 2012 H Help (see Tax help) I Injured spouse, Injured spouse exception. File federal taxes online free 2012 Innocent spouse relief, Tax Court review of request for relief from joint and several liability on a joint return. File federal taxes online free 2012 , Relief from joint and several liability on a joint return. File federal taxes online free 2012 Installment agreement, Installment Agreement Request Installment method Estates, claim for refund by, Claim for refund by estates electing the installment method of payment. File federal taxes online free 2012 Interest Abatement Disaster areas, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Error or delay by IRS, Abatement of Interest Due to Error or Delay by the IRS Terrorist attacks, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Netting, overlapping underpayments and overpayments, Interest Netting Suspended, Suspension of interest and penalties. File federal taxes online free 2012 J Joint and several liability, relief from, Tax Court review of request for relief from joint and several liability on a joint return. File federal taxes online free 2012 , Relief from joint and several liability on a joint return. File federal taxes online free 2012 L Losses Disaster area, Disaster area claims for refund. File federal taxes online free 2012 Low Income Taxpayer Clinics, Low Income Taxpayer Clinics. File federal taxes online free 2012 M Mediation, fast track, Fast track mediation. File federal taxes online free 2012 More information, Useful Items - You may want to see: N Notice of deficiency Timely mailing, Suspension of interest and penalties. File federal taxes online free 2012 Notices Third party contacts, Notice of IRS contact of third parties. File federal taxes online free 2012 O Offer in compromise, Offer in Compromise Overpayments Offsets against state tax, Offset of past-due state income tax obligations against overpayments. File federal taxes online free 2012 P Penalties, suspended, Suspension of interest and penalties. File federal taxes online free 2012 Practitioners, federally authorized Confidential communications, Confidentiality privilege. File federal taxes online free 2012 , Confidentiality privilege. File federal taxes online free 2012 Presidentially declared disaster, Disaster area claims for refund. File federal taxes online free 2012 Publications (see Tax help) R Refund, Claims for Refund, Periods of financial disability. File federal taxes online free 2012 , Offset of past-due state income tax obligations against overpayments. File federal taxes online free 2012 Reduced, Reduced Refund Refund deadline postponement, Postponed refund deadlines. File federal taxes online free 2012 Refund or credit before court decision, Refund or Credit of Overpayments Before Final Determination Rights Communications, privileged, Confidentiality privilege. File federal taxes online free 2012 , Confidentiality privilege. File federal taxes online free 2012 Requests to waive, Prohibition on requests to taxpayers to give up rights to bring civil action. File federal taxes online free 2012 S Suggestions for publication, Comments and suggestions. File federal taxes online free 2012 T Tax Court, Appeals to the Courts, Tax Court Employment status, review of, Jurisdiction for determination of employment status. File federal taxes online free 2012 Innocent spouse relief, review of request for, Tax Court review of request for relief from joint and several liability on a joint return. File federal taxes online free 2012 Refund or credit before decision, Refund or Credit of Overpayments Before Final Determination Tax help, How To Get Tax Help Taxpayer Advocate, Taxpayer Advocate Service. File federal taxes online free 2012 Taxpayer Advocate Service, Taxpayer Advocate Service. File federal taxes online free 2012 Terrorist attacks, abatement of interest, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Third party authorization, Third party authorization. File federal taxes online free 2012 TTY/TDD information, How To Get Tax Help W Waivers Tax suits, civil action, Prohibition on requests to taxpayers to give up rights to bring civil action. File federal taxes online free 2012 Z Zero rate, overlapping periods of interest (see Interest, netting) Prev  Up     Home   More Online Publications
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File federal taxes online free 2012 4. File federal taxes online free 2012   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. File federal taxes online free 2012 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. File federal taxes online free 2012 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. File federal taxes online free 2012 This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. File federal taxes online free 2012 The student loan interest deduction is taken as an adjustment to income. File federal taxes online free 2012 This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). File federal taxes online free 2012 This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. File federal taxes online free 2012 Table 4-1. File federal taxes online free 2012 Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. File federal taxes online free 2012 Do not rely on this table alone. File federal taxes online free 2012 Refer to the text for complete details. File federal taxes online free 2012 Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. File federal taxes online free 2012 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. File federal taxes online free 2012 Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. File federal taxes online free 2012 Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. File federal taxes online free 2012 Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). File federal taxes online free 2012 Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. File federal taxes online free 2012 It includes both required and voluntary interest payments. File federal taxes online free 2012 Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. File federal taxes online free 2012 Loans from the following sources are not qualified student loans. File federal taxes online free 2012 A related person. File federal taxes online free 2012 A qualified employer plan. File federal taxes online free 2012 Your dependent. File federal taxes online free 2012   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. File federal taxes online free 2012 You can find more information about dependents in Publication 501. File federal taxes online free 2012 Exceptions. File federal taxes online free 2012   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. File federal taxes online free 2012 An individual can be your dependent even if you are the dependent of another taxpayer. File federal taxes online free 2012 An individual can be your dependent even if the individual files a joint return with a spouse. File federal taxes online free 2012 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). File federal taxes online free 2012 Reasonable period of time. File federal taxes online free 2012   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. File federal taxes online free 2012   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. File federal taxes online free 2012 The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. File federal taxes online free 2012   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. File federal taxes online free 2012 Academic period. File federal taxes online free 2012   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. File federal taxes online free 2012 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. File federal taxes online free 2012 Eligible student. File federal taxes online free 2012   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. File federal taxes online free 2012 Enrolled at least half-time. File federal taxes online free 2012   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. File federal taxes online free 2012   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. File federal taxes online free 2012 However, the standard may not be lower than any of those established by the U. File federal taxes online free 2012 S. File federal taxes online free 2012 Department of Education under the Higher Education Act of 1965. File federal taxes online free 2012 Related person. File federal taxes online free 2012   You cannot deduct interest on a loan you get from a related person. File federal taxes online free 2012 Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. File federal taxes online free 2012 ), Your lineal descendants (children, grandchildren, etc. File federal taxes online free 2012 ), and Certain corporations, partnerships, trusts, and exempt organizations. File federal taxes online free 2012 Qualified employer plan. File federal taxes online free 2012   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. File federal taxes online free 2012 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. File federal taxes online free 2012 They include amounts paid for the following items. File federal taxes online free 2012 Tuition and fees. File federal taxes online free 2012 Room and board. File federal taxes online free 2012 Books, supplies, and equipment. File federal taxes online free 2012 Other necessary expenses (such as transportation). File federal taxes online free 2012 The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. File federal taxes online free 2012 Eligible educational institution. File federal taxes online free 2012   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. File federal taxes online free 2012 S. File federal taxes online free 2012 Department of Education. File federal taxes online free 2012 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. File federal taxes online free 2012   Certain educational institutions located outside the United States also participate in the U. File federal taxes online free 2012 S. File federal taxes online free 2012 Department of Education's Federal Student Aid (FSA) programs. File federal taxes online free 2012   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. File federal taxes online free 2012   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. File federal taxes online free 2012 The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. File federal taxes online free 2012    The educational institution should be able to tell you if it is an eligible educational institution. File federal taxes online free 2012 Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. File federal taxes online free 2012 Employer-provided educational assistance. File federal taxes online free 2012 See chapter 11, Employer-Provided Educational Assistance . File federal taxes online free 2012 Tax-free distribution of earnings from a Coverdell education savings account (ESA). File federal taxes online free 2012 See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. File federal taxes online free 2012 Tax-free distribution of earnings from a qualified tuition program (QTP). File federal taxes online free 2012 See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. File federal taxes online free 2012 U. File federal taxes online free 2012 S. File federal taxes online free 2012 savings bond interest that you exclude from income because it is used to pay qualified education expenses. File federal taxes online free 2012 See chapter 10, Education Savings Bond Program . File federal taxes online free 2012 The tax-free part of scholarships and fellowships. File federal taxes online free 2012 See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. File federal taxes online free 2012 Veterans' educational assistance. File federal taxes online free 2012 See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. File federal taxes online free 2012 Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. File federal taxes online free 2012 Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. File federal taxes online free 2012 Loan origination fee. File federal taxes online free 2012   In general, this is a one-time fee charged by the lender when a loan is made. File federal taxes online free 2012 To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. File federal taxes online free 2012 A loan origination fee treated as interest accrues over the term of the loan. File federal taxes online free 2012   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. File federal taxes online free 2012 If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. File federal taxes online free 2012 The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. File federal taxes online free 2012 A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. File federal taxes online free 2012 Example. File federal taxes online free 2012 In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. File federal taxes online free 2012 The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. File federal taxes online free 2012 Bill began making payments on his student loan in 2013. File federal taxes online free 2012 Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. File federal taxes online free 2012 Bill's loan is payable in 120 equal monthly payments. File federal taxes online free 2012 He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). File federal taxes online free 2012 Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. File federal taxes online free 2012 To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. File federal taxes online free 2012 Capitalized interest. File federal taxes online free 2012   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. File federal taxes online free 2012 Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. File federal taxes online free 2012 No deduction for capitalized interest is allowed in a year in which no loan payments were made. File federal taxes online free 2012 Interest on revolving lines of credit. File federal taxes online free 2012   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. File federal taxes online free 2012 See Qualified Education Expenses , earlier. File federal taxes online free 2012 Interest on refinanced student loans. File federal taxes online free 2012   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. File federal taxes online free 2012    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. File federal taxes online free 2012 Voluntary interest payments. File federal taxes online free 2012   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. File federal taxes online free 2012 Example. File federal taxes online free 2012 The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. File federal taxes online free 2012 He began making payments as required. File federal taxes online free 2012 In September 2013, Roger enrolled in graduate school on a full-time basis. File federal taxes online free 2012 He applied for and was granted deferment of his loan payments while in graduate school. File federal taxes online free 2012 Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. File federal taxes online free 2012 Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. File federal taxes online free 2012 Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. File federal taxes online free 2012 To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. File federal taxes online free 2012 Example. File federal taxes online free 2012 In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. File federal taxes online free 2012 The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. File federal taxes online free 2012 The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. File federal taxes online free 2012 At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. File federal taxes online free 2012 The loan is payable over 60 months, with a payment of $200. File federal taxes online free 2012 51 due on the first of each month, beginning November 2013. File federal taxes online free 2012 Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. File federal taxes online free 2012 However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). File federal taxes online free 2012 Payment Date   Payment   Stated Interest   Principal November 2013   $200. File federal taxes online free 2012 51   $44. File federal taxes online free 2012 27   $156. File federal taxes online free 2012 24 December 2013   $200. File federal taxes online free 2012 51   $43. File federal taxes online free 2012 62   $156. File federal taxes online free 2012 89 Totals   $401. File federal taxes online free 2012 02   $87. File federal taxes online free 2012 89   $313. File federal taxes online free 2012 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. File federal taxes online free 2012 89. File federal taxes online free 2012 Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). File federal taxes online free 2012 A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. File federal taxes online free 2012 Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. File federal taxes online free 2012 Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. File federal taxes online free 2012 02 ($87. File federal taxes online free 2012 89 + $10 + $303. File federal taxes online free 2012 13). File federal taxes online free 2012 For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. File federal taxes online free 2012 She also will apply the remaining amount of capitalized interest ($625 − $303. File federal taxes online free 2012 13 = $321. File federal taxes online free 2012 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. File federal taxes online free 2012 Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. File federal taxes online free 2012 Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. File federal taxes online free 2012 Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. File federal taxes online free 2012 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. File federal taxes online free 2012 For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. File federal taxes online free 2012 When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. File federal taxes online free 2012 Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. File federal taxes online free 2012 Your filing status is any filing status except married filing separately. File federal taxes online free 2012 No one else is claiming an exemption for you on his or her tax return. File federal taxes online free 2012 You are legally obligated to pay interest on a qualified student loan. File federal taxes online free 2012 You paid interest on a qualified student loan. File federal taxes online free 2012 Claiming an exemption for you. File federal taxes online free 2012   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. File federal taxes online free 2012 Example 1. File federal taxes online free 2012 During 2013, Josh paid $600 interest on his qualified student loan. File federal taxes online free 2012 Only he is legally obligated to make the payments. File federal taxes online free 2012 No one claimed an exemption for Josh for 2013. File federal taxes online free 2012 Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. File federal taxes online free 2012 Example 2. File federal taxes online free 2012 During 2013, Jo paid $1,100 interest on her qualified student loan. File federal taxes online free 2012 Only she is legally obligated to make the payments. File federal taxes online free 2012 Jo's parents claimed an exemption for her on their 2013 tax return. File federal taxes online free 2012 In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. File federal taxes online free 2012 Interest paid by others. File federal taxes online free 2012   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. File federal taxes online free 2012 Example 1. File federal taxes online free 2012 Darla obtained a qualified student loan to attend college. File federal taxes online free 2012 After Darla's graduation from college, she worked as an intern for a nonprofit organization. File federal taxes online free 2012 As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. File federal taxes online free 2012 This payment was treated as additional compensation and reported in box 1 of her Form W-2. File federal taxes online free 2012 Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. File federal taxes online free 2012 Example 2. File federal taxes online free 2012 Ethan obtained a qualified student loan to attend college. File federal taxes online free 2012 After graduating from college, the first monthly payment on his loan was due in December. File federal taxes online free 2012 As a gift, Ethan's mother made this payment for him. File federal taxes online free 2012 No one is claiming a dependency exemption for Ethan on his or her tax return. File federal taxes online free 2012 Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. File federal taxes online free 2012 No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). File federal taxes online free 2012 Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. File federal taxes online free 2012 However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. File federal taxes online free 2012 You can use Worksheet 4-1. File federal taxes online free 2012 Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. File federal taxes online free 2012 Form 1098-E. File federal taxes online free 2012   To help you figure your student loan interest deduction, you should receive Form 1098-E. File federal taxes online free 2012 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. File federal taxes online free 2012   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. File federal taxes online free 2012 Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. File federal taxes online free 2012 However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. File federal taxes online free 2012 See Allocating Payments Between Interest and Principal , earlier. File federal taxes online free 2012    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. File federal taxes online free 2012 The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. File federal taxes online free 2012 Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). File federal taxes online free 2012 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). File federal taxes online free 2012 Modified adjusted gross income (MAGI). File federal taxes online free 2012   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. File federal taxes online free 2012 However, as discussed below, there may be other modifications. File federal taxes online free 2012 Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. File federal taxes online free 2012 Table 4-2. File federal taxes online free 2012 Effect of MAGI on Student Loan Interest Deduction IF your filing status is. File federal taxes online free 2012 . File federal taxes online free 2012 . File federal taxes online free 2012 AND your MAGI is. File federal taxes online free 2012 . File federal taxes online free 2012 . File federal taxes online free 2012 THEN your student loan interest deduction is. File federal taxes online free 2012 . File federal taxes online free 2012 . File federal taxes online free 2012 single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. File federal taxes online free 2012 more than $60,000  but less than $75,000 reduced because of the phaseout. File federal taxes online free 2012 $75,000 or more eliminated by the phaseout. File federal taxes online free 2012 married filing joint return not more than $125,000 not affected by the phaseout. File federal taxes online free 2012 more than $125,000 but less than $155,000 reduced because of the phaseout. File federal taxes online free 2012 $155,000 or more eliminated by the phaseout. File federal taxes online free 2012 MAGI when using Form 1040A. File federal taxes online free 2012   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). File federal taxes online free 2012 MAGI when using Form 1040. File federal taxes online free 2012   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. File federal taxes online free 2012 MAGI when using Form 1040NR. File federal taxes online free 2012   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). File federal taxes online free 2012 MAGI when using Form 1040NR-EZ. File federal taxes online free 2012   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). File federal taxes online free 2012 Phaseout. File federal taxes online free 2012   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. File federal taxes online free 2012 To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. File federal taxes online free 2012 The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). File federal taxes online free 2012 The denominator is $15,000 ($30,000 in the case of a joint return). File federal taxes online free 2012 Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. File federal taxes online free 2012 Example 1. File federal taxes online free 2012 During 2013 you paid $800 interest on a qualified student loan. File federal taxes online free 2012 Your 2013 MAGI is $145,000 and you are filing a joint return. File federal taxes online free 2012 You must reduce your deduction by $533, figured as follows. File federal taxes online free 2012   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). File federal taxes online free 2012 Example 2. File federal taxes online free 2012 The facts are the same as in Example 1 except that you paid $2,750 interest. File federal taxes online free 2012 Your maximum deduction for 2013 is $2,500. File federal taxes online free 2012 You must reduce your maximum deduction by $1,667, figured as follows. File federal taxes online free 2012   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). File federal taxes online free 2012 Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. File federal taxes online free 2012 However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. File federal taxes online free 2012 Student Loan Interest Deduction Worksheet at the end of this chapter. File federal taxes online free 2012 Claiming the Deduction The student loan interest deduction is an adjustment to income. File federal taxes online free 2012 To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). File federal taxes online free 2012 Worksheet 4-1. File federal taxes online free 2012 Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. File federal taxes online free 2012 Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. File federal taxes online free 2012 1. File federal taxes online free 2012 Enter the total interest you paid in 2013 on qualified student loans. File federal taxes online free 2012 Do not enter  more than $2,500 1. File federal taxes online free 2012   2. File federal taxes online free 2012 Enter the amount from Form 1040, line 22 2. File federal taxes online free 2012       3. File federal taxes online free 2012 Enter the total of the amounts from Form 1040,  lines 23 through 32 3. File federal taxes online free 2012           4. File federal taxes online free 2012 Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. File federal taxes online free 2012           5. File federal taxes online free 2012 Add lines 3 and 4 5. File federal taxes online free 2012       6. File federal taxes online free 2012 Subtract line 5 from line 2 6. File federal taxes online free 2012       7. File federal taxes online free 2012 Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. File federal taxes online free 2012       8. File federal taxes online free 2012 Enter any foreign housing deduction (Form 2555, line 50) 8. File federal taxes online free 2012       9. File federal taxes online free 2012 Enter the amount of income from Puerto Rico you are excluding 9. File federal taxes online free 2012       10. File federal taxes online free 2012 Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. File federal taxes online free 2012       11. File federal taxes online free 2012 Add lines 6 through 10. File federal taxes online free 2012 This is your modified adjusted gross income 11. File federal taxes online free 2012   12. File federal taxes online free 2012 Enter the amount shown below for your filing status 12. File federal taxes online free 2012     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. File federal taxes online free 2012 Is the amount on line 11 more than the amount on line 12?       □ No. File federal taxes online free 2012 Skip lines 13 and 14, enter -0- on line 15, and go to line 16. File federal taxes online free 2012       □ Yes. File federal taxes online free 2012 Subtract line 12 from line 11 13. File federal taxes online free 2012   14. File federal taxes online free 2012 Divide line 13 by $15,000 ($30,000 if married filing jointly). File federal taxes online free 2012 Enter the result as a decimal  (rounded to at least three places). File federal taxes online free 2012 If the result is 1. File federal taxes online free 2012 000 or more, enter 1. File federal taxes online free 2012 000 14. File federal taxes online free 2012 . File federal taxes online free 2012 15. File federal taxes online free 2012 Multiply line 1 by line 14 15. File federal taxes online free 2012   16. File federal taxes online free 2012 Student loan interest deduction. File federal taxes online free 2012 Subtract line 15 from line 1. File federal taxes online free 2012 Enter the result here  and on Form 1040, line 33. File federal taxes online free 2012 Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. File federal taxes online free 2012 ) 16. 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