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Free E File Extension

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Free E File Extension

Free e file extension 6. Free e file extension   Dual-Status Tax Year Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tax Year Income Subject to Tax Restrictions for Dual-Status Taxpayers Exemptions How To Figure TaxIncome Tax Credits and Payments Forms To File When and Where To File Introduction You have a dual-status tax year when you have been both a resident alien and a nonresident alien in the same year. Free e file extension Dual status does not refer to your citizenship; it refers only to your resident status in the United States. Free e file extension In determining your U. Free e file extension S. Free e file extension income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the United States and the part of the year you are a nonresident. Free e file extension The most common dual-status tax years are the years of arrival and departure. Free e file extension See Dual-Status Aliens in chapter 1. Free e file extension If you are married and choose to be treated as a U. Free e file extension S. Free e file extension resident for the entire year, as explained in chapter 1, the rules of this chapter do not apply to you for that year. Free e file extension Topics - This chapter discusses: Income subject to tax, Restrictions for dual-status taxpayers, Exemptions, How to figure the tax, Forms to file, When and where to file, and How to fill out a dual-status return. Free e file extension Useful Items - You may want to see: Publication 503 Child and Dependent Care Expenses 514 Foreign Tax Credit for Individuals 575 Pension and Annuity Income Form (and Instructions) 1040 U. Free e file extension S. Free e file extension Individual Income Tax Return 1040-C U. Free e file extension S. Free e file extension Departing Alien Income Tax Return 1040-ES Estimated Tax for Individuals 1040-ES (NR) U. Free e file extension S. Free e file extension Estimated Tax for Nonresident Alien Individuals 1040NR U. Free e file extension S. Free e file extension Nonresident Alien Income Tax Return 1116 Foreign Tax Credit See chapter 12 for information about getting these publications and forms. Free e file extension Tax Year You must file your tax return on the basis of an annual accounting period called a tax year. Free e file extension If you have not previously established a fiscal tax year, your tax year is the calendar year. Free e file extension A calendar year is 12 consecutive months ending on December 31. Free e file extension If you have previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December, or a 52–53 week year) and are considered to be a U. Free e file extension S. Free e file extension resident for any calendar year, you will be treated as a U. Free e file extension S. Free e file extension resident for any part of your fiscal year that falls within that calendar year. Free e file extension Income Subject to Tax For the part of the year you are a resident alien, you are taxed on income from all sources. Free e file extension Income from sources outside the United States is taxable if you receive it while you are a resident alien. Free e file extension The income is taxable even if you earned it while you were a nonresident alien or if you became a nonresident alien after receiving it and before the end of the year. Free e file extension For the part of the year you are a nonresident alien, you are taxed on income from U. Free e file extension S. Free e file extension sources and on certain foreign source income treated as effectively connected with a U. Free e file extension S. Free e file extension trade or business. Free e file extension (The rules for treating foreign source income as effectively connected are discussed in chapter 4 under Foreign Income. Free e file extension ) Income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if you receive it while you are a nonresident alien. Free e file extension The income is not taxable even if you earned it while you were a resident alien or if you became a resident alien or a U. Free e file extension S. Free e file extension citizen after receiving it and before the end of the year. Free e file extension Income from U. Free e file extension S. Free e file extension sources is taxable whether you receive it while a nonresident alien or a resident alien unless specifically exempt under the Internal Revenue Code or a tax treaty provision. Free e file extension Generally, tax treaty provisions apply only to the part of the year you were a nonresident. Free e file extension In certain cases, however, treaty provisions may apply while you were a resident alien. Free e file extension See chapter 9 for more information. Free e file extension When determining what income is taxed in the United States, you must consider exemptions under U. Free e file extension S. Free e file extension tax law as well as the reduced tax rates and exemptions provided by tax treaties between the United States and certain foreign countries. Free e file extension For a further discussion of tax treaties, see chapter 9. Free e file extension Restrictions for Dual-Status Taxpayers The following restrictions apply if you are filing a tax return for a dual-status tax year. Free e file extension 1) Standard deduction. Free e file extension   You cannot use the standard deduction allowed on Form 1040. Free e file extension However, you can itemize any allowable deductions. Free e file extension 2) Exemptions. Free e file extension   Your total deduction for the exemptions for your spouse and allowable dependents cannot be more than your taxable income (figured without deducting personal exemptions) for the period you are a resident alien. Free e file extension 3) Head of household. Free e file extension   You cannot use the head of household Tax Table column or Tax Computation Worksheet. Free e file extension 4) Joint return. Free e file extension   You cannot file a joint return. Free e file extension However, see Choosing Resident Alien Status under Dual-Status Aliens in chapter 1. Free e file extension 5) Tax rates. Free e file extension   If you are married and a nonresident of the United States for all or part of the tax year and you do not choose to file jointly as discussed in chapter 1, you must use the Tax Table column or Tax Computation Worksheet for married filing separately to figure your tax on income effectively connected with a U. Free e file extension S. Free e file extension trade or business. Free e file extension You cannot use the Tax Table column or Tax Computation Worksheet for married filing jointly or single. Free e file extension However, you may be able to file as single if you lived apart from your spouse during the last 6 months of the year and you are a: Married resident of Canada, Mexico, or South Korea, or Married U. Free e file extension S. Free e file extension national. Free e file extension  See the instructions for Form 1040NR to see if you qualify. Free e file extension    A U. Free e file extension S. Free e file extension national is an individual who, although not a U. Free e file extension S. Free e file extension citizen, owes his or her allegiance to the United States. Free e file extension U. Free e file extension S. Free e file extension nationals include American Samoans and Northern Mariana Islanders who chose to become U. Free e file extension S. Free e file extension nationals instead of U. Free e file extension S. Free e file extension citizens. Free e file extension 6) Tax credits. Free e file extension   You cannot claim the education credits, the earned income credit, or the credit for the elderly or the disabled unless: You are married, and You choose to be treated as a resident for all of 2013 by filing a joint return with your spouse who is a U. Free e file extension S. Free e file extension citizen or resident, as discussed in chapter 1. Free e file extension Exemptions As a dual-status taxpayer, you usually will be able to claim your own personal exemption. Free e file extension Subject to the general rules for qualification, you can claim exemptions for your spouse and dependents when you figure taxable income for the part of the year you are a resident alien. Free e file extension The amount you can claim for these exemptions is limited to your taxable income (figured before subtracting exemptions) for the part of the year you are a resident alien. Free e file extension You cannot use exemptions (other than your own) to reduce taxable income to less than zero for that period. Free e file extension Special rules apply to exemptions for the part of the tax year you are a nonresident alien if you are a: Resident of Canada, Mexico, or South Korea, U. Free e file extension S. Free e file extension national, or Student or business apprentice from India. Free e file extension For more information, see Exemptions in chapter 5. Free e file extension How To Figure Tax When you figure your U. Free e file extension S. Free e file extension tax for a dual-status year, you are subject to different rules for the part of the year you are a resident and the part of the year you are a nonresident. Free e file extension Income All income for your period of residence and all income that is effectively connected with a trade or business in the United States for your period of nonresidence, after allowable deductions, is added and taxed at the rates that apply to U. Free e file extension S. Free e file extension citizens and residents. Free e file extension Income that is not connected with a trade or business in the United States for your period of nonresidence is subject to the flat 30% rate or lower treaty rate. Free e file extension You cannot take any deductions against this income. Free e file extension Social security and railroad retirement benefits. Free e file extension   During the part of the year you are a nonresident alien, 85% of any U. Free e file extension S. Free e file extension social security benefits (and the equivalent portion of tier 1 railroad retirement benefits) you receive is subject to the flat 30% tax, unless exempt, or subject to a lower treaty rate. Free e file extension (See The 30% Tax in chapter 4. Free e file extension )   During the part of the year you are a resident alien, part of the social security and the equivalent portion of tier 1 railroad retirement benefits will be taxed at graduated rates if your modified adjusted gross income plus half of these benefits is more than a certain base amount. Free e file extension Use the Social Security Benefits Worksheet in the Form 1040 instructions to help you figure the taxable part of your social security and equivalent tier 1 railroad retirement benefits for the part of the year you were a resident alien. Free e file extension If you received U. Free e file extension S. Free e file extension social security benefits while you were a nonresident alien, the Social Security Administration will send you Form SSA-1042S showing your combined benefits for the entire year and the amount of tax withheld. Free e file extension You will not receive separate statements for the benefits received during your periods of U. Free e file extension S. Free e file extension residence and nonresidence. Free e file extension Therefore, it is important for you to keep careful records of these amounts. Free e file extension You will need this information to properly complete your return and determine your tax liability. Free e file extension If you received railroad retirement benefits while you were a nonresident alien, the U. Free e file extension S. Free e file extension Railroad Retirement Board (RRB) will send you Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, and/or Form RRB-1099-R, Annuities or Pensions by the Railroad Retirement Board. Free e file extension If your country of legal residence changed or your rate of tax changed during the tax year, you may receive more than one form. Free e file extension Tax Credits and Payments This discussion covers tax credits and payments for dual-status aliens. Free e file extension Credits As a dual-status alien, you generally can claim tax credits using the same rules that apply to resident aliens. Free e file extension There are certain restrictions that may apply. Free e file extension These restrictions are discussed here, along with a brief explanation of credits often claimed by individuals. Free e file extension Foreign tax credit. Free e file extension   If you have paid or are liable for the payment of income tax to a foreign country on income from foreign sources, you may be able to claim a credit for the foreign taxes. Free e file extension   If you claim the foreign tax credit, you generally must file Form 1116 with your income tax return. Free e file extension For more information, see the Instructions for Form 1116 and Publication 514. Free e file extension Child and dependent care credit. Free e file extension   You may qualify for this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse so that you can work or look for work. Free e file extension Generally, you must be able to claim an exemption for your dependent. Free e file extension   Married dual-status aliens can claim the credit only if they choose to file a joint return as discussed in chapter 1, or if they qualify as certain married individuals living apart. Free e file extension   The amount of your child and dependent care expense that qualifies for the credit in any tax year cannot be more than your earned income for that tax year. Free e file extension   For more information, get Publication 503 and Form 2441. Free e file extension Retirement savings contributions credit. Free e file extension   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. Free e file extension You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than $29,500. Free e file extension Use Form 8880 to figure the credit. Free e file extension For more information, see Publication 590. Free e file extension Child tax credit. Free e file extension   You may be able to take this credit if you have a qualifying child. Free e file extension   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. Free e file extension Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew). Free e file extension Is a U. Free e file extension S. Free e file extension citizen, a U. Free e file extension S. Free e file extension national, or a resident alien. Free e file extension Did not provide over half of his or her own support for 2013. Free e file extension Lived with you more than half of 2013. Free e file extension Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. Free e file extension Is claimed as a dependent on your return. Free e file extension An adopted child is always treated as your own child. Free e file extension An adopted child includes a child lawfully placed with you for legal adoption. Free e file extension   See your form instructions for additional details. Free e file extension Adoption credit. Free e file extension   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. Free e file extension This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. Free e file extension To claim the adoption credit, file Form 8839 with the U. Free e file extension S. Free e file extension income tax return that you file. Free e file extension   Married dual-status aliens can claim the credit only if they choose to file a joint return with a U. Free e file extension S. Free e file extension citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Married Persons Not Filing Jointly in the Form 8839 instructions). Free e file extension Payments You can report as payments against your U. Free e file extension S. Free e file extension income tax liability certain taxes you paid, are considered to have paid, or that were withheld from your income. Free e file extension These include: Tax withheld from wages earned in the United States, Taxes withheld at the source from various items of income from U. Free e file extension S. Free e file extension sources other than wages, Estimated tax paid with Form 1040-ES or Form 1040-ES (NR), and Tax paid with Form 1040-C, at the time of departure from the United States. Free e file extension Forms To File The U. Free e file extension S. Free e file extension income tax return you must file as a dual-status alien depends on whether you are a resident alien or a nonresident alien at the end of the tax year. Free e file extension Resident at end of year. Free e file extension   You must file Form 1040 if you are a dual-status taxpayer who becomes a resident during the year and who is a U. Free e file extension S. Free e file extension resident on the last day of the tax year. Free e file extension Write “Dual-Status Return” across the top of the return. Free e file extension Attach a statement to your return to show the income for the part of the year you are a nonresident. Free e file extension You can use Form 1040NR or Form 1040NR-EZ as the statement, but be sure to mark “Dual-Status Statement” across the top. Free e file extension Nonresident at end of year. Free e file extension   You must file Form 1040NR or Form 1040NR-EZ if you are a dual-status taxpayer who gives up residence in the United States during the year and who is not a U. Free e file extension S. Free e file extension resident on the last day of the tax year. Free e file extension Write “Dual-Status Return” across the top of the return. Free e file extension Attach a statement to your return to show the income for the part of the year you are a resident. Free e file extension You can use Form 1040 as the statement, but be sure to mark “Dual-Status Statement” across the top. Free e file extension   If you expatriated or terminated your residency in 2013, you may be required to file an expatriation statement (Form 8854) with your tax return. Free e file extension For more information, see Expatriation Tax in chapter 4. Free e file extension Statement. Free e file extension   Any statement must have your name, address, and taxpayer identification number on it. Free e file extension You do not need to sign a separate statement or schedule accompanying your return, because your signature on the return also applies to the supporting statements and schedules. Free e file extension When and Where To File If you are a resident alien on the last day of your tax year and report your income on a calendar year basis, you must file no later than April 15 of the year following the close of your tax year. Free e file extension If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 4th month following the close of your tax year. Free e file extension In either case, file your return with the address for dual-status aliens shown on the back page of the Form 1040 instructions. Free e file extension If you are a nonresident alien on the last day of your tax year and you report your income on a calendar year basis, you must file no later than April 15 of the year following the close of your tax year if you receive wages subject to withholding. Free e file extension If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 4th month following the close of your tax year. Free e file extension If you did not receive wages subject to withholding and you report your income on a calendar year basis, you must file no later than June 15 of the year following the close of your tax year. Free e file extension If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 6th month following the close of your tax year. Free e file extension In any case, mail your return to:  Department of the Treasury Internal Revenue Service  Austin, TX 73301-0215 If enclosing a payment, mail your return to:  Internal Revenue Service  P. Free e file extension O. Free e file extension Box 1303 Charlotte, NC 28201-1303 If the regular due date for filing falls on a Saturday, Sunday, or legal holiday, the due date is the next day that is not a Saturday, Sunday, or legal holiday. Free e file extension Prev  Up  Next   Home   More Online Publications
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The Taxpayer Advocate Service Is Your Voice at the IRS

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. We help taxpayers who are experiencing economic harm, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving problems with the IRS; and those who believe an IRS system or procedure is not working as it should. Here are ten things every taxpayer should know about TAS:

  1. The Taxpayer Advocate Service is your voice at the IRS.
  2. Our service is free and tailored to meet your needs.
  3. You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should.
  4. The worst thing you can do is nothing at all!
  5. We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.
  6. If you qualify for our help, we’ll do everything we can to get your problem resolved. You will be assigned to one advocate who will be with you at every turn.
  7. We have at least one local taxpayer advocate office in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book and in Publication 1546, Taxpayer Advocate Service -- Your Voice at the IRS. You can also call our toll-free number at 1-877-777-4778.
  8. As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Our tax toolkit at www.taxtoolkit.irs.gov can help you understand these rights.
  9. TAS also handles large-scale or systemic problems that affect many taxpayers. If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System.
  10. You can get updates on hot tax topics by visiting our YouTube channel at www.youtube.com/tasnta and our Facebook page at http://www.facebook.com/YourVoiceAtIRS, or by following our tweets at http://twitter.com/YourVoiceatIRS
Page Last Reviewed or Updated: 14-Mar-2014

The Free E File Extension

Free e file extension 2. Free e file extension   American Opportunity Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible StudentException. Free e file extension Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Refundable Part of Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. Free e file extension They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). Free e file extension This chapter explains: Who can claim the American opportunity credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. Free e file extension What is the tax benefit of the American opportunity credit. Free e file extension   For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student. Free e file extension   A tax credit reduces the amount of income tax you may have to pay. Free e file extension Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Free e file extension Forty percent of the American opportunity credit may be refundable. Free e file extension This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. Free e file extension   Your allowable American opportunity credit may be limited by the amount of your income. Free e file extension Also, the nonrefundable part of the credit may be limited by the amount of your tax. Free e file extension Overview of the American opportunity credit. Free e file extension   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. Free e file extension The details are discussed in this chapter. Free e file extension Can you claim more than one education credit this year. Free e file extension   For each student, you can elect for any year only one of the credits. Free e file extension For example, if you elect to take the American opportunity credit for a child on your 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013. Free e file extension   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. Free e file extension If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. Free e file extension This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. Free e file extension Differences between the American opportunity and lifetime learning credits. Free e file extension   There are several differences between these two credits. Free e file extension For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope Scholarship Credit for that student. Free e file extension However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. Free e file extension The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. Free e file extension If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. Free e file extension If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. Free e file extension Table 2-1. Free e file extension Overview of the American Opportunity Credit Maximum credit Up to $2,500 credit per eligible student Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship Credit was claimed) Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return. Free e file extension Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. Free e file extension You pay qualified education expenses of higher education. Free e file extension You pay the education expenses for an eligible student. Free e file extension The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Free e file extension Student qualifications. Free e file extension   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. Free e file extension As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. Free e file extension For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. Free e file extension Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. Free e file extension If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. Free e file extension For at least one academic period beginning (or treated as beginning) in 2013, the student both: Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and Carried at least one-half the normal full-time workload for his or her course of study. Free e file extension The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Free e file extension However, the standard may not be lower than any of those established by the U. Free e file extension S. Free e file extension Department of Education under the Higher Education Act of 1965. Free e file extension For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. Free e file extension See Prepaid expenses, later. Free e file extension As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. Free e file extension Example 1. Free e file extension Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. Free e file extension Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. Free e file extension Sharon claimed the American opportunity credit on her 2012 tax return. Free e file extension The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. Free e file extension Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. Free e file extension If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. Free e file extension Example 2. Free e file extension Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. Free e file extension His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. Free e file extension No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. Free e file extension The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. Free e file extension Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. Free e file extension If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. Free e file extension If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. Free e file extension Example 3. Free e file extension Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. Free e file extension Glenda pays her tuition for the 2014 Spring semester in December 2013. Free e file extension Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. Free e file extension If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. Free e file extension You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Free e file extension Note. Free e file extension Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. Free e file extension “Qualified education expenses” are defined later under Qualified Education Expenses . Free e file extension “Eligible students” are defined later under Who Is an Eligible Student . Free e file extension A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Free e file extension You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2013 , later, helpful in determining if you can claim an American opportunity credit on your tax return. Free e file extension This image is too large to be displayed in the current screen. Free e file extension Please click the link to view the image. Free e file extension Figure 2-1 Can you claim the American opportunity credit for 2012? Who Cannot Claim the Credit You cannot claim the American opportunity credit for 2013 if any of the following apply. Free e file extension Your filing status is married filing separately. Free e file extension You are listed as a dependent on another person's tax return (such as your parents'). Free e file extension See Who Can Claim a Dependent's Expenses , later. Free e file extension Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). Free e file extension MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Free e file extension 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. Free e file extension More information on nonresident aliens can be found in Publication 519, U. Free e file extension S. Free e file extension Tax Guide for Aliens. Free e file extension What Expenses Qualify The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Free e file extension Generally, the credit is allowed for adjusted qualified education expenses paid in 2013 for an academic period beginning in 2013 or beginning in the first three months of 2014. Free e file extension For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning January 2014, you can use that $1,500 in figuring your 2013 credit. Free e file extension Academic period. Free e file extension   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. Free e file extension 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. Free e file extension Paid with borrowed funds. Free e file extension   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Free e file extension Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. Free e file extension Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Free e file extension Student withdraws from class(es). Free e file extension   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. Free e file extension Qualified Education Expenses For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Free e file extension Eligible educational institution. Free e file extension   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. Free e file extension S. Free e file extension Department of Education. Free e file extension It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free e file extension The educational institution should be able to tell you if it is an eligible educational institution. Free e file extension   Certain educational institutions located outside the United States also participate in the U. Free e file extension S. Free e file extension Department of Education's Federal Student Aid (FSA) programs. Free e file extension Related expenses. Free e file extension   Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Free e file extension   However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. Free e file extension Prepaid expenses. Free e file extension   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. Free e file extension See Academic period, earlier. Free e file extension 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 an education credit for 2013 only (if you meet all the other requirements). Free e file extension    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Free e file extension   In the following examples, assume that each student is an eligible student at an eligible educational institution. Free e file extension Example 1. Free e file extension Jefferson is a sophomore in University V's degree program in dentistry. Free e file extension This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Free e file extension Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. Free e file extension Example 2. Free e file extension Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. Free e file extension The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Free e file extension William bought his books from a friend; Grace bought hers at College W's bookstore. Free e file extension Both are qualified education expenses for the American opportunity credit. Free e file extension Example 3. Free e file extension When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Free e file extension This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. Free e file extension No portion of the fee covers personal expenses. Free e file extension Although labeled as a student activity fee, the fee is required for Kelly's enrollment and attendance at College X and is a qualified expense. Free e file extension No Double Benefit Allowed You cannot do any of the following. Free e file extension Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an American opportunity credit based on those same expenses. Free e file extension Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. Free e file extension Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. Free e file extension Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. Free e file extension See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. Free e file extension Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. Free e file extension See Adjustments to Qualified Education Expenses, next. Free e file extension Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Free e file extension The result is the amount of adjusted qualified education expenses for each student. Free e file extension Tax-free educational assistance. Free e file extension   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Free e file extension See Academic period, earlier. Free e file extension   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Free e file extension 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). Free e file extension   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. Free e file extension 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. Free e file extension   Tax-free educational assistance includes: The tax-free parts of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). Free e file extension Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free e file extension Generally, any scholarship or fellowship is treated as tax free. Free e file extension However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. Free e file extension 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Free e file extension 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Free e file extension You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. Free e file extension For examples, see Coordination with Pell grants and other scholarships, later. Free e file extension Refunds. Free e file extension   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Free e file extension Some tax-free educational assistance received after 2013 may be treated as a refund. Free e file extension See Tax-free educational assistance, earlier. Free e file extension Refunds received in 2013. Free e file extension   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Free e file extension Refunds received after 2013 but before your income tax return is filed. Free e file extension   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. Free e file extension Refunds received after 2013 and after your income tax return is filed. Free e file extension   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. Free e file extension See Credit recapture, next. Free e file extension Credit recapture. Free e file extension    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Free e file extension You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. Free e file extension You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you claimed the refigured credit(s). Free e file extension Include that amount as an additional tax for the year the refund or tax-free assistance was received. Free e file extension Example. Free e file extension   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. Free e file extension You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. Free e file extension After you filed your return, you received a refund of $4,000. Free e file extension You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. Free e file extension The refigured credit is $2,250. Free e file extension The increase to your tax liability is also $250. Free e file extension Include the difference of $250 as additional tax on your 2014 tax return. Free e file extension See the instructions for your 2014 income tax return to determine where to include this tax. Free e file extension If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. Free e file extension Amounts that do not reduce qualified education expenses. Free e file extension   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. Free e file extension   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. Free e file extension 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 as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Free e file extension The use of the money is not restricted. Free e file extension Example 1. Free e file extension Joan paid $3,000 for tuition and $5,000 for room and board at University X. Free e file extension The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. Free e file extension To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. Free e file extension The terms of the scholarship state that it can be used to pay any of Joan's college expenses. Free e file extension University X applies the $2,000 scholarship against Joan's $8,000 total bill, and Joan pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. Free e file extension Joan does not report any portion of the scholarship as income on her tax return. Free e file extension In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. Free e file extension The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. Free e file extension Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). Free e file extension Example 2. Free e file extension The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. Free e file extension Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Free e file extension Joan is treated as having paid $3,000 in qualified education expenses. Free e file extension Coordination with Pell grants and other scholarships. Free e file extension   In some cases, you may be able to reduce your tax liability by including scholarships in income. Free e file extension If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. Free e file extension The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Free e file extension Example 1—No scholarship. Free e file extension Bill Pass, age 28 and unmarried, enrolled full-time in 2013 as a first-year student at a local college to earn a degree in law enforcement. Free e file extension This was his first year of postsecondary education. Free e file extension During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. Free e file extension He and the college meet all the requirements for the American opportunity credit. Free e file extension Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. Free e file extension Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. Free e file extension His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. Free e file extension He figures his American opportunity credit based on qualified education expenses of $4,000, which results in a credit of $2,500 and tax after credits of $99. Free e file extension Example 2—Scholarship excluded from income. Free e file extension The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. Free e file extension Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. Free e file extension If Bill excludes the scholarship from income, he will be deemed (for purposes of computing his education credit) to have used the scholarship to pay for tuition, required fees, and course materials. Free e file extension His adjusted qualified education expenses will be zero and he will not have an education credit. Free e file extension Therefore, Bill's tax after credits would be $2,599. Free e file extension Example 3—Scholarship partially included in income. Free e file extension The facts are the same as in Example 2—Scholarship excluded from income. Free e file extension If, unlike Example 2, Bill includes $4,000 of the scholarship in income, he will be deemed to have used that amount to pay for room and board. Free e file extension The remaining $1,600 of the $5,600 scholarship will reduce his qualified education expenses and his adjusted qualified education expenses will be $4,000. Free e file extension Bill's AGI will increase to $34,000, his taxable income will increase to $24,250, and his tax before credits will increase to $3,199. Free e file extension Based on his adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity tax credit of $2,500 and his tax after credits would be $699. Free e file extension 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. Free e file extension This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Free e file extension Sports, games, hobbies, and noncredit courses. Free e file extension   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. Free e file extension However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Free e file extension Comprehensive or bundled fees. Free e file extension   Some eligible educational institutions combine all of their fees for an academic period into one amount. Free e file extension 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 earlier, contact the institution. Free e file extension 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. Free e file extension See Figuring the Credit , later, for more information about Form 1098-T. Free e file extension Who Is an Eligible Student To claim the American opportunity credit, the student for whom you pay qualified education expenses must be an eligible student. Free e file extension This is a student who meets all of the following requirements. Free e file extension The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. Free e file extension This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. Free e file extension The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. Free e file extension For at least one academic period beginning in 2013, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Free e file extension The student has not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2013. Free e file extension These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. Free e file extension Completion of first 4 years. Free e file extension   A student has completed the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4 years of academic credit at that institution for coursework completed by the student before 2013. Free e file extension This student generally would not be an eligible student for purposes of the American opportunity credit. Free e file extension Exception. Free e file extension   Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education. Free e file extension Enrolled at least half-time. Free e file extension   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. Free e file extension   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Free e file extension However, the standard may not be lower than any of those established by the U. Free e file extension S. Free e file extension Department of Education under the Higher Education Act of 1965. Free e file extension Please click here for the text description of the image. Free e file extension Figure 2-2 Example 1. Free e file extension Mack graduated from high school in June 2012. Free e file extension In September, he enrolled in an undergraduate degree program at College U, and attended full-time for both the 2012 fall and 2013 spring semesters. Free e file extension For the 2013 fall semester, Mack was enrolled less than half-time. Free e file extension Because Mack was enrolled in an undergraduate degree program on at least a half-time basis for at least one academic period that began during 2012 and at least one academic period that began during 2013, he is an eligible student for tax years 2012 and 2013 (including the 2013 fall semester when he enrolled at College U on less than a half-time basis). Free e file extension Example 2. Free e file extension After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2013 spring semester. Free e file extension College V classified Shelly as a second-semester senior (fourth year) for the 2013 spring semester and as a first-semester graduate student (fifth year) for the 2013 fall semester. Free e file extension Because College V did not classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2013, Shelly is an eligible student for tax year 2013. Free e file extension Therefore, the qualified education expenses paid for the 2013 spring semester and the 2013 fall semester are taken into account in calculating the American opportunity credit for 2013. Free e file extension Example 3. Free e file extension During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. Free e file extension Larry was not enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. Free e file extension Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. Free e file extension Example 4. Free e file extension The facts are the same as in Example 3. Free e file extension During the 2013 spring semester, Larry again attended College X but not as part of a degree program. Free e file extension Larry graduated from high school in June 2013. Free e file extension For the 2013 fall semester, Larry enrolled as a full-time student in College X as part of a degree program, and College X awarded Larry credit for his prior coursework at College X. Free e file extension Because Larry was enrolled in a degree program at College X for the 2013 fall term on at least a half-time basis, Larry is an eligible student for all of tax year 2013. Free e file extension Therefore, the qualified education expenses paid for classes taken at College X during both the 2013 spring semester (during which Larry was not enrolled in a degree program) and the 2013 fall semester are taken into account in computing any American opportunity credit. Free e file extension Example 5. Free e file extension Dee graduated from high school in June 2012. Free e file extension In January 2013, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a travel agent. Free e file extension Dee completed the program in December 2013, and was awarded a certificate. Free e file extension In January 2014, she enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a computer programmer. Free e file extension Dee is an eligible student for both tax years 2013 and 2014 because she meets the degree requirement, the work load requirement, and the year of study requirement for those years. Free e file extension Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim an American opportunity credit for your dependent's expenses for that year. Free e file extension For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. Free e file extension You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Free e file extension IF you. Free e file extension . Free e file extension . Free e file extension THEN only. Free e file extension . Free e file extension . Free e file extension claim an exemption on  your tax return for a  dependent who is an  eligible student you can claim the American opportunity credit based on that dependent's expenses. Free e file extension The dependent cannot claim the credit. Free e file extension do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the American opportunity credit. Free e file extension You cannot claim the credit based on this dependent's expenses. Free e file extension Expenses paid by dependent. Free e file extension   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Free e file extension Include these expenses when figuring the amount of your American opportunity credit. Free e file extension    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. Free e file extension Expenses paid by you. Free e file extension   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the American opportunity credit. Free e file extension If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the American opportunity credit. Free e file extension Expenses paid by others. Free e file extension   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. Free e file extension In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Free e file extension If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Free e file extension Example. Free e file extension In 2013, Ms. Free e file extension Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Free e file extension For purposes of claiming an American opportunity credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. Free e file extension Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim an American opportunity credit. Free e file extension If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim an American opportunity credit. Free e file extension If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. Free e file extension Tuition reduction. Free e file extension    When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. Free e file extension If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. Free e file extension For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Free e file extension Figuring the Credit The amount of the American opportunity credit (per eligible student) is the sum of: 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and 25% of the next $2,000 of qualified education expenses you paid for that student. Free e file extension The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. Free e file extension You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. Free e file extension However, the credit may be reduced based on your MAGI. Free e file extension See Effect of the Amount of Your Income on the Amount of Your Credit , later. Free e file extension Example. Free e file extension Jack and Kay Ford are married and file a joint tax return. Free e file extension For 2013, they claim an exemption for their dependent daughter on their tax return. Free e file extension Their MAGI is $70,000. Free e file extension Their daughter is in her junior (third) year of studies at the local university. Free e file extension Jack and Kay paid qualified education expenses of $4,300 in 2013. Free e file extension Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. Free e file extension Jack and Kay can claim a $2,500 American opportunity credit in 2013. Free e file extension This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. Free e file extension Form 1098-T. Free e file extension   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. Free e file extension 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. Free e file extension An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Free e file extension However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. Free e file extension When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Free e file extension   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. Free e file extension    The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. Free e file extension Effect of the Amount of Your Income on the Amount of Your Credit The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). Free e file extension You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). Free e file extension Modified adjusted gross income (MAGI). Free e file extension   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Free e file extension MAGI when using Form 1040A. Free e file extension   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Free e file extension MAGI when using Form 1040. Free e file extension   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Free e file extension You can use Worksheet 2-1, next, to figure your MAGI. Free e file extension    Worksheet 2-1. Free e file extension MAGI for the American Opportunity Credit 1. Free e file extension Enter your adjusted gross income  (Form 1040, line 38)   1. Free e file extension   2. Free e file extension Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Free e file extension       3. Free e file extension Enter your foreign housing deduction (Form 2555, line 50)   3. Free e file extension       4. Free e file extension Enter the amount of income from Puerto Rico you are excluding   4. Free e file extension       5. Free e file extension Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Free e file extension       6. Free e file extension Add the amounts on lines 2, 3, 4, and 5   6. Free e file extension   7. Free e file extension Add the amounts on lines 1 and 6. Free e file extension  This is your modified adjusted  gross income. Free e file extension Enter here and  on Form 8863, line 3   7. Free e file extension   Phaseout. Free e file extension   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2-7, of Form 8863, Part I. Free e file extension The same method is shown in the following example. Free e file extension Example. Free e file extension You are filing a joint return and your MAGI is $165,000. Free e file extension In 2013, you paid $5,000 of qualified education expenses. Free e file extension You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses). Free e file extension Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. Free e file extension The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. Free e file extension The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). Free e file extension The result is the amount of your phased out (reduced) American opportunity credit ($1,875). Free e file extension      $2,500 × $180,000 − $165,000  $20,000 = $1,875   Refundable Part of Credit Forty percent of the American opportunity credit is refundable for most taxpayers. Free e file extension However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Free e file extension Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. Free e file extension You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. Free e file extension You were: Under age 18 at the end of 2013, or Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). Free e file extension At least one of your parents was alive at the end of 2013. Free e file extension You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. Free e file extension Earned income. Free e file extension   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Free e file extension Earned income includes the part of any scholarship or fellowship that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship. Free e file extension Earned income does not include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. Free e file extension   If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). Free e file extension However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. Free e file extension Support. Free e file extension   Your support includes food, shelter, clothing, medical and dental care, education, and the like. Free e file extension Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. Free e file extension If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. Free e file extension However, a scholarship received by you is not considered support if you are a full-time student. Free e file extension See Publication 501 for details. Free e file extension Full-time student. Free e file extension   You are a full-time student for 2013 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. Free e file extension Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Free e file extension Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. Free e file extension Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. Free e file extension A filled-in Form 8863 is shown at the end of this publication. Free e file extension Note. Free e file extension In Appendix A. Free e file extension at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. Free e file extension Prev  Up  Next   Home   More Online Publications