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H&r Block Tax Form

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H&r Block Tax Form

H&r block tax form 7. H&r block tax form   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. H&r block tax form For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. H&r block tax form There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. H&r block tax form However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. H&r block tax form See Contributions , later. H&r block tax form This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. H&r block tax form What is the tax benefit of the Coverdell ESA. H&r block tax form   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. H&r block tax form   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. H&r block tax form See Tax-Free Distributions , later. H&r block tax form    Table 7-1 summarizes the main features of the Coverdell ESA. H&r block tax form Table 7-1. H&r block tax form Coverdell ESA at a Glance Do not rely on this table alone. H&r block tax form It provides only general highlights. H&r block tax form See the text for definitions of terms in bold type and for more complete explanations. H&r block tax form Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. H&r block tax form Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. H&r block tax form Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. H&r block tax form Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). H&r block tax form Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. H&r block tax form What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. H&r block tax form When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. H&r block tax form To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. H&r block tax form The document creating and governing the account must be in writing and must satisfy the following requirements. H&r block tax form The trustee or custodian must be a bank or an entity approved by the IRS. H&r block tax form The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. H&r block tax form The contribution is in cash. H&r block tax form The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block tax form The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. H&r block tax form Money in the account cannot be invested in life insurance contracts. H&r block tax form Money in the account cannot be combined with other property except in a common trust fund or common investment fund. H&r block tax form The balance in the account generally must be distributed within 30 days after the earlier of the following events. H&r block tax form The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. H&r block tax form The beneficiary's death. H&r block tax form Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. H&r block tax form For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. H&r block tax form Designated beneficiary. H&r block tax form   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. H&r block tax form Contributions to a qualified tuition program (QTP). H&r block tax form   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. H&r block tax form In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. H&r block tax form See chapter 8, Qualified Tuition Program . H&r block tax form Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. H&r block tax form Eligible postsecondary school. H&r block tax form   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. H&r block tax form S. H&r block tax form Department of Education. H&r block tax form It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. H&r block tax form The educational institution should be able to tell you if it is an eligible educational institution. H&r block tax form   Certain educational institutions located outside the United States also participate in the U. H&r block tax form S. H&r block tax form Department of Education's Federal Student Aid (FSA) programs. H&r block tax form Eligible elementary or secondary school. H&r block tax form   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. H&r block tax form Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. H&r block tax form As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. H&r block tax form The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. H&r block tax form Tuition and fees. H&r block tax form Books, supplies, and equipment. H&r block tax form Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. H&r block tax form Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). H&r block tax form The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. H&r block tax form The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. H&r block tax form The actual amount charged if the student is residing in housing owned or operated by the school. H&r block tax form Half-time student. H&r block tax form   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. H&r block tax form Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. H&r block tax form As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. H&r block tax form There are special rules for computer-related expenses. H&r block tax form The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. H&r block tax form Tuition and fees. H&r block tax form Books, supplies, and equipment. H&r block tax form Academic tutoring. H&r block tax form Special needs services for a special needs beneficiary. H&r block tax form The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. H&r block tax form Room and board. H&r block tax form Uniforms. H&r block tax form Transportation. H&r block tax form Supplementary items and services (including extended day programs). H&r block tax form The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. H&r block tax form (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. H&r block tax form ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. H&r block tax form For individuals filing joint returns, that amount is $220,000. H&r block tax form Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. H&r block tax form There is no requirement that an organization's income be below a certain level. H&r block tax form Contributions must meet all of the following requirements. H&r block tax form They must be in cash. H&r block tax form They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block tax form They must be made by the due date of the contributor's tax return (not including extensions). H&r block tax form Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. H&r block tax form Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. H&r block tax form Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. H&r block tax form When contributions considered made. H&r block tax form   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. H&r block tax form They must be made by the due date (not including extensions) for filing your return for the preceding year. H&r block tax form   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. H&r block tax form Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. H&r block tax form Limit for each designated beneficiary. H&r block tax form   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. H&r block tax form This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. H&r block tax form Rollovers are discussed under Rollovers and Other Transfers , later. H&r block tax form Example. H&r block tax form When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. H&r block tax form In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. H&r block tax form For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. H&r block tax form Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. H&r block tax form These contributions could be put into any of Maria's Coverdell ESA accounts. H&r block tax form Limit for each contributor. H&r block tax form   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. H&r block tax form This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. H&r block tax form Example. H&r block tax form The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. H&r block tax form If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. H&r block tax form Reduced limit. H&r block tax form   Your contribution limit may be reduced. H&r block tax form If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). H&r block tax form If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. H&r block tax form Table 7-2. H&r block tax form Coverdell ESA Contributions at a Glance Do not rely on this table alone. H&r block tax form It provides only general highlights. H&r block tax form See the text for more complete explanations. H&r block tax form Question Answer Are contributions deductible? No. H&r block tax form What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. H&r block tax form What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. H&r block tax form What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. H&r block tax form Can contributions other than cash be made to a Coverdell ESA? No. H&r block tax form When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. H&r block tax form Modified adjusted gross income (MAGI). H&r block tax form   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. H&r block tax form MAGI when using Form 1040A. H&r block tax form   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. H&r block tax form MAGI when using Form 1040. H&r block tax form   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. H&r block tax form MAGI when using Form 1040NR. H&r block tax form   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. H&r block tax form MAGI when using Form 1040NR-EZ. H&r block tax form   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. H&r block tax form   If you have any of these adjustments, you can use Worksheet 7-1. H&r block tax form MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. H&r block tax form Worksheet 7-1. H&r block tax form MAGI for a Coverdell ESA 1. H&r block tax form Enter your adjusted gross income  (Form 1040, line 38)   1. H&r block tax form   2. H&r block tax form Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. H&r block tax form       3. H&r block tax form Enter your foreign housing deduction (Form 2555, line 50)   3. H&r block tax form         4. H&r block tax form Enter the amount of income from Puerto Rico you are excluding   4. H&r block tax form       5. H&r block tax form Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. H&r block tax form       6. H&r block tax form Add lines 2, 3, 4, and 5   6. H&r block tax form   7. H&r block tax form Add lines 1 and 6. H&r block tax form This is your  modified adjusted gross income   7. H&r block tax form   Figuring the limit. H&r block tax form    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. H&r block tax form The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). H&r block tax form The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). H&r block tax form Subtract the result from $2,000. H&r block tax form This is the amount you can contribute for each beneficiary. H&r block tax form You can use Worksheet 7-2. H&r block tax form Coverdell ESA Contribution Limit to figure the limit on contributions. H&r block tax form    Worksheet 7-2. H&r block tax form Coverdell ESA Contribution Limit 1. H&r block tax form Maximum contribution   1. H&r block tax form $2,000 2. H&r block tax form Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. H&r block tax form   3. H&r block tax form Enter $190,000 if married filing jointly; $95,000 for all other filers   3. H&r block tax form   4. H&r block tax form Subtract line 3 from line 2. H&r block tax form If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. H&r block tax form   5. H&r block tax form Enter $30,000 if married filing jointly; $15,000 for all other filers   5. H&r block tax form     Note. H&r block tax form If the amount on line 4 is greater than or equal to the amount on line 5, stop here. H&r block tax form You are not allowed to contribute to a Coverdell ESA for 2013. H&r block tax form       6. H&r block tax form Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. H&r block tax form . H&r block tax form 7. H&r block tax form Multiply line 1 by line 6   7. H&r block tax form   8. H&r block tax form Subtract line 7 from line 1   8. H&r block tax form   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. H&r block tax form Example. H&r block tax form Paul, who is single, had a MAGI of $96,500 for 2013. H&r block tax form Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. H&r block tax form Worksheet 7-2. H&r block tax form Coverdell ESA Contribution Limit—Illustrated 1. H&r block tax form Maximum contribution   1. H&r block tax form $2,000 2. H&r block tax form Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. H&r block tax form 96,500 3. H&r block tax form Enter $190,000 if married filing jointly; $95,000 for all other filers   3. H&r block tax form 95,000 4. H&r block tax form Subtract line 3 from line 2. H&r block tax form If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. H&r block tax form 1,500 5. H&r block tax form Enter $30,000 if married filing jointly; $15,000 for all other filers   5. H&r block tax form 15,000   Note. H&r block tax form If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. H&r block tax form You are not allowed to  contribute to a Coverdell ESA for 2013. H&r block tax form       6. H&r block tax form Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. H&r block tax form . H&r block tax form 100 7. H&r block tax form Multiply line 1 by line 6   7. H&r block tax form 200 8. H&r block tax form Subtract line 7 from line 1   8. H&r block tax form 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. H&r block tax form Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. H&r block tax form Excess contributions are the total of the following two amounts. H&r block tax form Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). H&r block tax form Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. H&r block tax form Exceptions. H&r block tax form   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). H&r block tax form   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. H&r block tax form You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. H&r block tax form Box 2 of that form will show the amount of earnings on your excess contributions. H&r block tax form Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. H&r block tax form See Instructions for Recipient on the back of copy B of your Form 1099-Q. H&r block tax form Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. H&r block tax form For more information, see Taxable Distributions , later. H&r block tax form   The excise tax does not apply to any rollover contribution. H&r block tax form Note. H&r block tax form Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. H&r block tax form Example. H&r block tax form In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. H&r block tax form Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. H&r block tax form In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. H&r block tax form Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. H&r block tax form (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. H&r block tax form Figuring and reporting the additional tax. H&r block tax form   You figure this excise tax in Part V of Form 5329. H&r block tax form Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). H&r block tax form Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. H&r block tax form The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. H&r block tax form Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. H&r block tax form This age limitation does not apply if the new beneficiary is a special needs beneficiary. H&r block tax form An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. H&r block tax form Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. H&r block tax form These are not taxable distributions. H&r block tax form Members of the beneficiary's family. H&r block tax form   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. H&r block tax form Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. H&r block tax form Brother, sister, stepbrother, or stepsister. H&r block tax form Father or mother or ancestor of either. H&r block tax form Stepfather or stepmother. H&r block tax form Son or daughter of a brother or sister. H&r block tax form Brother or sister of father or mother. H&r block tax form Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. H&r block tax form The spouse of any individual listed above. H&r block tax form First cousin. H&r block tax form Example. H&r block tax form When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. H&r block tax form He wanted to give this money to his younger sister, who was still in high school. H&r block tax form In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. H&r block tax form Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. H&r block tax form This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). H&r block tax form Military death gratuity. H&r block tax form   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). H&r block tax form Such payments are made to an eligible survivor upon the death of a member of the armed forces. H&r block tax form The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. H&r block tax form   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . H&r block tax form The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. H&r block tax form   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. H&r block tax form See Distributions , later. H&r block tax form The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. H&r block tax form Changing the Designated Beneficiary The designated beneficiary can be changed. H&r block tax form See Members of the beneficiary's family , earlier. H&r block tax form There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. H&r block tax form Example. H&r block tax form Assume the same situation for Aaron as in the last example (see Rollovers , earlier). H&r block tax form Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. H&r block tax form Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. H&r block tax form After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. H&r block tax form Example. H&r block tax form In their divorce settlement, Peg received her ex-husband's Coverdell ESA. H&r block tax form In this process, the account was transferred into her name. H&r block tax form Peg now treats the funds in this Coverdell ESA as if she were the original owner. H&r block tax form Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. H&r block tax form Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. H&r block tax form See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. H&r block tax form Table 7-3. H&r block tax form Coverdell ESA Distributions at a Glance Do not rely on this table alone. H&r block tax form It provides only general highlights. H&r block tax form See the text for definitions of terms in bold type and for more complete explanations. H&r block tax form Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. H&r block tax form After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. H&r block tax form Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. H&r block tax form Also, certain transfers to members of the beneficiary's family are permitted. H&r block tax form Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. H&r block tax form Adjusted qualified education expenses. H&r block tax form   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. H&r block tax form Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits 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), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. H&r block tax form The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. H&r block tax form Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. H&r block tax form Do not report tax-free distributions (including qualifying rollovers) on your tax return. H&r block tax form Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. H&r block tax form Excess distribution. H&r block tax form   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. H&r block tax form Earnings and basis. H&r block tax form   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. H&r block tax form The amount of your gross distribution will be shown in box 1. H&r block tax form For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. H&r block tax form This will be shown in the blank box below boxes 5 and 6. H&r block tax form   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. H&r block tax form Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. H&r block tax form Figure the taxable portion for 2013 as shown in the following steps. H&r block tax form Multiply the total amount distributed by a fraction. H&r block tax form The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. H&r block tax form Subtract the amount figured in (1) from the total amount distributed during 2013. H&r block tax form The result is the amount of earnings included in the distribution(s). H&r block tax form Multiply the amount of earnings figured in (2) by a fraction. H&r block tax form The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. H&r block tax form Subtract the amount figured in (3) from the amount figured in (2). H&r block tax form The result is the amount the beneficiary must include in income. H&r block tax form The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. H&r block tax form Example. H&r block tax form You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. H&r block tax form There were no contributions in 2013. H&r block tax form This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. H&r block tax form The value (balance) of your account on December 31, 2013, was $950. H&r block tax form You had $700 of adjusted qualified education expenses (AQEE) for the year. H&r block tax form Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. H&r block tax form   1. H&r block tax form $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. H&r block tax form $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. H&r block tax form $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. H&r block tax form $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. H&r block tax form Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. H&r block tax form Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). H&r block tax form Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. H&r block tax form This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. H&r block tax form Example. H&r block tax form Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. H&r block tax form He paid his college expenses from the following sources. H&r block tax form     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. H&r block tax form Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. H&r block tax form Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. H&r block tax form     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. H&r block tax form The balance in Derek's account was $1,800 on December 31, 2013. H&r block tax form Prior to 2013, $2,100 had been contributed to this account. H&r block tax form Contributions for 2013 totaled $400. H&r block tax form Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. H&r block tax form   1. H&r block tax form $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. H&r block tax form $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. H&r block tax form $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. H&r block tax form $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). H&r block tax form This is the amount of distributed earnings not used for adjusted qualified higher education expenses. H&r block tax form Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. H&r block tax form The following two examples illustrate possible allocations. H&r block tax form Example 1. H&r block tax form In 2013, Beatrice graduated from high school and began her first semester of college. H&r block tax form That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. H&r block tax form To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. H&r block tax form No one claimed Beatrice as a dependent, nor was she eligible for an education credit. H&r block tax form She did not receive any tax-free educational assistance in 2013. H&r block tax form Beatrice must allocate her total qualified education expenses between the two distributions. H&r block tax form Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. H&r block tax form The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. H&r block tax form Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). H&r block tax form She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. H&r block tax form Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. H&r block tax form (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. H&r block tax form ) Example 2. H&r block tax form Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. H&r block tax form In this case, she allocates her qualified education expenses as follows. H&r block tax form Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. H&r block tax form Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). H&r block tax form   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). H&r block tax form See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. H&r block tax form   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). H&r block tax form The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. H&r block tax form However, you do not have to allocate your expenses in the same way. H&r block tax form You can use any reasonable method. H&r block tax form Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. H&r block tax form You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. H&r block tax form Your basis is the total amount of contributions to that Coverdell ESA. H&r block tax form You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. H&r block tax form If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. H&r block tax form ) from all such accounts in order to determine your taxable earnings for the year. H&r block tax form By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. H&r block tax form For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. H&r block tax form Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. H&r block tax form Exceptions. H&r block tax form   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. H&r block tax form Made because the designated beneficiary is disabled. H&r block tax form A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. H&r block tax form A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. H&r block tax form Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. H&r block tax form Made on account of the attendance of the designated beneficiary at a U. H&r block tax form S. H&r block tax form military academy (such as the USMA at West Point). H&r block tax form This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. H&r block tax form S. H&r block tax form Code) attributable to such attendance. H&r block tax form Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier). H&r block tax form Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). H&r block tax form The distributed earnings must be included in gross income for the year in which the excess contribution was made. H&r block tax form Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. H&r block tax form Figuring the additional tax. H&r block tax form    Use Part II of Form 5329, to figure any additional tax. H&r block tax form Report the amount on Form 1040, line 58, or Form 1040NR, line 56. H&r block tax form When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. H&r block tax form The designated beneficiary reaches age 30. H&r block tax form In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. H&r block tax form However, this rule does not apply if the beneficiary is a special needs beneficiary. H&r block tax form The designated beneficiary dies before reaching age 30. H&r block tax form In this case, the remaining assets must generally be distributed within 30 days after the date of death. H&r block tax form Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. H&r block tax form (“Family member” was defined earlier under Rollovers . H&r block tax form ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. H&r block tax form This age limitation does not apply if the new beneficiary is a special needs beneficiary. H&r block tax form There are no tax consequences as a result of the transfer. H&r block tax form How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. H&r block tax form You determine these earnings as shown in the following two steps. H&r block tax form Multiply the amount distributed by a fraction. H&r block tax form The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. H&r block tax form Subtract the amount figured in (1) from the total amount distributed during 2013. H&r block tax form The result is the amount of earnings included in the distribution. H&r block tax form For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. H&r block tax form The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. H&r block tax form Worksheet 7-3 Instructions. H&r block tax form Coverdell ESA—Taxable Distributions and Basis Line G. H&r block tax form Enter the total distributions received from all Coverdell ESAs during 2013. H&r block tax form Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). H&r block tax form Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. H&r block tax form Line 2. H&r block tax form Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. H&r block tax form   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. H&r block tax form For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. H&r block tax form For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. H&r block tax form You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. H&r block tax form Line 4. H&r block tax form Enter the total distributions received from this Coverdell ESA in 2013. H&r block tax form Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). H&r block tax form   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. H&r block tax form Line 7. H&r block tax form Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. H&r block tax form A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. H&r block tax form   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. H&r block tax form An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. H&r block tax form Worksheet 7-3. H&r block tax form Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. H&r block tax form • • • Complete Part I, lines A through H, on only one worksheet. H&r block tax form  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. H&r block tax form  Complete Part III, the Summary (line 16), on only one worksheet. H&r block tax form Part I. H&r block tax form Qualified Education Expenses (Complete for total expenses)       A. H&r block tax form Enter your total qualified education expenses for 2013   A. H&r block tax form   B. H&r block tax form Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. H&r block tax form         C. H&r block tax form Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). H&r block tax form Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. H&r block tax form         D. H&r block tax form Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. H&r block tax form         E. H&r block tax form Add lines B, C, and D   D. H&r block tax form   F. H&r block tax form Subtract line E from line A. H&r block tax form This is your adjusted qualified education expense for 2013   E. H&r block tax form   G. H&r block tax form Enter your total distributions from all Coverdell ESAs during 2013. H&r block tax form Do not include rollovers  or the return of excess contributions (see instructions)   F. H&r block tax form   H. H&r block tax form Divide line F by line G. H&r block tax form Enter the result as a decimal (rounded to at least 3 places). H&r block tax form If the  result is 1. H&r block tax form 000 or more, enter 1. H&r block tax form 000   G. H&r block tax form . H&r block tax form Part II. H&r block tax form Taxable Distributions and Basis (Complete separately for each account) 1. H&r block tax form Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. H&r block tax form Do not include rollovers or the return of excess contributions   1. H&r block tax form   2. H&r block tax form Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. H&r block tax form   3. H&r block tax form Add lines 1 and 2   3. H&r block tax form   4. H&r block tax form Enter the total distributions from this Coverdell ESA during 2013. H&r block tax form Do not include rollovers  or the return of excess contributions (see instructions)   4. H&r block tax form   5. H&r block tax form Multiply line 4 by line H. H&r block tax form This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. H&r block tax form         6. H&r block tax form Subtract line 5 from line 4   6. H&r block tax form         7. H&r block tax form Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. H&r block tax form         8. H&r block tax form Add lines 4 and 7   8. H&r block tax form         9. H&r block tax form Divide line 3 by line 8. H&r block tax form Enter the result as a decimal (rounded to  at least 3 places). H&r block tax form If the result is 1. H&r block tax form 000 or more, enter 1. H&r block tax form 000   9. H&r block tax form . H&r block tax form       10. H&r block tax form Multiply line 4 by line 9. H&r block tax form This is the amount of basis allocated to your  distributions, and is tax free   10. H&r block tax form     Note. H&r block tax form If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. H&r block tax form       11. H&r block tax form Subtract line 10 from line 4   11. H&r block tax form   12. H&r block tax form Divide line 5 by line 4. H&r block tax form Enter the result as a decimal (rounded to  at least 3 places). H&r block tax form If the result is 1. H&r block tax form 000 or more, enter 1. H&r block tax form 000   12. H&r block tax form . H&r block tax form       13. H&r block tax form Multiply line 11 by line 12. H&r block tax form This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. H&r block tax form   14. H&r block tax form Subtract line 13 from line 11. H&r block tax form This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. H&r block tax form   15. H&r block tax form Subtract line 10 from line 3. H&r block tax form This is your basis in this Coverdell ESA as of December 31, 2013   15. H&r block tax form   Part III. H&r block tax form Summary (Complete only once)       16. H&r block tax form Taxable amount. H&r block tax form Add together all amounts on line 14 for all your Coverdell ESAs. H&r block tax form Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. H&r block tax form   Prev  Up  Next   Home   More Online Publications
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The H&r Block Tax Form

H&r block tax form Publication 225 - Introductory Material Table of Contents IntroductionOrdering forms and publications. H&r block tax form Tax questions. H&r block tax form Future Developments What's New for 2013 What's New for 2014 Reminders Introduction You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant. H&r block tax form A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. H&r block tax form It also includes plantations, ranches, ranges, and orchards. H&r block tax form This publication explains how the federal tax laws apply to farming. H&r block tax form Use this publication as a guide to figure your taxes and complete your farm tax return. H&r block tax form If you need more information on a subject, get the specific IRS tax publication covering that subject. H&r block tax form We refer to many of these free publications throughout this publication. H&r block tax form See chapter 16 for information on ordering these publications. H&r block tax form The explanations and examples in this publication reflect the Internal Revenue Service's interpretation of tax laws enacted by Congress, Treasury regulations, and court decisions. H&r block tax form However, the information given does not cover every situation and is not intended to replace the law or change its meaning. H&r block tax form This publication covers subjects on which a court may have made a decision more favorable to taxpayers than the interpretation of the Service. H&r block tax form Until these differing interpretations are resolved by higher court decisions, or in some other way, this publication will continue to present the interpretation of the Service. H&r block tax form The IRS Mission. H&r block tax form   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. H&r block tax form Comments and suggestions. H&r block tax form   We welcome your comments about this publication and your suggestions for future editions. H&r block tax form   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. H&r block tax form NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H&r block tax form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block tax form   You can email us at taxforms@irs. H&r block tax form gov. H&r block tax form Please put “Publications Comment” on the subject line. H&r block tax form You can also send us comments from www. H&r block tax form irs. H&r block tax form gov/formspubs/, select “Comment on Tax Forms and Publications” under “More Information. H&r block tax form ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H&r block tax form Ordering forms and publications. H&r block tax form   Visit www. H&r block tax form irs. H&r block tax form gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H&r block tax form Internal Revenue Service 1201 N. H&r block tax form Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block tax form   If you have a tax question, check the information available on IRS. H&r block tax form gov or call 1-800-829-1040. H&r block tax form We cannot answer tax questions sent to either of the above addresses. H&r block tax form Comments on IRS enforcement actions. H&r block tax form   The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were established to receive comments from small business about federal agency enforcement actions. H&r block tax form The Ombudsman will annually evaluate the enforcement activities of each agency and rate its responsiveness to small business. H&r block tax form If you wish to comment on the enforcement actions of the IRS, you can: Call 1-888-734-3247, Fax your comments to 202-481-5719, Write to Office of the National Ombudsman U. H&r block tax form S. H&r block tax form Small Business Administration 409 3rd Street, S. H&r block tax form W. H&r block tax form  Washington, DC 20416 Send an email to ombudsman@sba. H&r block tax form gov, or Download the appraisal form at  www. H&r block tax form sba. H&r block tax form gov/ombudsman. H&r block tax form Treasury Inspector General for Tax Administration. H&r block tax form   If you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call 1-800-366-4484 (1-800-877-8339 for TTY/TDD users). H&r block tax form You can remain anonymous. H&r block tax form Farm tax classes. H&r block tax form   Many state Cooperative Extension Services conduct farm tax workshops in conjunction with the IRS. H&r block tax form Contact your county extension office for more information. H&r block tax form Rural tax education website. H&r block tax form   The Rural Tax Education website is a source for information concerning agriculturally related income and deductions and self-employment tax. H&r block tax form The website is available for farmers and ranchers, other agricultural producers, Extension educators, and any one interested in learning about the tax side of the agricultural community. H&r block tax form Members of the National Farm Income Tax Extension Committee are contributors for the website and the website is hosted by Utah State University Cooperative Extension. H&r block tax form You can visit the website at www. H&r block tax form ruraltax. H&r block tax form org. H&r block tax form Future Developments The IRS has created a page on IRS. H&r block tax form gov for information about Publication 225, at  www. H&r block tax form irs. H&r block tax form gov/pub225. H&r block tax form Information about recent developments affecting Publication 225 will be posted on that page. H&r block tax form What's New for 2013 The following items highlight a number of administrative and tax law changes for 2013. H&r block tax form They are discussed in more detail throughout the publication. H&r block tax form Standard mileage rate. H&r block tax form  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. H&r block tax form 5 cents. H&r block tax form See chapter 4. H&r block tax form Simplified method for business use of home deduction. H&r block tax form  The IRS now provides a simplified method to determine your expenses for business use of your home. H&r block tax form For more information, see Schedule C (Form 1040), Part II, and its instructions. H&r block tax form See chapter 4. H&r block tax form Increased section 179 expense deduction dollar limits. H&r block tax form  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. H&r block tax form This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. H&r block tax form See chapter 7. H&r block tax form Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. H&r block tax form  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. H&r block tax form See chapter 7. H&r block tax form Expiration of the 3-year recovery period for certain race horses. H&r block tax form . H&r block tax form  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. H&r block tax form See chapter 7. H&r block tax form Tax rates. H&r block tax form  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. H&r block tax form 4% to 12. H&r block tax form 4%. H&r block tax form As a result, the self-employment tax is increased from 13. H&r block tax form 3% to 15. H&r block tax form 3%. H&r block tax form See chapter 12. H&r block tax form Maximum net earnings. H&r block tax form  The maximum net self-employment earnings subject to the social security part (12. H&r block tax form 4%) of the self-employment tax increased to $113,700 for 2013. H&r block tax form There is no maximum limit on earnings subject to the Medicare part (2. H&r block tax form 9%). H&r block tax form See chapter 12. H&r block tax form Net investment income tax. H&r block tax form  For tax years beginning in 2013, individuals, estates, and trusts may be subject to the net investment income tax (NIIT). H&r block tax form If you are a trader in financial instruments and commodities and required to file Schedule C (Form 1040), your investment income (for purposes of the NIIT) may be reduced by your interest and other investment expenses to the extent those expenses are not used to reduce your self-employment income. H&r block tax form For information about NIIT and the special rule for traders in financial instruments and commodities, see the Instructions for Form 8960. H&r block tax form Social Security and Medicare Tax for 2013. H&r block tax form  The employee tax rate for social security is 6. H&r block tax form 2%. H&r block tax form The employer tax rate for social security remains unchanged at 6. H&r block tax form 2%. H&r block tax form The social security wage base limit is $113,700. H&r block tax form The Medicare tax rate is 1. H&r block tax form 45% each for the employee and employer, unchanged from 2012. H&r block tax form There is no wage base limit for Medicare tax. H&r block tax form See chapter 13. H&r block tax form Additional Medicare Tax. H&r block tax form  For tax years beginning in 2013, a 0. H&r block tax form 9% Additional Medicare Tax applies to your Medicare wages, Railroad Tax Act (RRTA) compensation, and self-employment income above a threshold amount. H&r block tax form Use Form 8959, Additional Medicare Tax, to figure this tax. H&r block tax form For more information, see the Instructions for Form 8959 and the Instructions for Schedule SE (Form 1040). H&r block tax form In addition to withholding Medicare tax at 1. H&r block tax form 45%, you must withhold a 0. H&r block tax form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. H&r block tax form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. H&r block tax form Additional Medicare Tax is only imposed on the employee. H&r block tax form There is no employer share of Additional Medicare Tax. H&r block tax form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. H&r block tax form For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. H&r block tax form For more information on Additional Medicare Tax, visit IRS. H&r block tax form gov and enter “Additional Medicare Tax” in the search box. H&r block tax form See chapter 13. H&r block tax form Leave-Based donation programs to aid victims of Hurricane Sandy. H&r block tax form  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. H&r block tax form The donated leave will not be included in the income or wages of the employee. H&r block tax form The employer may deduct the cash payments as business expenses or charitable contributions. H&r block tax form See chapter 13. H&r block tax form Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. H&r block tax form  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. H&r block tax form Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. H&r block tax form For more information, visit IRS. H&r block tax form gov and enter “work opportunity credit” in the search box. H&r block tax form See chapter 13. H&r block tax form Estimated tax. H&r block tax form  For tax years beginning in 2013, the Net Investment Income Tax (NIIT) may need to be included when calculating your estimated tax. H&r block tax form Also, when figuring your estimated tax, you may need to include the 0. H&r block tax form 9% Additional Medicare Tax applicable to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above the threshold amount based on your filing status. H&r block tax form For more information, see Publication 505. H&r block tax form What's New for 2014 Maximum net earnings. H&r block tax form  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. H&r block tax form See chapter 12. H&r block tax form Social security and Medicare tax for 2014. H&r block tax form  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). H&r block tax form The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). H&r block tax form There is no limit on the amount of wages subject to Medicare tax. H&r block tax form See chapter 13. H&r block tax form Reminders The following reminders and other items may help you file your tax return. H&r block tax form   IRS e-file (Electronic Filing) You can file your tax returns electronically using an IRS e-file option. H&r block tax form The benefits of IRS e-file include faster refunds, increased accuracy, and acknowledgment of IRS receipt of your return. H&r block tax form You can use one of the following IRS e-file options. H&r block tax form Use an authorized IRS e-file provider. H&r block tax form Use a personal computer. H&r block tax form Visit a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site. H&r block tax form For details on these fast filing methods, see your income tax package. H&r block tax form Principal agricultural activity codes. H&r block tax form  You must enter on line B of Schedule F (Form 1040) a code that identifies your principal agricultural activity. H&r block tax form It is important to use the correct code because this information will identify market segments of the public for IRS Taxpayer Education programs. H&r block tax form The U. H&r block tax form S. H&r block tax form Census Bureau also uses this information for its economic census. H&r block tax form See the list of Principal Agricultural Activity Codes on page 2 of Schedule F (Form 1040). H&r block tax form Publication on employer identification numbers (EIN). H&r block tax form  Publication 1635, Understanding Your Employer Identification Number, provides general information on employer identification numbers. H&r block tax form Topics include how to apply for an EIN and how to complete Form SS-4. H&r block tax form Change of address. H&r block tax form  If you change your home address, you should use Form 8822, Change of Addres, to notify the IRS. H&r block tax form If you change your business address, you should use Form 8822-B, Change of Address or Responsible Party — Business, to notify the IRS. H&r block tax form Be sure to include your suite, room, or other unit number. H&r block tax form Reportable transactions. H&r block tax form  You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. H&r block tax form You may have to pay a penalty if you are required to file Form 8886 but do not do so. H&r block tax form Reportable transactions include (1) transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, (2) transactions offered to you under conditions of confidentiality and for which you paid an advisor a minimum fee, (3) transactions for which you have or a related party has a right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained, (4) transactions that result in losses of at least $2 million in any single year or $4 million in any combination of years, and (5) transactions with asset holding periods of 45 days or less and that result in a tax credit of more than $250,000. H&r block tax form For more information, see the Instructions for Form 8886. H&r block tax form Form W-4 for 2014. H&r block tax form  You should make new Forms W-4 available to your employees and encourage them to check their income tax withholding for 2014. H&r block tax form Those employees who owed a large amount of tax or received a large refund for 2013 may need to submit a new Form W-4. H&r block tax form See Publication 919, How Do I Adjust My Tax Withholding. H&r block tax form Form 1099-MISC. H&r block tax form  Generally, file Form 1099-MISC if you pay at least $600 in rents, services, and other miscellaneous payments in your farming business to an individual (for example, an accountant, an attorney, or a veterinarian) who is not your employee. H&r block tax form Limited Liability Company (LLC). H&r block tax form  For purposes of this publication, a limited liability company (LLC) is a business entity organized in the United States under state law. H&r block tax form Unlike a partnership, all of the members of an LLC have limited personal liability for its debts. H&r block tax form An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner by applying the rules in Regulations section 301. H&r block tax form 7701-3. H&r block tax form See Publication 3402 for more details. H&r block tax form Photographs of missing children. H&r block tax form  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block tax form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H&r block tax form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H&r block tax form Prev  Up  Next   Home   More Online Publications