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State Tax Rates

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State Tax Rates

State tax rates 6. State tax rates   Ingresos de Propinas Table of Contents Introduction Useful Items - You may want to see: Cómo Mantener un Registro Diario de PropinasRegistro electrónico de propinas. State tax rates Cómo Declarar las Propinas a su EmpleadorInforme electrónico de propinas. State tax rates Declaración final. State tax rates Cómo se Declaran las Propinas en la Declaración de Impuestos Asignación de Propinas Introduction Este capítulo es para empleados que reciben propinas. State tax rates Todas las propinas que usted reciba son ingresos y están sujetas al impuesto federal sobre los ingresos. State tax rates Tiene que incluir en el ingreso bruto todas las propinas que reciba directamente, propinas recibidas por medio de cargos a tarjetas de crédito o débito que le son entregadas por su empleador y su participación de todas las propinas recibidas de un fondo común u otro acuerdo de distribución de propinas. State tax rates El valor de las propinas que no son pagadas en efectivo, tales como boletos, pases u otros artículos de valor también son ingresos y están sujetos al impuesto. State tax rates La declaración correcta de los ingresos de propinas no es difícil. State tax rates Usted tiene que completar tres pasos: Mantener un registro diario de propinas. State tax rates Declarar sus propinas a su empleador. State tax rates Declarar todas sus propinas en su declaración de impuestos. State tax rates  Este capítulo le explicará estos tres pasos y le ayudará a determinar cómo completar su declaración de impuestos si no ha realizado los dos primeros pasos. State tax rates Este capítulo también le mostrará cómo tratar las propinas asignadas. State tax rates Para información sobre acuerdos y programas especiales relacionados con las propinas, vea la Publicación 531, en inglés. State tax rates Useful Items - You may want to see: Publicación 531 Reporting Tip Income (Cómo declarar los ingresos de propinas), en inglés 1244-PR Registro Diario de Propinas Recibidas por el(la) Empleado(a) e Informe al Patrono, en español 1244 Employee's Daily Record of Tips and Report to Employer (Registro Diario de Propinas Recibidas por el(la) Empleado(a) e Informe al Empleador), en inglés Formularios (e Instrucciones) 4137 Social Security and Medicare Tax on Unreported Tip Income (Impuestos del Seguro Social y Medicare sobre el ingreso de propinas no declaradas), en inglés 4070-PR Informe al Patrono de Propinas Recibidas por el(la) Empleado(a), disponible en español 4070 Employee's Report of Tips to Employer (Informe al Empleador de Propinas Recibidas por el(la) Empleado(a)), en inglés Cómo Mantener un Registro Diario de Propinas ¿Por qué mantener un registro diario de propinas?   Usted tiene que mantener un registro diario de propinas para que pueda: Declarar sus propinas correctamente a su empleador, Declarar sus propinas correctamente en su declaración de impuestos y Comprobar sus ingresos de propinas si se cuestiona su declaración. State tax rates Cómo mantener un registro diario de propinas. State tax rates   Hay dos maneras de mantener un registro diario de propinas. State tax rates Puede optar por: Anotar la información sobre sus propinas en un diario de propinas o Mantener copias de documentos que comprueben sus propinas, tales como cuentas de restaurantes y recibos de cargos hechos a tarjetas de crédito o de débito. State tax rates Usted debe mantener su registro diario de propinas junto con su documentación tributaria u otra documentación personal. State tax rates Tiene que guardar su documentación por el tiempo en que sea importante para la aplicación de la ley tributaria federal. State tax rates Para información sobre cuánto tiempo debe guardar esta documentación, vea el tema titulado Cuánto Tiempo Debe Mantener Los Documentos , en el capítulo 1. State tax rates    Si mantiene un registro de propinas, puede utilizar el Formulario 4070A-PR, Registro Diario de Propinas del(la) Empleado(a) (o el Formulario 4070-A, en inglés). State tax rates Para obtener el Formulario 4070A-PR (o el Formulario 4070-A), pídale al IRS o a su empleador la Publicación 1244-PR (o la Publicación 1244, en inglés). State tax rates Asimismo, la Publicación 1244-PR está disponible en el sitio web www. State tax rates irs. State tax rates gov/pub/irs-pdf/p1244pr. State tax rates pdf. State tax rates La Publicación 1244-PR (o la Publicación 1244, en inglés) contiene suficientes copias del Formulario 4070A-PR (o del Formulario 4070-A, en inglés) para un año. State tax rates Cada día, anote la información solicitada en el formulario. State tax rates   Además de la información solicitada en el Formulario 4070A-PR, también es necesario que mantenga un registro u otra documentación de la fecha y el valor de toda propina que reciba que no sea en efectivo, tales como boletos, pases u otros artículos de valor. State tax rates Aunque no declara estas propinas a su empleador, tiene que declararlas en su declaración de impuestos. State tax rates   Si no utiliza el Formulario 4070A-PR (o el Formulario 4070-A, en inglés), comience su registro escribiendo su nombre, el nombre de su empleador y el nombre del negocio o establecimiento donde trabaja si es distinto al nombre de su empleador. State tax rates Luego, cada día que trabaje, anote la fecha y la siguiente información: Propinas en efectivo que obtiene directamente de los clientes o de otros empleados. State tax rates Propinas de los clientes que pagan con tarjeta de crédito y de débito que su empleador le paga. State tax rates El valor de toda propina que haya recibido que no sea pagada en efectivo, tales como boletos, pases y otros artículos de valor. State tax rates La cantidad de propinas que usted le pagó a otros empleados a través de un fondo común u otro acuerdo de distribución de propinas y los nombres de los empleados a los cuales les pagó las propinas. State tax rates Registro electrónico de propinas. State tax rates   Usted puede utilizar un sistema electrónico provisto por su empleador para mantener un registro de propinas diarias. State tax rates En tal caso, tiene que recibir y guardar una copia en papel de este registro. State tax rates Cargos por servicios. State tax rates   No anote en su registro de propinas la cantidad de ningún cargo por servicios que su empleador añada a la cuenta de un cliente y que luego le pague a usted y que el empleador trate como salario de usted. State tax rates Los cargos de este tipo son parte de su salario, no son propinas. State tax rates Vea los ejemplos que se presentan a continuación. State tax rates Ejemplo 1. State tax rates El restaurante Buena Comida añade un cargo del 18% a la cuenta de grupos de 6 o más clientes. State tax rates Juanita forma parte de un grupo de 8 personas. State tax rates Además del costo de la comida y bebidas que se sirvieron a todos en el grupo de Juanita, la cuenta incluye un monto igual al 18% del costo de las mismas, el cual aparece en la línea para anotar propinas. State tax rates Dicho monto se incluye en el total de la cuenta. State tax rates Debido a que Juanita no tenía un derecho ilimitado de determinar el monto en la línea para anotar propinas, el cargo del 18% se considera un cargo por servicios. State tax rates No anote el cargo del 18% en su registro de propinas. State tax rates Los cargos por servicios que se le paguen son considerados salarios y no propinas. State tax rates Ejemplo 2. State tax rates El restaurante Buena Comida también incluye ejemplos de cálculos para las cantidades de propinas en la parte inferior de la cuenta para la comida y las bebidas servidas a los clientes. State tax rates En la parte inferior de la cuenta de David, debajo de la línea para la firma, se incluye una línea en blanco para anotar propinas, además de ejemplos de propinas calculadas en base al 15%, 18% y 20% de los costos de la comida y bebidas que le sirvieron. State tax rates Debido a que David tenía libertad para anotar cualquier cantidad en la línea para anotar propinas, o dejarla en blanco, cualquier cantidad que David anote se considera propina. State tax rates Cerciórese de incluir esta cantidad en su registro de propinas. State tax rates Cómo Declarar las Propinas a su Empleador ¿Por qué tiene que declarar sus propinas a su empleador?   Tiene que declarar sus propinas a su empleador para que: Éste pueda retenerle impuesto federal sobre el ingreso, impuestos del Seguro Social, impuestos de Medicare, Impuesto Adicional del Medicare o impuestos de la jubilación ferroviaria, Éste pueda declarar la cantidad correcta de sus ganancias a la Administración del Seguro Social o a la Junta de la Jubilación Ferroviaria (lo cual afecta sus beneficios cuando se jubile o si queda incapacitado, o los beneficios de su familia cuando usted fallezca) y Usted pueda evitar la Multa por no declarar las propinas a su empleador (tema explicado más adelante). State tax rates Propinas que tiene que declarar a su empleador. State tax rates   Declárele a su empleador solamente las propinas que reciba en efectivo, en cheques, tarjetas de débito y de crédito. State tax rates   Si el total de las propinas que reciba de un trabajo en un mes determinado es menos de $20, no declare las propinas de ese mes a ese empleador. State tax rates   Si recibe propinas conforme a un acuerdo para compartir propinas equitativamente, declare sólo las propinas que reciba y retenga. State tax rates No declare a su empleador ninguna parte de las propinas que reciba para luego entregárselas a otros empleados. State tax rates Sin embargo, tiene que declarar las propinas que reciba de otros empleados. State tax rates    No declare a su empleador el valor de las propinas que no reciba en efectivo, tales como boletos o pases. State tax rates No se pagan impuestos del Seguro Social, Medicare, Impuesto Adicional del Medicare o impuestos de la jubilación ferroviaria sobre estas propinas. State tax rates Cómo se declaran las propinas. State tax rates    Si su empleador no le proporciona otro medio para declarar las propinas, puede usar el Formulario 4070-PR, en español (o el Formulario 4070, en inglés). State tax rates Escriba la información requerida en el formulario, incluya su firma y la fecha y entrégueselo a su empleador. State tax rates Si desea obtener copias del formulario para un año completo, comuníquese con el IRS o pídale a su empleador la Publicación 1244-PR (o la Publicación 1244, en inglés). State tax rates   Si no usa el Formulario 4070-PR (o el Formulario 4070, en inglés), entréguele a su empleador un informe con la información siguiente: Su nombre, dirección y número de Seguro Social. State tax rates El nombre de su empleador, la dirección y el nombre del establecimiento (si es diferente al nombre del empleador). State tax rates El mes (o las fechas de cualquier período más corto) en el cual usted recibió propinas. State tax rates El total de propinas que se tienen que declarar para ese período. State tax rates Usted tiene que firmar y fechar el informe. State tax rates Cerciórese de guardar una copia junto con sus documentos tributarios u otros documentos personales. State tax rates   Su empleador puede requerirle que declare sus propinas más de una vez al mes. State tax rates Sin embargo, el informe no puede abarcar un período mayor de un mes natural. State tax rates Informe electrónico de propinas. State tax rates   Su empleador puede exigir que facilite su informe de propinas por medios electrónicos. State tax rates Cuándo debe declarar las propinas. State tax rates   Entregue a su empleador el informe correspondiente a cada mes, a más tardar el día 10 del mes siguiente. State tax rates Si el día 10 cae en sábado, domingo o día feriado legal, entonces entréguele el informe a su empleador el próximo día siempre que no sea sábado, domingo o día feriado legal. State tax rates Ejemplo. State tax rates Tiene que declararle a su empleador la cantidad de propinas que recibió en septiembre del año 2014 a más tardar el día 10 de octubre de 2014. State tax rates Declaración final. State tax rates   Si deja de trabajar durante el mes, puede declarar las propinas recibidas cuando termine su empleo. State tax rates Multa por no declarar las propinas. State tax rates   Si no le declara a su empleador las propinas que recibió, tal como se requiere, puede estar sujeto a que se le imponga una multa equivalente al 50% de los impuestos del Seguro Social, Medicare, Impuesto Adicional del Medicare o impuesto de la jubilación ferroviaria que adeude sobre las propinas que no declaró. State tax rates (Para información sobre estos impuestos, vea Cómo declarar los impuestos del Seguro Social, Medicare, Impuesto Adicional del Medicare o impuesto de la jubilación ferroviaria sobre las propinas no declaradas a su empleador , bajo Cómo se Declaran las Propinas en la Declaración de Impuestos, más adelante). State tax rates La cantidad de la multa que se impone es adicional a los impuestos que adeude. State tax rates   Puede evitar que esta multa le sea impuesta si puede demostrar que existe causa razonable por la cual no le declaró las propinas a su empleador. State tax rates Para hacerlo, adjunte un documento escrito a su declaración de impuestos explicando la razón por la cual no declaró la cantidad de propinas que recibió. State tax rates Entrega de dinero al empleador para el pago de los impuestos. State tax rates   Es posible que lo que gana normalmente no sea suficiente para que su empleador le retenga todos los impuestos que adeude sobre su salario normal más las propinas que recibe. State tax rates Si esto ocurre, puede entregarle dinero a su empleador hasta el cierre del año natural para pagar el resto de los impuestos. State tax rates   Si no le entrega dinero suficiente a su empleador, el mismo aplicará su salario normal y todo dinero que usted le entregue para los impuestos, en el orden siguiente: Todos los impuestos sobre su salario normal. State tax rates Los impuestos del Seguro Social, Medicare, Impuesto Adicional del Medicare o impuestos de la jubilación ferroviaria sobre las propinas que declaró. State tax rates Los impuestos federales, estatales y locales sobre los ingresos sobre las propinas que declaró. State tax rates    Su empleador puede descontar de su próximo salario todo impuesto que quede pendiente. State tax rates Si al final del año aún no se le han retenido suficientes impuestos, usted puede estar sujeto a una multa por pago insuficiente de impuestos estimados. State tax rates Vea la Publicación 505, Tax Withholding and Estimated Tax (Retención de impuestos e impuesto estimado), en inglés, para más información. State tax rates    Impuestos no recaudados. State tax rates Usted tiene que informar en su declaración de impuestos todo impuesto del Seguro Social y Medicare o impuestos de la jubilación ferroviaria que no se recaudaron al final del año 2013. State tax rates Estos impuestos no recaudados aparecerán en su Formulario W-2 del año 2013. State tax rates Vea el tema titulado Cómo se declaran los impuestos no recaudados del Seguro Social, Medicare o impuesto de la jubilación ferroviaria sobre propinas declaradas a su empleador , bajo Cómo se Declaran las Propinas en la Declaración de Impuestos, a continuación. State tax rates Cómo se Declaran las Propinas en la Declaración de Impuestos Cómo se declaran las propinas. State tax rates    Declare las propinas que recibió junto con su salario en la línea 7 del Formulario 1040, la línea 7 del Formulario 1040A o en la línea 1 del Formulario 1040EZ. State tax rates Qué propinas se tienen que declarar. State tax rates   Usted tiene que informar en su declaración de impuestos todas las propinas que recibió en 2013. State tax rates Incluya las que recibió en efectivo y las que no fueron en efectivo. State tax rates Toda propina que usted haya declarado en 2013 a su empleador está incluida en los salarios que aparecen en el recuadro 1 de su Formulario W-2. State tax rates Sume a la cantidad del recuadro 1 solamente las propinas que usted no le declaró a su empleador. State tax rates    Si recibió $20 o más en propinas en efectivo o cargadas a tarjetas de crédito o débito en un mes y no las declaró a su empleador, vea más adelante el tema titulado Cómo declarar los impuestos del Seguro Social, Medicare, Impuesto Adicional del Medicare o impuesto de la jubilación ferroviaria sobre las propinas no declaradas a su empleador . State tax rates    Si usted no llevó un registro diario de las propinas que recibió, tal como se requiere, y aparece una cantidad en el recuadro 8 del Formulario W-2, vea más adelante la sección titulada Asignación de Propinas . State tax rates   Si usted llevó un registro diario y declaró a su empleador todas las propinas que recibió, tal como se requiere conforme a las reglas explicadas anteriormente, añada a la cantidad que aparece en el recuadro 1 de su Formulario W-2 las siguientes propinas: Las propinas que recibió tanto en efectivo como cargadas a tarjetas de crédito o débito que fueron menos de $20 en un mes cualquiera. State tax rates El valor de las propinas que no recibió en efectivo, tales como boletos, pases u otros artículos de valor. State tax rates Ejemplo. State tax rates Mariano Almendares comenzó a trabajar en el Restaurante Océano Azul (su único empleador en el año 2013) el día 30 de junio y recibió $10,000 en salarios durante el año. State tax rates Mariano llevó un registro diario de las propinas que recibió durante el año, el cual muestra que en junio recibió $18 en propinas y en el resto del año recibió $7,000 en propinas. State tax rates Al Sr. State tax rates Almendares no se le requirió declararle a su empleador las propinas que recibió en junio, pero sí le declaró todas las propinas que recibió durante el resto del año, tal como se requiere. State tax rates El Formulario W-2 que el Sr. State tax rates Almendares recibió del Restaurante Océano Azul muestra $17,000 ($10,000 de salario más $7,000 de propinas declaradas) en el recuadro 1. State tax rates El Sr. State tax rates Almendares añade a esa cantidad los $18 de propinas que no le declaró al empleador y declara $17,018 como salario en su declaración de impuestos. State tax rates Cómo declarar los impuestos del Seguro Social, Medicare, Impuesto Adicional del Medicare o impuesto de la jubilación ferroviaria sobre las propinas no declaradas a su empleador. State tax rates    Si en un mes recibió $20 o más en propinas en efectivo o cargadas a tarjetas de crédito o débito en algún empleo y no declaró todas esas propinas a su empleador, tiene que declarar como impuesto adicional los impuestos del Seguro Social, Medicare e Impuesto Adicional del Medicare sobre las propinas que no declaró a su empleador. State tax rates Para declarar estos impuestos, tiene que presentar una declaración aunque de otro modo no tuviera que presentarla. State tax rates Para hacerlo, tiene que usar el Formulario 1040. State tax rates (No puede presentar el Formulario 1040EZ ni el Formulario 1040A). State tax rates    Use el Formulario 4137, Social Security and Medicare Tax on Unreported Tip Income (Impuestos del Seguro Social y de Medicare sobre el ingreso de propinas no declaradas), en inglés, para calcular los impuestos al Seguro Social y al Medicare. State tax rates Anote el impuesto en su declaración como se indica y adjunte el Formulario 4137 debidamente completado a la misma. State tax rates Use el Formulario 8959, en inglés, para calcular el Impuesto Adicional del Medicare. State tax rates    Si usted está sujeto a la Railroad Retirement Tax Act (Ley Tributaria para la Jubilación Ferroviaria), no puede utilizar el Formulario 4137 para pagar el impuesto para la jubilación ferroviaria sobre propinas no declaradas. State tax rates Para obtener crédito para la jubilación ferroviaria, tiene que declarar sus propinas a su empleador. State tax rates Cómo se declaran los impuestos no recaudados del Seguro Social, Medicare o impuesto de la jubilación ferroviaria sobre propinas declaradas a su empleador. State tax rates   Usted podría tener impuestos sin recaudar si su salario normal no es suficiente para que su empleador retenga todos los impuestos adeudados y si no le dio a su empleador dinero suficiente para pagar el resto de los impuestos. State tax rates Para más información, vea Entrega de dinero al empleador para el pago de los impuestos , bajo Cómo Declarar las Propinas a su Empleador, anteriormente. State tax rates   Si su empleador no pudo recaudar todos los impuestos al Seguro Social y al Medicare o impuesto de la jubilación ferroviaria que usted adeuda sobre propinas declaradas para 2013, los impuestos por recaudar se mostrarán en el recuadro 12 del Formulario W-2 (códigos A y B). State tax rates Tiene que declarar estas cantidades como impuesto adicional en su declaración. State tax rates A diferencia de la parte no recaudada del impuesto regular al Medicare (1. State tax rates 45%), el Impuesto Adicional del Medicare no recaudado no se declara en el recuadro 12 del Formulario W-2 con el código B. State tax rates    Para declarar estos impuestos no recaudados, tiene que presentar una declaración aunque no tuviera que presentarla de otro modo. State tax rates Tiene que declarar estos impuestos en la línea 60 del Formulario 1040. State tax rates Vea las instrucciones para la línea 60 del Formulario 1040, disponibles en inglés. State tax rates (No puede presentar el Formulario 1040EZ ni el Formulario 1040A). State tax rates Asignación de Propinas Si su empleador le asignó propinas, las mismas aparecen por separado en el recuadro 8 de su Formulario W-2. State tax rates Estas propinas no están incluidas en el recuadro 1 con sus salarios y propinas declaradas. State tax rates Si el recuadro 8 está en blanco, lo que se explica en esta sección no es aplicable en su caso. State tax rates ¿Qué son propinas asignadas?   Éstas son propinas que su empleador le asignó, además de las que usted le declaró para el año. State tax rates Su empleador habrá hecho esto únicamente si: Usted trabajó en un establecimiento (restaurante, bar o negocio similar) que tiene que asignar las propinas a los empleados y La cantidad de propinas que declaró a su empleador fue menos de su parte del 8% de las ventas de comidas y bebidas del establecimiento donde usted trabajó. State tax rates De las propinas asignadas, no se retienen impuestos sobre los ingresos, Seguro Social, Medicare, Impuesto Adicional del Medicare ni impuestos de la jubilación ferroviaria. State tax rates ¿Cómo se calcula su asignación de propinas?   Las propinas que se le asignan a usted son su parte de una cantidad calculada restando las propinas declaradas de todos los empleados del 8% (u otra tasa más baja aprobada) de las ventas de comida y bebida (que no sean ventas de comida para llevar por los clientes o ventas con un cargo por servicio del 10% o más). State tax rates Su parte de esa cantidad fue calculada utilizando un método provisto por un acuerdo laboral entre empleador y empleado o por un método provisto por los reglamentos del IRS basado en las ventas hechas o las horas trabajadas por los empleados. State tax rates Para más información sobre el método de asignación exacto utilizado, consulte a su empleador. State tax rates ¿Tiene que incluir en la declaración sus propinas asignadas?   Tiene que incluir en la declaración de impuestos todas las propinas que recibió en 2013, incluyendo las propinas pagadas en efectivo como las no pagadas en efectivo. State tax rates Todas las propinas que usted haya declarado en 2013 a su empleador están incluidas en los salarios que aparecen en el recuadro 1 de su Formulario W-2. State tax rates Sume a la cantidad del recuadro 1 solamente las propinas que usted no le declaró a su empleador. State tax rates Esto tiene que incluir toda propina asignada mostrada en el recuadro 8 de su(s) Formulario(s) W-2, a menos que tenga registros confiables que muestren que recibió menos propinas en el año que las cifras asignadas. State tax rates   Vea los temas titulados Qué propinas se tienen que declarar , bajo Cómo se Declaran las Propinas en la Declaración de Impuestos y Cómo Mantener un Registro Diario de Propinas , anteriormente. State tax rates Cómo declarar las propinas asignadas. State tax rates   Declare la cantidad en el recuadro 1 y las propinas asignadas en el recuadro 8 de su(s) Formulario(s) W-2 como salario en la línea 7 del Formulario 1040, en la línea 8 del Formulario 1040NR o en la línea 3 del Formulario 1040NR-EZ. State tax rates (No puede presentar el Formulario 1040A ni el Formulario 1040EZ cuando se tienen propinas asignadas). State tax rates    Debido a que los impuestos del Seguro Social, Medicare o Impuesto Adicional del Medicare no fueron retenidos de las propinas asignadas, tiene que declararlos como impuestos adicionales en su declaración. State tax rates Complete el Formulario 4137 e incluya las propinas asignadas en la línea 1 del formulario. State tax rates Vea Cómo declarar los impuestos del Seguro Social, Medicare, Impuesto Adicional del Medicare o impuesto de la jubilación ferroviaria sobre las propinas no declaradas a su empleador , bajo Cómo se Declaran las Propinas en la Declaración de Impuestos. 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Understanding your CP71D Notice

You received this notice to remind you of the amount you owe in tax, penalty and interest.

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Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Page Last Reviewed or Updated: 06-Mar-2014

The State Tax Rates

State tax rates 2. State tax rates   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. State tax rates 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. State tax rates They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). State tax rates 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. State tax rates What is the tax benefit of the American opportunity credit. State tax rates   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. State tax rates   A tax credit reduces the amount of income tax you may have to pay. State tax rates Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. State tax rates Forty percent of the American opportunity credit may be refundable. State tax rates This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. State tax rates   Your allowable American opportunity credit may be limited by the amount of your income. State tax rates Also, the nonrefundable part of the credit may be limited by the amount of your tax. State tax rates Overview of the American opportunity credit. State tax rates   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. State tax rates The details are discussed in this chapter. State tax rates Can you claim more than one education credit this year. State tax rates   For each student, you can elect for any year only one of the credits. State tax rates 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. State tax rates   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. State tax rates 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. State tax rates 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. State tax rates Differences between the American opportunity and lifetime learning credits. State tax rates   There are several differences between these two credits. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. State tax rates Table 2-1. State tax rates 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. State tax rates Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. State tax rates You pay qualified education expenses of higher education. State tax rates You pay the education expenses for an eligible student. State tax rates The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. State tax rates Student qualifications. State tax rates   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. State tax rates 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. State tax rates For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates The standard for what is half of the normal full-time work load is determined by each eligible educational institution. State tax rates However, the standard may not be lower than any of those established by the U. State tax rates S. State tax rates Department of Education under the Higher Education Act of 1965. State tax rates 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. State tax rates See Prepaid expenses, later. State tax rates 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. State tax rates Example 1. State tax rates Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. State tax rates 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. State tax rates Sharon claimed the American opportunity credit on her 2012 tax return. State tax rates The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. State tax rates Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. State tax rates 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. State tax rates Example 2. State tax rates Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. State tax rates His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. State tax rates No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. State tax rates The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. State tax rates Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. State tax rates If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. State tax rates If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. State tax rates Example 3. State tax rates Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. State tax rates Glenda pays her tuition for the 2014 Spring semester in December 2013. State tax rates 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. State tax rates If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. State tax rates You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. State tax rates Note. State tax rates 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. State tax rates “Qualified education expenses” are defined later under Qualified Education Expenses . State tax rates “Eligible students” are defined later under Who Is an Eligible Student . State tax rates A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . State tax rates 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. State tax rates This image is too large to be displayed in the current screen. State tax rates Please click the link to view the image. State tax rates 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. State tax rates Your filing status is married filing separately. State tax rates You are listed as a dependent on another person's tax return (such as your parents'). State tax rates See Who Can Claim a Dependent's Expenses , later. State tax rates Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). State tax rates MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . State tax rates 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. State tax rates More information on nonresident aliens can be found in Publication 519, U. State tax rates S. State tax rates Tax Guide for Aliens. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates Academic period. State tax rates   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. State tax rates 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. State tax rates Paid with borrowed funds. State tax rates   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. State tax rates 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. State tax rates Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. State tax rates Student withdraws from class(es). State tax rates   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. State tax rates 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. State tax rates Eligible educational institution. State tax rates   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. State tax rates S. State tax rates Department of Education. State tax rates It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. State tax rates The educational institution should be able to tell you if it is an eligible educational institution. State tax rates   Certain educational institutions located outside the United States also participate in the U. State tax rates S. State tax rates Department of Education's Federal Student Aid (FSA) programs. State tax rates Related expenses. State tax rates   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. State tax rates   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. State tax rates Prepaid expenses. State tax rates   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. State tax rates See Academic period, earlier. State tax rates 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). State tax rates    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). State tax rates   In the following examples, assume that each student is an eligible student at an eligible educational institution. State tax rates Example 1. State tax rates Jefferson is a sophomore in University V's degree program in dentistry. State tax rates 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. State tax rates Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. State tax rates Example 2. State tax rates 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. State tax rates 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. State tax rates William bought his books from a friend; Grace bought hers at College W's bookstore. State tax rates Both are qualified education expenses for the American opportunity credit. State tax rates Example 3. State tax rates When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. State tax rates 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. State tax rates No portion of the fee covers personal expenses. State tax rates 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. State tax rates No Double Benefit Allowed You cannot do any of the following. State tax rates 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. State tax rates Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. State tax rates Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates See Adjustments to Qualified Education Expenses, next. State tax rates 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. State tax rates The result is the amount of adjusted qualified education expenses for each student. State tax rates Tax-free educational assistance. State tax rates   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. State tax rates See Academic period, earlier. State tax rates   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. State tax rates 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). State tax rates   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. State tax rates 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. State tax rates   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). State tax rates 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. State tax rates Generally, any scholarship or fellowship is treated as tax free. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates For examples, see Coordination with Pell grants and other scholarships, later. State tax rates Refunds. State tax rates   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. State tax rates Some tax-free educational assistance received after 2013 may be treated as a refund. State tax rates See Tax-free educational assistance, earlier. State tax rates Refunds received in 2013. State tax rates   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. State tax rates Refunds received after 2013 but before your income tax return is filed. State tax rates   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. State tax rates Refunds received after 2013 and after your income tax return is filed. State tax rates   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. State tax rates See Credit recapture, next. State tax rates Credit recapture. State tax rates    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. State tax rates 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. State tax rates 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). State tax rates Include that amount as an additional tax for the year the refund or tax-free assistance was received. State tax rates Example. State tax rates   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. State tax rates You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. State tax rates After you filed your return, you received a refund of $4,000. State tax rates You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. State tax rates The refigured credit is $2,250. State tax rates The increase to your tax liability is also $250. State tax rates Include the difference of $250 as additional tax on your 2014 tax return. State tax rates See the instructions for your 2014 income tax return to determine where to include this tax. State tax rates 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. State tax rates Amounts that do not reduce qualified education expenses. State tax rates   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. State tax rates   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. State tax rates 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. State tax rates The use of the money is not restricted. State tax rates Example 1. State tax rates Joan paid $3,000 for tuition and $5,000 for room and board at University X. State tax rates The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. State tax rates To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. State tax rates The terms of the scholarship state that it can be used to pay any of Joan's college expenses. State tax rates 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. State tax rates Joan does not report any portion of the scholarship as income on her tax return. State tax rates 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. State tax rates 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. State tax rates Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). State tax rates Example 2. State tax rates The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. State tax rates Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. State tax rates Joan is treated as having paid $3,000 in qualified education expenses. State tax rates Coordination with Pell grants and other scholarships. State tax rates   In some cases, you may be able to reduce your tax liability by including scholarships in income. State tax rates 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. State tax rates The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. State tax rates Example 1—No scholarship. State tax rates 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. State tax rates This was his first year of postsecondary education. State tax rates During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. State tax rates He and the college meet all the requirements for the American opportunity credit. State tax rates Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. State tax rates Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. State tax rates His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. State tax rates 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. State tax rates Example 2—Scholarship excluded from income. State tax rates The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. State tax rates Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. State tax rates 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. State tax rates His adjusted qualified education expenses will be zero and he will not have an education credit. State tax rates Therefore, Bill's tax after credits would be $2,599. State tax rates Example 3—Scholarship partially included in income. State tax rates The facts are the same as in Example 2—Scholarship excluded from income. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. State tax rates Sports, games, hobbies, and noncredit courses. State tax rates   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. State tax rates However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. State tax rates Comprehensive or bundled fees. State tax rates   Some eligible educational institutions combine all of their fees for an academic period into one amount. State tax rates 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. State tax rates 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. State tax rates See Figuring the Credit , later, for more information about Form 1098-T. State tax rates 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. State tax rates This is a student who meets all of the following requirements. State tax rates The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. State tax rates This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. State tax rates The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. State tax rates 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. State tax rates 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. State tax rates These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. State tax rates Completion of first 4 years. State tax rates   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. State tax rates This student generally would not be an eligible student for purposes of the American opportunity credit. State tax rates Exception. State tax rates   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. State tax rates Enrolled at least half-time. State tax rates   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. State tax rates   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. State tax rates However, the standard may not be lower than any of those established by the U. State tax rates S. State tax rates Department of Education under the Higher Education Act of 1965. State tax rates Please click here for the text description of the image. State tax rates Figure 2-2 Example 1. State tax rates Mack graduated from high school in June 2012. State tax rates 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. State tax rates For the 2013 fall semester, Mack was enrolled less than half-time. State tax rates 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). State tax rates Example 2. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates Example 3. State tax rates During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. State tax rates 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. State tax rates Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. State tax rates Example 4. State tax rates The facts are the same as in Example 3. State tax rates During the 2013 spring semester, Larry again attended College X but not as part of a degree program. State tax rates Larry graduated from high school in June 2013. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates Example 5. State tax rates Dee graduated from high school in June 2012. State tax rates 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. State tax rates Dee completed the program in December 2013, and was awarded a certificate. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. State tax rates You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. State tax rates IF you. State tax rates . State tax rates . State tax rates THEN only. State tax rates . State tax rates . State tax rates 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. State tax rates The dependent cannot claim the credit. State tax rates 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. State tax rates You cannot claim the credit based on this dependent's expenses. State tax rates Expenses paid by dependent. State tax rates   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. State tax rates Include these expenses when figuring the amount of your American opportunity credit. State tax rates    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. State tax rates Expenses paid by you. State tax rates   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. State tax rates 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. State tax rates Expenses paid by others. State tax rates   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. State tax rates In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. State tax rates If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. State tax rates Example. State tax rates In 2013, Ms. State tax rates Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. State tax rates 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. State tax rates 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. State tax rates 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. State tax rates If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. State tax rates Tuition reduction. State tax rates    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. State tax rates 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. State tax rates For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. State tax rates 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. State tax rates The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. State tax rates You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. State tax rates However, the credit may be reduced based on your MAGI. State tax rates See Effect of the Amount of Your Income on the Amount of Your Credit , later. State tax rates Example. State tax rates Jack and Kay Ford are married and file a joint tax return. State tax rates For 2013, they claim an exemption for their dependent daughter on their tax return. State tax rates Their MAGI is $70,000. State tax rates Their daughter is in her junior (third) year of studies at the local university. State tax rates Jack and Kay paid qualified education expenses of $4,300 in 2013. State tax rates Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. State tax rates Jack and Kay can claim a $2,500 American opportunity credit in 2013. State tax rates This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. State tax rates Form 1098-T. State tax rates   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. State tax rates 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. State tax rates An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. State tax rates However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. State tax rates When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. State tax rates   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. State tax rates    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. State tax rates 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). State tax rates 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). State tax rates Modified adjusted gross income (MAGI). State tax rates   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. State tax rates MAGI when using Form 1040A. State tax rates   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. State tax rates MAGI when using Form 1040. State tax rates   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. State tax rates You can use Worksheet 2-1, next, to figure your MAGI. State tax rates    Worksheet 2-1. State tax rates MAGI for the American Opportunity Credit 1. State tax rates Enter your adjusted gross income  (Form 1040, line 38)   1. State tax rates   2. State tax rates Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. State tax rates       3. State tax rates Enter your foreign housing deduction (Form 2555, line 50)   3. State tax rates       4. State tax rates Enter the amount of income from Puerto Rico you are excluding   4. State tax rates       5. State tax rates Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. State tax rates       6. State tax rates Add the amounts on lines 2, 3, 4, and 5   6. State tax rates   7. State tax rates Add the amounts on lines 1 and 6. State tax rates  This is your modified adjusted  gross income. State tax rates Enter here and  on Form 8863, line 3   7. State tax rates   Phaseout. State tax rates   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. State tax rates The same method is shown in the following example. State tax rates Example. State tax rates You are filing a joint return and your MAGI is $165,000. State tax rates In 2013, you paid $5,000 of qualified education expenses. State tax rates 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). State tax rates 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. State tax rates The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. State tax rates The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). State tax rates The result is the amount of your phased out (reduced) American opportunity credit ($1,875). State tax rates      $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. State tax rates 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. State tax rates Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. State tax rates You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. State tax rates 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). State tax rates At least one of your parents was alive at the end of 2013. State tax rates You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. State tax rates Earned income. State tax rates   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. State tax rates 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. State tax rates 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. State tax rates   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). State tax rates However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. State tax rates Support. State tax rates   Your support includes food, shelter, clothing, medical and dental care, education, and the like. State tax rates Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. State tax rates 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. State tax rates However, a scholarship received by you is not considered support if you are a full-time student. State tax rates See Publication 501 for details. State tax rates Full-time student. State tax rates   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. State tax rates Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. State tax rates Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. State tax rates Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. State tax rates A filled-in Form 8863 is shown at the end of this publication. State tax rates Note. State tax rates In Appendix A. State tax rates 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. State tax rates Prev  Up  Next   Home   More Online Publications