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Students Exempt From Income Tax

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Students Exempt From Income Tax

Students exempt from income tax 12. Students exempt from income tax   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. Students exempt from income tax Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. Students exempt from income tax  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013, is 56. Students exempt from income tax 5 cents per mile. Students exempt from income tax For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. Students exempt from income tax Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. Students exempt from income tax To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. Students exempt from income tax What is the tax benefit of taking a business deduction for work-related education. Students exempt from income tax   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Students exempt from income tax Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. Students exempt from income tax An itemized deduction reduces the amount of your income subject to tax. Students exempt from income tax   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Students exempt from income tax This reduces the amount of your income subject to both income tax and self-employment tax. Students exempt from income tax   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. Students exempt from income tax You may qualify for these other benefits even if you do not meet the requirements listed above. Students exempt from income tax   Also, your work-related education expenses may qualify you to claim more than one tax benefit. Students exempt from income tax Generally, you may claim any number of benefits as long as you use different expenses to figure each one. Students exempt from income tax Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. Students exempt from income tax This is education that meets at least one of the following two tests. Students exempt from income tax The education is required by your employer or the law to keep your present salary, status, or job. Students exempt from income tax The required education must serve a bona fide business purpose of your employer. Students exempt from income tax The education maintains or improves skills needed in your present work. Students exempt from income tax However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Students exempt from income tax You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Students exempt from income tax Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. Students exempt from income tax Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. Students exempt from income tax This additional education is qualifying work-related education if all three of the following requirements are met. Students exempt from income tax It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. Students exempt from income tax When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. Students exempt from income tax See Education To Maintain or Improve Skills , later. Students exempt from income tax Example. Students exempt from income tax You are a teacher who has satisfied the minimum requirements for teaching. Students exempt from income tax Your employer requires you to take an additional college course each year to keep your teaching job. Students exempt from income tax If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. Students exempt from income tax This image is too large to be displayed in the current screen. Students exempt from income tax Please click the link to view the image. Students exempt from income tax Figure 12-1 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. Students exempt from income tax This could include refresher courses, courses on current developments, and academic or vocational courses. Students exempt from income tax Example. Students exempt from income tax You repair televisions, radios, and stereo systems for XYZ Store. Students exempt from income tax To keep up with the latest changes, you take special courses in radio and stereo service. Students exempt from income tax These courses maintain and improve skills required in your work. Students exempt from income tax Maintaining skills vs. Students exempt from income tax qualifying for new job. Students exempt from income tax   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. Students exempt from income tax Education during temporary absence. Students exempt from income tax   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Students exempt from income tax Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Students exempt from income tax Example. Students exempt from income tax You quit your biology research job to become a full-time biology graduate student for 1 year. Students exempt from income tax If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. Students exempt from income tax Education during indefinite absence. Students exempt from income tax   If you stop work for more than a year, your absence from your job is considered indefinite. Students exempt from income tax Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. Students exempt from income tax Therefore, it is not qualifying work-related education. Students exempt from income tax Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Students exempt from income tax The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. Students exempt from income tax Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. Students exempt from income tax This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. Students exempt from income tax You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. Students exempt from income tax Example 1. Students exempt from income tax You are a full-time engineering student. Students exempt from income tax Although you have not received your degree or certification, you work part time as an engineer for a firm that will employ you as a full-time engineer after you finish college. Students exempt from income tax Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. Students exempt from income tax The education is not qualifying work-related education. Students exempt from income tax Example 2. Students exempt from income tax You are an accountant and you have met the minimum educational requirements of your employer. Students exempt from income tax Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. Students exempt from income tax These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. Students exempt from income tax Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. Students exempt from income tax The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. Students exempt from income tax If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. Students exempt from income tax The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. Students exempt from income tax You generally will be considered a faculty member when one or more of the following occurs. Students exempt from income tax You have tenure. Students exempt from income tax Your years of service count toward obtaining tenure. Students exempt from income tax You have a vote in faculty decisions. Students exempt from income tax Your school makes contributions for you to a retirement plan other than social security or a similar program. Students exempt from income tax Example 1. Students exempt from income tax The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. Students exempt from income tax In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. Students exempt from income tax If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. Students exempt from income tax However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. Students exempt from income tax Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. Students exempt from income tax If you have all the required education except the fifth year, you have met the minimum educational requirements. Students exempt from income tax The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. Students exempt from income tax Example 2. Students exempt from income tax Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. Students exempt from income tax The additional four education courses can be qualifying work-related education. Students exempt from income tax Although you do not have all the required courses, you have already met the minimum educational requirements. Students exempt from income tax Example 3. Students exempt from income tax Assume the same facts as in Example 1 except that you are hired with only 3 years of college. Students exempt from income tax The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. Students exempt from income tax They are needed to meet the minimum educational requirements for employment as a teacher. Students exempt from income tax Example 4. Students exempt from income tax You have a bachelor's degree and you work as a temporary instructor at a university. Students exempt from income tax At the same time, you take graduate courses toward an advanced degree. Students exempt from income tax The rules of the university state that you can become a faculty member only if you get a graduate degree. Students exempt from income tax Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. Students exempt from income tax You have not met the minimum educational requirements to qualify you as a faculty member. Students exempt from income tax The graduate courses are not qualifying work-related education. Students exempt from income tax Certification in a new state. Students exempt from income tax   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. Students exempt from income tax This is true even if you must get additional education to be certified in another state. Students exempt from income tax Any additional education you need is qualifying work-related education. Students exempt from income tax You have already met the minimum requirements for teaching. Students exempt from income tax Teaching in another state is not a new trade or business. Students exempt from income tax Example. Students exempt from income tax You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. Students exempt from income tax You move to State B and are promptly hired as a teacher. Students exempt from income tax You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. Students exempt from income tax These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. Students exempt from income tax Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. Students exempt from income tax This is true even if you do not plan to enter that trade or business. Students exempt from income tax If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. Students exempt from income tax Example 1. Students exempt from income tax You are an accountant. Students exempt from income tax Your employer requires you to get a law degree at your own expense. Students exempt from income tax You register at a law school for the regular curriculum that leads to a law degree. Students exempt from income tax Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. Students exempt from income tax Example 2. Students exempt from income tax You are a general practitioner of medicine. Students exempt from income tax You take a 2-week course to review developments in several specialized fields of medicine. Students exempt from income tax The course does not qualify you for a new profession. Students exempt from income tax It is qualifying work- related education because it maintains or improves skills required in your present profession. Students exempt from income tax Example 3. Students exempt from income tax While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. Students exempt from income tax The program will lead to qualifying you to practice psychoanalysis. Students exempt from income tax The psychoanalytic training does not qualify you for a new profession. Students exempt from income tax It is qualifying work-related education because it maintains or improves skills required in your present profession. Students exempt from income tax Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. Students exempt from income tax They are part of a program of study that can qualify you for a new profession. Students exempt from income tax Teaching and Related Duties All teaching and related duties are considered the same general kind of work. Students exempt from income tax A change in duties in any of the following ways is not considered a change to a new business. Students exempt from income tax Elementary school teacher to secondary school teacher. Students exempt from income tax Teacher of one subject, such as biology, to teacher of another subject, such as art. Students exempt from income tax Classroom teacher to guidance counselor. Students exempt from income tax Classroom teacher to school administrator. Students exempt from income tax What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education you can generally deduct your education expenses as business expenses. Students exempt from income tax If you are not self-employed, you can deduct business expenses only if you itemize your deductions. Students exempt from income tax You cannot deduct expenses related to tax-exempt and excluded income. Students exempt from income tax Deductible expenses. Students exempt from income tax   The following education expenses can be deducted. Students exempt from income tax Tuition, books, supplies, lab fees, and similar items. Students exempt from income tax Certain transportation and travel costs. Students exempt from income tax Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. Students exempt from income tax Nondeductible expenses. Students exempt from income tax   You cannot deduct personal or capital expenses. Students exempt from income tax For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. Students exempt from income tax This amount is a personal expense. Students exempt from income tax Unclaimed reimbursement. Students exempt from income tax   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. Students exempt from income tax Example. Students exempt from income tax Your employer agrees to pay your education expenses if you file a voucher showing your expenses. Students exempt from income tax You do not file a voucher and you do not get reimbursed. Students exempt from income tax Because you did not file a voucher, you cannot deduct the expenses on your tax return. Students exempt from income tax Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. Students exempt from income tax If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Students exempt from income tax Temporary basis. Students exempt from income tax   You go to school on a temporary basis if either of the following situations applies to you. Students exempt from income tax Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. Students exempt from income tax Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Students exempt from income tax Your attendance is temporary up to the date you determine it will last more than 1 year. Students exempt from income tax If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. Students exempt from income tax Attendance not on a temporary basis. Students exempt from income tax   You do not go to school on a temporary basis if either of the following situations apply to you. Students exempt from income tax Your attendance at school is realistically expected to last more than 1 year. Students exempt from income tax It does not matter how long you actually attend. Students exempt from income tax Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Students exempt from income tax Your attendance is not temporary after the date you determine it will last more than 1 year. Students exempt from income tax Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. Students exempt from income tax This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. Students exempt from income tax Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Students exempt from income tax Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. Students exempt from income tax Example 1. Students exempt from income tax You regularly work in a nearby town, and go directly from work to home. Students exempt from income tax You also attend school every work night for 3 months to take a course that improves your job skills. Students exempt from income tax Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. Students exempt from income tax This is true regardless of the distance traveled. Students exempt from income tax Example 2. Students exempt from income tax Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. Students exempt from income tax You can deduct your transportation expenses from your regular work site to school and then home. Students exempt from income tax Example 3. Students exempt from income tax Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Students exempt from income tax Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. Students exempt from income tax Example 4. Students exempt from income tax Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Students exempt from income tax Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. Students exempt from income tax If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. Students exempt from income tax If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. Students exempt from income tax Using your car. Students exempt from income tax    If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. Students exempt from income tax The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. Students exempt from income tax 5 cents per mile. Students exempt from income tax Whichever method you use, you can also deduct parking fees and tolls. Students exempt from income tax See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. Students exempt from income tax Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. Students exempt from income tax Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. Students exempt from income tax For more information, see chapter 1 of Publication 463. Students exempt from income tax You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. Students exempt from income tax Mainly personal travel. Students exempt from income tax   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. Students exempt from income tax You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. Students exempt from income tax   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. Students exempt from income tax An important factor is the comparison of time spent on personal activities with time spent on educational activities. Students exempt from income tax If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. Students exempt from income tax Example 1. Students exempt from income tax John works in Newark, New Jersey. Students exempt from income tax He traveled to Chicago to take a deductible 1-week course at the request of his employer. Students exempt from income tax His main reason for going to Chicago was to take the course. Students exempt from income tax While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. Students exempt from income tax Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. Students exempt from income tax He cannot deduct his transportation expenses of going to Pleasantville. Students exempt from income tax He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. Students exempt from income tax Example 2. Students exempt from income tax Sue works in Boston. Students exempt from income tax She went to a university in Michigan to take a course for work. Students exempt from income tax The course is qualifying work-related education. Students exempt from income tax She took one course, which is one-fourth of a full course load of study. Students exempt from income tax She spent the rest of the time on personal activities. Students exempt from income tax Her reasons for taking the course in Michigan were all personal. Students exempt from income tax Sue's trip is mainly personal because three-fourths of her time is considered personal time. Students exempt from income tax She cannot deduct the cost of her round-trip train ticket to Michigan. Students exempt from income tax She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. Students exempt from income tax Example 3. Students exempt from income tax Dave works in Nashville and recently traveled to California to take a 2-week seminar. Students exempt from income tax The seminar is qualifying work-related education. Students exempt from income tax While there, he spent an extra 8 weeks on personal activities. Students exempt from income tax The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. Students exempt from income tax Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. Students exempt from income tax He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. Students exempt from income tax Cruises and conventions. Students exempt from income tax   Certain cruises and conventions offer seminars or courses as part of their itinerary. Students exempt from income tax Even if the seminars or courses are work related, your deduction for travel may be limited. Students exempt from income tax This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. Students exempt from income tax   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. Students exempt from income tax 50% limit on meals. Students exempt from income tax   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. Students exempt from income tax If you were reimbursed for the meals, see How To Treat Reimbursements , later. Students exempt from income tax   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. Students exempt from income tax Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. Students exempt from income tax Example. Students exempt from income tax You are a French language teacher. Students exempt from income tax While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. Students exempt from income tax You chose your itinerary and most of your activities to improve your French language skills. Students exempt from income tax You cannot deduct your travel expenses as education expenses. Students exempt from income tax This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. Students exempt from income tax No Double Benefit Allowed You cannot do either of the following. Students exempt from income tax Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. Students exempt from income tax Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. Students exempt from income tax See Adjustments to Qualifying Work-Related Education Expenses, next. Students exempt from income tax Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. Students exempt from income tax You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. Students exempt from income tax Tax-free educational assistance. Students exempt from income tax   This includes: The tax-free part 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). Students exempt from income tax 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. Students exempt from income tax Amounts that do not reduce qualifying work-related education expenses. Students exempt from income tax   Do not reduce the qualifying work-related 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. Students exempt from income tax Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. Students exempt from income tax How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. Students exempt from income tax There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. Students exempt from income tax You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. Students exempt from income tax Note. Students exempt from income tax The following rules about reimbursement arrangements also apply to expense allowances received from your employer. Students exempt from income tax Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. Students exempt from income tax Your expenses must have a business connection. Students exempt from income tax This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. Students exempt from income tax You must adequately account to your employer for your expenses within a reasonable period of time. Students exempt from income tax You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. Students exempt from income tax If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. Students exempt from income tax If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. Students exempt from income tax Accountable plan rules not met. Students exempt from income tax   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. Students exempt from income tax Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). Students exempt from income tax Expenses equal reimbursement. Students exempt from income tax   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. Students exempt from income tax Because your expenses and reimbursements are equal, you do not have a deduction. Students exempt from income tax Excess expenses. Students exempt from income tax   If your expenses are more than your reimbursement, you can deduct your excess expenses. Students exempt from income tax This is discussed later, under Deducting Business Expenses . Students exempt from income tax Allocating your reimbursements for meals. Students exempt from income tax   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. Students exempt from income tax If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. Students exempt from income tax Make the allocation as follows. Students exempt from income tax Divide your meal expenses by your total expenses. Students exempt from income tax Multiply your total reimbursement by the result from (1). Students exempt from income tax This is the allocated reimbursement for your meal expenses. Students exempt from income tax Subtract the amount figured in (2) from your total reimbursement. Students exempt from income tax The difference is the allocated reimbursement for your other expenses of qualifying work-related education. Students exempt from income tax Example. Students exempt from income tax Your employer paid you an expense allowance of $2,000 under an accountable plan. Students exempt from income tax The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. Students exempt from income tax There was no indication of how much of the reimbursement was for each type of expense. Students exempt from income tax Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). Students exempt from income tax Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. Students exempt from income tax   1. Students exempt from income tax $425 meal expenses  $2,500 total expenses = . Students exempt from income tax 17   2. Students exempt from income tax $2,000 (reimbursement)×. Students exempt from income tax 17     =$340 (allocated reimbursement for meal expenses)   3. Students exempt from income tax $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). Students exempt from income tax After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). Students exempt from income tax Nonaccountable Plans Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay and report the total in box 1 of your Form W-2. Students exempt from income tax You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. Students exempt from income tax This is discussed later under Deducting Business Expenses . Students exempt from income tax An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. Students exempt from income tax Reimbursements for nondeductible expenses. Students exempt from income tax   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. Students exempt from income tax You must include them in your income. Students exempt from income tax For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. Students exempt from income tax   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. Students exempt from income tax Deducting Business Expenses Self-employed persons and employees report their business expenses differently. Students exempt from income tax The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. Students exempt from income tax Self-Employed Persons If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). Students exempt from income tax If your education expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. Students exempt from income tax See the instructions for the form you file for information on how to complete it. Students exempt from income tax Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. Students exempt from income tax If either (1) or (2) applies, you can deduct the total qualifying cost. Students exempt from income tax If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. Students exempt from income tax In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Students exempt from income tax (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Students exempt from income tax ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Students exempt from income tax Form 2106 or 2106-EZ. Students exempt from income tax   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. Students exempt from income tax Form not required. Students exempt from income tax   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. Students exempt from income tax   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Students exempt from income tax (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. Students exempt from income tax ) Using Form 2106-EZ. Students exempt from income tax   This form is shorter and easier to use than Form 2106. Students exempt from income tax Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. Students exempt from income tax   If you do not meet both of these requirements, use Form 2106. Students exempt from income tax Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. Students exempt from income tax Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. Students exempt from income tax You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. Students exempt from income tax You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . Students exempt from income tax For more information on qualified performing artists, see chapter 6 of Publication 463. Students exempt from income tax Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Students exempt from income tax They are not subject to the 2%-of-adjusted-gross-income limit. Students exempt from income tax To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . Students exempt from income tax For more information on impairment-related work expenses, see chapter 6 of Publication 463. Students exempt from income tax Recordkeeping You must keep records as proof of any deduction claimed on your tax return. Students exempt from income tax Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. Students exempt from income tax If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. Students exempt from income tax However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. Students exempt from income tax Examples of records to keep. Students exempt from income tax   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. Students exempt from income tax You should keep adequate records or have sufficient evidence that will support your expenses. Students exempt from income tax Estimates or approximations do not qualify as proof of an expense. Students exempt from income tax Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. Students exempt from income tax , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. Students exempt from income tax Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. Students exempt from income tax Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. Students exempt from income tax Complete information about any scholarship or fellowship grants, including amounts you received during the year. Students exempt from income tax Illustrated Example Victor Jones teaches math at a private high school in North Carolina. Students exempt from income tax He was selected to attend a 3-week math seminar at a university in California. Students exempt from income tax The seminar will improve his skills in his current job and is qualifying work-related education. Students exempt from income tax He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. Students exempt from income tax Victor will file Form 1040. Students exempt from income tax His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. Students exempt from income tax He shows his expenses for the seminar in Part I of the form. Students exempt from income tax He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. Students exempt from income tax He enters $400 on line 4 for his tuition and books. Students exempt from income tax On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. Students exempt from income tax He multiplies that amount by 50% and enters the result, $263, on line 5. Students exempt from income tax On line 6, Victor totals the amounts from lines 3 through 5. Students exempt from income tax He carries the total, $2,313, to Schedule A (Form 1040), line 21. Students exempt from income tax Since he does not claim any vehicle expenses, Victor leaves Part II blank. Students exempt from income tax His filled-in form is shown on the next page. Students exempt from income tax This image is too large to be displayed in the current screen. Students exempt from income tax Please click the link to view the image. Students exempt from income tax Form 2106-EZ for V. Students exempt from income tax Jones Prev  Up  Next   Home   More Online Publications
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Students exempt from income tax 15. Students exempt from income tax   Examination and Appeal Procedures If your excise tax return is examined and you disagree with the findings, you can get information about audit and appeal procedures from Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund. Students exempt from income tax An unagreed case involving an excise tax covered in this publication differs from other tax cases in that you can only contest it in court after payment of the tax by filing suit for a refund in the United States District Court or the United States Court of Federal Claims. Students exempt from income tax Prev  Up  Next   Home   More Online Publications