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Tax Forms 2009

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Tax Forms 2009

Tax forms 2009 6. Tax forms 2009   Tuition and Fees Deduction Table of Contents IntroductionWhat is the tax benefit of the tuition and fees deduction. Tax forms 2009 Can You Claim the DeductionWho Can Claim the Deduction Who Cannot Claim the Deduction What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Claiming the Deduction Illustrated Example Introduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). Tax forms 2009 You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. Tax forms 2009 The qualified expenses must be for higher education, as explained later under Qualified Education Expenses . Tax forms 2009 What is the tax benefit of the tuition and fees deduction. Tax forms 2009   The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. Tax forms 2009   This deduction is taken as an adjustment to income. Tax forms 2009 This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). Tax forms 2009 This deduction may be beneficial to you if you do not qualify for the American opportunity or lifetime learning credits. Tax forms 2009 You can choose the education benefit that will give you the lowest tax. Tax forms 2009 You may want to compare the tuition and fees deduction to the education credits. Tax forms 2009 See chapter 2, American Opportunity Credit and chapter 3, Lifetime Learning Credit for more information on the education credits. Tax forms 2009 Table 6-1. Tax forms 2009 Tuition and Fees Deduction at a Glance summarizes the features of the tuition and fees deduction. Tax forms 2009 Can You Claim the Deduction The following rules will help you determine if you can claim the tuition and fees deduction. Tax forms 2009 Who Can Claim the Deduction Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. Tax forms 2009 You pay qualified education expenses of higher education. Tax forms 2009 You pay the education expenses for an eligible student. Tax forms 2009 The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return. Tax forms 2009 The term “qualified education expenses” is defined later under Qualified Education Expenses . Tax forms 2009 “Eligible student” is defined later under Who Is an Eligible Student . Tax forms 2009 For more information on claiming the deduction for a dependent, see Who Can Claim a Dependent's Expenses , later. Tax forms 2009 Table 6-1. Tax forms 2009 Tuition and Fees Deduction at a Glance Do not rely on this table alone. Tax forms 2009 Refer to the text for complete details. Tax forms 2009 Question Answer What is the maximum benefit? You can reduce your income subject to tax by up to $4,000. Tax forms 2009 What is the limit on modified adjusted gross income (MAGI)? $160,000 if married filing a joint return; $80,000 if single, head of household, or qualifying widow(er). Tax forms 2009 Where is the deduction taken? As an adjustment to income on  Form 1040 or Form 1040A. Tax forms 2009 For whom must the expenses be paid? A student enrolled in an eligible educational institution who is either: •you,  •your spouse, or  •your dependent for whom you claim an exemption. Tax forms 2009 What tuition and fees are deductible? Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. Tax forms 2009 Who Cannot Claim the Deduction You cannot claim the tuition and fees deduction if any of the following apply. Tax forms 2009 Your filing status is married filing separately. Tax forms 2009 Another person can claim an exemption for you as a dependent on his or her tax return. Tax forms 2009 You cannot take the deduction even if the other person does not actually claim that exemption. Tax forms 2009 Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). Tax forms 2009 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. Tax forms 2009 More information on nonresident aliens can be found in Publication 519. Tax forms 2009 What Expenses Qualify The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Tax forms 2009 Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period beginning in 2013 or in the first 3 months of 2014. Tax forms 2009 For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 deduction. Tax forms 2009 Academic period. Tax forms 2009   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. Tax forms 2009 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. Tax forms 2009 Paid with borrowed funds. Tax forms 2009   You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. Tax forms 2009 Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. Tax forms 2009 Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. Tax forms 2009 Student withdraws from class(es). Tax forms 2009   You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws. Tax forms 2009 Qualified Education Expenses For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Tax forms 2009 Eligible educational institution. Tax forms 2009   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. Tax forms 2009 S. Tax forms 2009 Department of Education. Tax forms 2009 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Tax forms 2009 The educational institution should be able to tell you if it is an eligible educational institution. Tax forms 2009   Certain educational institutions located outside the United States also participate in the U. Tax forms 2009 S. Tax forms 2009 Department of Education's Federal Student Aid (FSA) programs. Tax forms 2009 Related expenses. Tax forms 2009   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Tax forms 2009 Prepaid expenses. Tax forms 2009   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. Tax forms 2009 See Academic period , earlier. Tax forms 2009 For example, 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). Tax forms 2009 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). Tax forms 2009 In the following examples, assume that each student is an eligible student and each college or university an eligible educational institution. Tax forms 2009 Example 1. Tax forms 2009 Jackson is a sophomore in University V's degree program in dentistry. Tax forms 2009 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. Tax forms 2009 Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified education expense. Tax forms 2009 Example 2. Tax forms 2009 Donna and Charles, 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. Tax forms 2009 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. Tax forms 2009 Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Tax forms 2009 Donna bought hers at College W's bookstore. Tax forms 2009 Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified education expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. Tax forms 2009 Example 3. Tax forms 2009 When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Tax forms 2009 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. Tax forms 2009 No portion of the fee covers personal expenses. Tax forms 2009 Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Tax forms 2009 Therefore, it is a qualified expense. Tax forms 2009 No Double Benefit Allowed You cannot do any of the following. Tax forms 2009 Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense. Tax forms 2009 Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year. Tax forms 2009 Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). Tax forms 2009 For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Tax forms 2009 See Coordination With Tuition and Fees Deduction in chapter 8, Qualified Tuition Program, later. Tax forms 2009 Deduct qualified education expenses that have been paid with tax-free interest on U. Tax forms 2009 S. Tax forms 2009 savings bonds (Form 8815). Tax forms 2009 See Figuring the Tax-Free Amount in chapter 10, Education Savings Bond Program, later. Tax forms 2009 Deduct qualified education expenses that have been paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. Tax forms 2009 See the following section on Adjustments to Qualified Education Expenses. Tax forms 2009 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. Tax forms 2009 The result is the amount of adjusted qualified education expenses for each student. Tax forms 2009 You must also reduce qualified education expenses by the other amounts referred to in No Double Benefit Allowed , earlier. Tax forms 2009 Tax-free educational assistance. Tax forms 2009   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. Tax forms 2009 See Academic period , earlier. Tax forms 2009   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Tax forms 2009 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). Tax forms 2009   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. Tax forms 2009 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. Tax forms 2009   This tax-free education assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), 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. Tax forms 2009 Generally, any scholarship or fellowship is treated as tax free. Tax forms 2009 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. Tax forms 2009 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. Tax forms 2009 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. Tax forms 2009 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. Tax forms 2009 For details, see Adjustments to Qualified Education Expenses in chapters 2 and 3. Tax forms 2009 Refunds. Tax forms 2009   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. Tax forms 2009 Some tax-free educational assistance received after 2013 may be treated as a refund. Tax forms 2009 See Tax-free educational assistance , earlier. Tax forms 2009 Refunds received in 2013. Tax forms 2009   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. Tax forms 2009 Refunds received after 2013 but before your income tax return is filed. Tax forms 2009   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. Tax forms 2009 Refunds received after 2013 and after your income tax return is filed. Tax forms 2009   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. Tax forms 2009 See Credit recapture , later. Tax forms 2009 Coordination with Coverdell education savings accounts and qualified tuition programs. Tax forms 2009   Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). Tax forms 2009 For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Tax forms 2009 Credit recapture. Tax forms 2009    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. Tax forms 2009 You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing that amount by the amount of the refund or tax-free educational assistance. Tax forms 2009 You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Tax forms 2009 Include that amount as an additional tax for the year the refund or tax-free assistance was received. Tax forms 2009 Example. Tax forms 2009   You paid $3,500 of qualified education expenses in December 2013, and your child began college in January 2014. Tax forms 2009 You claimed $3,500 as the tuition and fees deduction on your 2013 income tax return. Tax forms 2009 The reduction reduced your taxable income by $3,500. Tax forms 2009 Also, you claimed no tax credits in 2013. Tax forms 2009 Your child withdrew from two classes and you received a refund of $2,000 in 2014 after you filed your 2013 tax return. Tax forms 2009 Refigure your 2013 tuition and fees deduction using $1,500 of qualified education expense instead of the $3,500. Tax forms 2009 The refigured tuition and fees deduction is $1,500. Tax forms 2009 Do not file an amended 2013 tax return to account for this adjustment. Tax forms 2009 Instead, include the difference of $2,000 (but only to the extent this difference would have increased your 2013 tax) on the “Other income” line of your 2014 Form 1040. Tax forms 2009 You cannot file Form 1040A for 2014. Tax forms 2009 Amounts that do not reduce qualified education expenses. Tax forms 2009   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. Tax forms 2009   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. Tax forms 2009 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 Restrictions. Tax forms 2009 The use of the money is not restricted. Tax forms 2009 Example 1. Tax forms 2009 In 2013, Jackie paid $3,000 for tuition and $5,000 for room and board at University X. Tax forms 2009 The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. Tax forms 2009 To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. Tax forms 2009 The terms of the scholarship state that it can be used to pay any of Jackie's college expenses. Tax forms 2009 University X applies the $2,000 scholarship against Jackie's $8,000 total bill, and Jackie pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. Tax forms 2009 Jackie does not report any portion of the scholarship as income on her tax return. Tax forms 2009 In figuring the tuition and fees deduction, Jackie must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. Tax forms 2009 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. Tax forms 2009 Jackie is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship) in 2013. Tax forms 2009 Example 2. Tax forms 2009 The facts are the same as in Example 1, except that Jackie reports her entire scholarship as income on her tax return. Tax forms 2009 Because Jackie reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Tax forms 2009 Jackie is treated as having paid $3,000 in qualified education expenses. Tax forms 2009 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. Tax forms 2009 This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Tax forms 2009 Sports, games, hobbies, and noncredit courses. Tax forms 2009   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. Tax forms 2009 However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Tax forms 2009 Comprehensive or bundled fees. Tax forms 2009   Some eligible educational institutions combine all of their fees for an academic period into one amount. Tax forms 2009 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 above, contact the institution. Tax forms 2009 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. Tax forms 2009 See Figuring the Deduction , later, for more information about Form 1098-T. Tax forms 2009 Who Is an Eligible Student For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses , earlier). Tax forms 2009 Who Can Claim a Dependent's Expenses Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must: Have paid the expenses, and Claim an exemption for the student as a dependent. Tax forms 2009 For you to be able to deduct qualified education expenses for your dependent, you must claim an exemption for that individual. Tax forms 2009 You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Tax forms 2009 IF your dependent is an eligible student and you. Tax forms 2009 . Tax forms 2009 . Tax forms 2009 AND. Tax forms 2009 . Tax forms 2009 . Tax forms 2009 THEN. Tax forms 2009 . Tax forms 2009 . Tax forms 2009 claim an exemption for your dependent you paid all qualified education expenses for your dependent only you can deduct the qualified education expenses that you paid. Tax forms 2009 Your dependent cannot take a deduction. Tax forms 2009 claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Tax forms 2009 do not claim an exemption for your dependent you paid all qualified education expenses no one is allowed to take a deduction. Tax forms 2009 do not claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Tax forms 2009 Expenses paid by dependent. Tax forms 2009   If your dependent pays qualified education expenses, no one can take a tuition and fees deduction for those expenses. Tax forms 2009 Neither you nor your dependent can deduct the expenses. Tax forms 2009 For purposes of the tuition and fees deduction, you are not treated as paying any expenses actually paid by a dependent for whom you or anyone other than the dependent can claim an exemption. Tax forms 2009 This rule applies even if you do not claim an exemption for your dependent on your tax return. Tax forms 2009 Expenses paid by you. Tax forms 2009   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring your tuition and fees deduction. Tax forms 2009 Expenses paid under divorce decree. Tax forms 2009   Qualified education expenses paid directly to an eligible educational institution for a student under a court-approved divorce decree are treated as paid by the student. Tax forms 2009 Only the student would be eligible to take a tuition and fees deduction for that payment, and then only if no one else could claim an exemption for the student. Tax forms 2009 Expenses paid by others. Tax forms 2009   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. Tax forms 2009 In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Tax forms 2009 If you claim, or can claim, an exemption on your tax return for the student, you are not considered to have paid the expenses and you cannot deduct them. Tax forms 2009 If the student is not a dependent, only the student can deduct payments made directly to the institution for his or her expenses. Tax forms 2009 If the student is your dependent, no one can deduct the payments. Tax forms 2009 Example. Tax forms 2009 In 2013, Ms. Tax forms 2009 Baker makes a payment directly to an eligible educational institution for her grandson Dan's qualified education expenses. Tax forms 2009 For purposes of deducting tuition and fees, Dan is treated as receiving the money from his grandmother and, in turn, paying his own qualified education expenses. Tax forms 2009 If an exemption cannot be claimed for Dan on anyone else's tax return, only Dan can claim a tuition and fees deduction for his grandmother's payment. Tax forms 2009 If someone else can claim an exemption for Dan, no one will be allowed a deduction for Ms. Tax forms 2009 Baker's payment. Tax forms 2009 Tuition reduction. Tax forms 2009   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. Tax forms 2009 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. Tax forms 2009 For more information on tuition reductions, see Qualified Tuition Reduction , in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Tax forms 2009 Figuring the Deduction The maximum tuition and fees deduction in 2013 is $4,000, $2,000, or $0, depending on the amount of your MAGI. Tax forms 2009 See Effect of the Amount of Your Income on the Amount of Your Deduction , later. Tax forms 2009 Form 1098-T. Tax forms 2009   To help you figure your tuition and fees deduction, the student should receive Form 1098-T (see Appendix A for a completed example of Form 1098-T). Tax forms 2009 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. Tax forms 2009 An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Tax forms 2009 However, the amount in boxes 1 and 2 of Form 1098-T might be different than what you paid. Tax forms 2009 When figuring the deduction, use only the amounts you paid in 2013 for qualified education expenses. Tax forms 2009   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. Tax forms 2009    The eligible educational institution may ask for a completed Form W-9S or similar statement to obtain the student's name, address, and taxpayer identification number. Tax forms 2009 Effect of the Amount of Your Income on the Amount of Your Deduction If your MAGI is not more than $65,000 ($130,000 if you are married filing jointly), your maximum tuition and fees deduction is $4,000. Tax forms 2009 If your MAGI is larger than $65,000 ($130,000 if you are married filing jointly), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum deduction is $2,000. Tax forms 2009 No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000 if you are married filing jointly). Tax forms 2009 Modified adjusted gross income (MAGI). Tax forms 2009   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for tuition and fees. Tax forms 2009 However, as discussed below, there may be other modifications. Tax forms 2009 MAGI when using Form 1040A. Tax forms 2009   If you file Form 1040A, your MAGI is the AGI on line 22 of that form, figured without taking into account any amount on line 19 (tuition and fees deduction). Tax forms 2009 MAGI when using Form 1040. Tax forms 2009   If you file Form 1040, your MAGI is the AGI on line 38 of that form, figured without taking into account any amount on line 34 (tuition and fees deduction) or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Tax forms 2009   Table 6-2 shows how the amount of your MAGI can affect your tuition and fees deduction. Tax forms 2009   You can use Worksheet 6-1. Tax forms 2009 MAGI for the Tuition and Fees Deduction , later, to figure your MAGI. Tax forms 2009 Table 6-2. Tax forms 2009 Effect of MAGI on Maximum Tuition and Fees Deduction IF your filing status is. Tax forms 2009 . Tax forms 2009 . Tax forms 2009 AND your MAGI is. Tax forms 2009 . Tax forms 2009 . Tax forms 2009 THEN your maximum tuition and fees deduction is. Tax forms 2009 . Tax forms 2009 . Tax forms 2009 single,  head of household, or qualifying widow(er) not more than $65,000 $4,000. Tax forms 2009 more than $65,000  but not more than $80,000 $2,000. Tax forms 2009 more than $80,000 $0. Tax forms 2009 married filing joint return not more than $130,000 $4,000. Tax forms 2009 more than $130,000 but not more than $160,000 $2,000. Tax forms 2009 more than $160,000 $0. Tax forms 2009 Claiming the Deduction You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A. Tax forms 2009 Enter the deduction on Form 1040, line 34, or Form 1040A, line 19. Tax forms 2009 A filled-in Form 8917 is shown at the end of this chapter. Tax forms 2009 Illustrated Example Tim Pfister, a single taxpayer, enrolled full-time at a local college to earn a degree in engineering. Tax forms 2009 This is the first year of his postsecondary education. Tax forms 2009 During 2013, he paid $3,600 for his qualified 2013 tuition expense. Tax forms 2009 Both he and the college meet all of the requirements for the tuition and fees deduction. Tax forms 2009 Tim's total income (Form 1040, line 22) and MAGI are $26,000. Tax forms 2009 He figures his deduction of $3,600 as shown on Form 8917, later. Tax forms 2009 Worksheet 6-1. Tax forms 2009 MAGI for the Tuition and Fees Deduction Use this worksheet if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Tax forms 2009 Before using this worksheet, you must complete Form 1040, lines 7 through 33, and figure any amount to be entered on the dotted line next to line 36. Tax forms 2009 1. Tax forms 2009 Enter the amount from Form 1040, line 22   1. Tax forms 2009         2. Tax forms 2009 Enter the total from Form 1040, lines 23 through 33   2. Tax forms 2009               3. Tax forms 2009 Enter the total of any amounts entered on the dotted line next to Form 1040, line 36   3. Tax forms 2009               4. Tax forms 2009 Add lines 2 and 3   4. Tax forms 2009         5. Tax forms 2009 Subtract line 4 from line 1   5. Tax forms 2009         6. Tax forms 2009 Enter your foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   6. Tax forms 2009         7. Tax forms 2009 Enter your foreign housing deduction (Form 2555, line 50)   7. Tax forms 2009         8. Tax forms 2009 Enter the amount of income from Puerto Rico you are excluding   8. Tax forms 2009         9. Tax forms 2009 Enter the amount of income from American Samoa you are  excluding (Form 4563, line 15)   9. Tax forms 2009         10. Tax forms 2009 Add lines 5 through 9. Tax forms 2009 This is your modified adjusted gross income   10. Tax forms 2009     Note. Tax forms 2009 If the amount on line 10 is more than $80,000 ($160,000 if married filing jointly),  you cannot take the deduction for tuition and fees. Tax forms 2009       This image is too large to be displayed in the current screen. Tax forms 2009 Please click the link to view the image. Tax forms 2009 Form 8917 for Tim Pfister Prev  Up  Next   Home   More Online Publications
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Am I Eligible to Claim an Education Credit?

This application will help you determine if you are eligible for certain educational credits or deductions including the American Opportunity Credit, the Lifetime Learning Credit and the Tuition and Fees Deduction.

Information You Will Need:

  • Filing status
  • Student’s enrollment status
  • Your adjusted gross income
  • Who paid the expenses, when the expenses were paid and for what academic period 
  • If any expenses were paid with tax exempt funds
  • If any expenses were paid with distributions from a Coverdell Education Savings Account or Qualified Tuition Program

Estimated Completion Time: 10 minutes.  However: 5 minutes of inactivity will end the interview and you will be forced to start over.

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Page Last Reviewed or Updated: 14-Feb-2014

The Tax Forms 2009

Tax forms 2009 6. Tax forms 2009   Insurance Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Deductible PremiumsSelf-Employed Health Insurance Deduction Nondeductible Premiums Capitalized Premiums When To Deduct Premiums What's New Retiree drug subsidy. Tax forms 2009  Beginning in 2013, sponsors of certain qualified retiree prescription drug plans must account for the subsidy received by reducing the amount of qualified retiree prescription drug plans expense by the subsidy received (taking into account the taxpayer's accounting method). Tax forms 2009 For more information, see the retiree drug subsidy frequently asked questions on IRS. Tax forms 2009 gov. Tax forms 2009 Introduction You generally can deduct the ordinary and necessary cost of insurance as a business expense if it is for your trade, business, or profession. Tax forms 2009 However, you may have to capitalize certain insurance costs under the uniform capitalization rules. Tax forms 2009 For more information, see Capitalized Premiums , later. Tax forms 2009 Topics - This chapter discusses: Deductible premiums Nondeductible premiums Capitalized premiums When to deduct premiums Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 538 Accounting Periods and Methods 547 Casualties, Disasters, and Thefts Form (and Instructions) 1040 U. Tax forms 2009 S. Tax forms 2009 Individual Income Tax Return See chapter 12 for information about getting publications and forms. Tax forms 2009 Deductible Premiums You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business. Tax forms 2009 Insurance that covers fire, storm, theft, accident, or similar losses. Tax forms 2009 Credit insurance that covers losses from business bad debts. Tax forms 2009 Group hospitalization and medical insurance for employees, including long-term care insurance. Tax forms 2009 If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners. Tax forms 2009 If an S corporation pays accident and health insurance premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages subject to federal income tax withholding. Tax forms 2009 See Publication 15-B. Tax forms 2009 Liability insurance. Tax forms 2009 Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Tax forms 2009 Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. Tax forms 2009 If a partnership pays workers' compensation premiums for its partners, it generally can deduct them as guaranteed payments to partners. Tax forms 2009 If an S corporation pays workers' compensation premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages. Tax forms 2009 Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Tax forms 2009 Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Tax forms 2009 Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Tax forms 2009 If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. Tax forms 2009 If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Tax forms 2009 Life insurance covering your officers and employees if you are not directly or indirectly a beneficiary under the contract. Tax forms 2009 Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Tax forms 2009 Self-Employed Health Insurance Deduction You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. Tax forms 2009 The insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. Tax forms 2009 A child includes your son, daughter, stepchild, adopted child, or foster child. Tax forms 2009 A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Tax forms 2009 One of the following statements must be true. Tax forms 2009 You were self-employed and had a net profit for the year reported on 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. Tax forms 2009 You were a partner with net earnings from self-employment for the year reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Tax forms 2009 , box 14, code A. Tax forms 2009 You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. Tax forms 2009 You received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Tax forms 2009 Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2, Wage and Tax Statement. Tax forms 2009 The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business. Tax forms 2009 For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual. Tax forms 2009 For partners, a policy can be either in the name of the partnership or in the name of the partner. Tax forms 2009 You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Tax forms 2009 However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Tax forms 2009 Otherwise, the insurance plan will not be considered to be established under your business. Tax forms 2009 For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. Tax forms 2009 You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. Tax forms 2009 However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Tax forms 2009 Otherwise, the insurance plan will not be considered to be established under your business. Tax forms 2009 Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. Tax forms 2009 If you previously filed returns without using Medicare premiums to figure the deduction, you can file timely amended returns to refigure the deduction. Tax forms 2009 For more information, see Form 1040X, Amended U. Tax forms 2009 S. Tax forms 2009 Individual Income Tax Return. Tax forms 2009 Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer cannot be used to figure the deduction. Tax forms 2009 Take the deduction on Form 1040, line 29. Tax forms 2009 Qualified long-term care insurance. Tax forms 2009   You can include premiums paid on a qualified long-term care insurance contract when figuring your deduction. Tax forms 2009 But, for each person covered, you can include only the smaller of the following amounts. Tax forms 2009 The amount paid for that person. Tax forms 2009 The amount shown below. Tax forms 2009 Use the person's age at the end of the tax year. Tax forms 2009 Age 40 or younger–$360 Age 41 to 50–$680 Age 51 to 60–$1,360 Age 61 to 70–$3,640 Age 71 or older–$4,550 Qualified long-term care insurance contract. Tax forms 2009   A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. Tax forms 2009 The contract must meet all the following requirements. Tax forms 2009 It must be guaranteed renewable. Tax forms 2009 It must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits. Tax forms 2009 It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed. Tax forms 2009 It generally must not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. Tax forms 2009 Qualified long-term care services. Tax forms 2009   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and Maintenance or personal care services. Tax forms 2009 The services must be required by a chronically ill individual and prescribed by a licensed health care practitioner. Tax forms 2009 Worksheet 6-A. Tax forms 2009 Self-Employed Health Insurance Deduction Worksheet Note. Tax forms 2009 Use a separate worksheet for each trade or business under which an insurance plan is established. Tax forms 2009 1. Tax forms 2009 Enter the total amount paid in 2013 for health insurance coverage established under your business for 2013 for you, your spouse, and your dependents. Tax forms 2009 Your insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. Tax forms 2009 But do not include the following. Tax forms 2009   Amounts for any month you were eligible to participate in a health plan subsidized by your or your spouse's employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. Tax forms 2009 Any amounts paid from retirement plan distributions that were nontaxable because you are a retired public safety officer. Tax forms 2009 Any amounts you included on Form 8885, line 4. Tax forms 2009 Any qualified health insurance premiums you paid to “U. Tax forms 2009 S. Tax forms 2009 Treasury-HCTC. Tax forms 2009 ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H. Tax forms 2009 Any payments for qualified long-term care insurance (see line 2) 1. Tax forms 2009   2. Tax forms 2009 For coverage under a qualified long-term care insurance contract, enter for each person covered the smaller of the following amounts. Tax forms 2009       a) Total payments made for that person during the year. Tax forms 2009       b) The amount shown below. Tax forms 2009 Use the person's age at the end of the tax year. Tax forms 2009         $360— if that person is age 40 or younger          $680— if age 41 to 50         $1,360— if age 51 to 60         $3,640— if age 61 to 70         $4,550— if age 71 or older         Do not include payments for any month you were eligible to participate in a long-term care insurance plan subsidized by your or your spouse’s employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. Tax forms 2009 If more than one person is covered, figure separately the amount to enter for each person. Tax forms 2009 Then enter the total of those amounts 2. Tax forms 2009   3. Tax forms 2009 Add lines 1 and 2 3. Tax forms 2009   4. Tax forms 2009 Enter your net profit* and any other earned income** from the trade or business under which the insurance plan is established. Tax forms 2009 Do not include Conservation Reserve Program payments exempt from self-employment tax. Tax forms 2009 If the business is an S corporation, skip to line 11 4. Tax forms 2009   5. Tax forms 2009 Enter the total of all net profits* from: Schedule C (Form 1040), line 31; Schedule C-EZ (Form 1040), line 3; Schedule F (Form 1040), line 34; or Schedule K-1 (Form 1065), box 14, code A; plus any other income allocable to the profitable businesses. Tax forms 2009 Do not include Conservation Reserve Program payments exempt from self-employment tax. Tax forms 2009 See the Instructions for Schedule SE (Form 1040). Tax forms 2009 Do not include any net losses shown on these schedules. Tax forms 2009 5. Tax forms 2009   6. Tax forms 2009 Divide line 4 by line 5 6. Tax forms 2009   7. Tax forms 2009 Multiply Form 1040, line 27, by the percentage on line 6 7. Tax forms 2009   8. Tax forms 2009 Subtract line 7 from line 4 8. Tax forms 2009   9. Tax forms 2009 Enter the amount, if any, from Form 1040, line 28, attributable to the same trade or business in which the insurance plan is established 9. Tax forms 2009   10. Tax forms 2009 Subtract line 9 from line 8 10. Tax forms 2009   11. Tax forms 2009 Enter your Medicare wages (Form W-2, box 5) from an S corporation in which you are a more-than-2% shareholder and in which the insurance plan is established 11. Tax forms 2009   12. Tax forms 2009 Enter any amount from Form 2555, line 45, attributable to the amount entered on line 4 or 11 above, or any amount from Form 2555-EZ, line 18, attributable to the amount entered on line 11 above 12. Tax forms 2009   13. Tax forms 2009 Subtract line 12 from line 10 or 11, whichever applies 13. Tax forms 2009   14. Tax forms 2009 Enter the smaller of line 3 or line 13 here and on Form 1040, line 29. Tax forms 2009 Do not include this amount when figuring any medical expense deduction on Schedule A (Form 1040). Tax forms 2009 14. Tax forms 2009   * If you used either optional method to figure your net earnings from self-employment from any business, do not enter your net profit from the business. Tax forms 2009 Instead, enter the amount attributable to that business from Schedule SE (Form 1040), Section B, line 4b. Tax forms 2009 * *Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. Tax forms 2009 However, it does not include capital gain income. Tax forms 2009 Chronically ill individual. Tax forms 2009   A chronically ill individual is a person who has been certified as one of the following. Tax forms 2009 An individual who has been unable, due to loss of functional capacity for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual. Tax forms 2009 Activities of daily living are eating, toileting, transferring (general mobility), bathing, dressing, and continence. Tax forms 2009 An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Tax forms 2009 The certification must have been made by a licensed health care practitioner within the previous 12 months. Tax forms 2009 Benefits received. Tax forms 2009   For information on excluding benefits you receive from a long-term care contract from gross income, see Publication 525. Tax forms 2009 Other coverage. Tax forms 2009   You cannot take the deduction for any month you were eligible to participate in any employer (including your spouse's) subsidized health plan at any time during that month, even if you did not actually participate. Tax forms 2009 In addition, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2013, do not use amounts paid for coverage for that month to figure the deduction. Tax forms 2009   These rules are applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance. Tax forms 2009 However, any medical insurance payments not deductible on Form 1040, line 29, can be included as medical expenses on Schedule A (Form 1040), Itemized Deductions, if you itemize deductions. Tax forms 2009 Effect on itemized deductions. Tax forms 2009   Subtract the health insurance deduction from your medical insurance when figuring medical expenses on Schedule A (Form 1040) if you itemize deductions. Tax forms 2009 Effect on self-employment tax. Tax forms 2009   For tax years beginning before or after 2010, you cannot subtract the self-employed health insurance deduction when figuring net earnings for your self-employment tax from the business under which the insurance plan is established, or considered to be established as discussed earlier. Tax forms 2009 For more information, see Schedule SE (Form 1040). Tax forms 2009 How to figure the deduction. Tax forms 2009   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Tax forms 2009 However, if any of the following apply, you must use Worksheet 6-A in this chapter. Tax forms 2009 You had more than one source of income subject to self-employment tax. Tax forms 2009 You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Tax forms 2009 You are using amounts paid for qualified long-term care insurance to figure the deduction. Tax forms 2009 If you are claiming the health coverage tax credit, complete Form 8885, Health Coverage Tax Credit, before you figure this deduction. Tax forms 2009 Health coverage tax credit. Tax forms 2009   You may be able to take this credit only if you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment trade adjustment assistance (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient. Tax forms 2009 Use Form 8885 to figure the amount, if any, of this credit. Tax forms 2009   When figuring the amount to enter on line 1 of Worksheet 6-A, do not include the following. Tax forms 2009 Any amounts you included on Form 8885, line 4. Tax forms 2009 Any qualified health insurance premiums you paid to “U. Tax forms 2009 S. Tax forms 2009 Treasury-HCTC. Tax forms 2009 ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Tax forms 2009 More than one health plan and business. Tax forms 2009   If you have more than one health plan during the year and each plan is established under a different business, you must use separate worksheets (Worksheet 6-A) to figure each plan's net earnings limit. Tax forms 2009 Include the premium you paid under each plan on line 1 or line 2 of that separate worksheet and your net profit (or wages) from that business on line 4 (or line 11). Tax forms 2009 For a plan that provides long-term care insurance, the total of the amounts entered for each person on line 2 of all worksheets cannot be more than the appropriate limit shown on line 2 for that person. Tax forms 2009 Nondeductible Premiums You cannot deduct premiums on the following kinds of insurance. Tax forms 2009 Self-insurance reserve funds. Tax forms 2009 You cannot deduct amounts credited to a reserve set up for self-insurance. Tax forms 2009 This applies even if you cannot get business insurance coverage for certain business risks. Tax forms 2009 However, your actual losses may be deductible. Tax forms 2009 See Publication 547. Tax forms 2009 Loss of earnings. Tax forms 2009 You cannot deduct premiums for a policy that pays for lost earnings due to sickness or disability. Tax forms 2009 However, see the discussion on overhead insurance, item (8), under Deductible Premiums , earlier. Tax forms 2009 Certain life insurance and annuities. Tax forms 2009 For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. Tax forms 2009 You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. Tax forms 2009 A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. Tax forms 2009 For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. Tax forms 2009 The disallowance applies without regard to whom the policy covers. Tax forms 2009 Partners. Tax forms 2009 If, as a partner in a partnership, you take out an insurance policy on your own life and name your partners as beneficiaries to induce them to retain their investments in the partnership, you are considered a beneficiary. Tax forms 2009 You cannot deduct the insurance premiums. Tax forms 2009 Insurance to secure a loan. Tax forms 2009 If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. Tax forms 2009 Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Tax forms 2009 In the event of death, the proceeds of the policy are generally not taxed as income even if they are used to liquidate the debt. Tax forms 2009 Capitalized Premiums Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Tax forms 2009 Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Tax forms 2009 You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Tax forms 2009 Indirect costs include premiums for insurance on your plant or facility, machinery, equipment, materials, property produced, or property acquired for resale. Tax forms 2009 Uniform capitalization rules. Tax forms 2009   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Tax forms 2009 Produce real property or tangible personal property. Tax forms 2009 For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Tax forms 2009 Acquire property for resale. Tax forms 2009 However, these rules do not apply to the following property. Tax forms 2009 Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Tax forms 2009 Property you produce if you meet either of the following conditions. Tax forms 2009 Your indirect costs of producing the property are $200,000 or less. Tax forms 2009 You use the cash method of accounting and do not account for inventories. Tax forms 2009 More information. Tax forms 2009   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Tax forms 2009 When To Deduct Premiums You can usually deduct insurance premiums in the tax year to which they apply. Tax forms 2009 Cash method. Tax forms 2009   If you use the cash method of accounting, you generally deduct insurance premiums in the tax year you actually paid them, even if you incurred them in an earlier year. Tax forms 2009 However, see Prepayment , later. Tax forms 2009 Accrual method. Tax forms 2009   If you use an accrual method of accounting, you cannot deduct insurance premiums before the tax year in which you incur a liability for them. Tax forms 2009 In addition, you cannot deduct insurance premiums before the tax year in which you actually pay them (unless the exception for recurring items applies). Tax forms 2009 For more information about the accrual method of accounting, see chapter 1. Tax forms 2009 For information about the exception for recurring items, see Publication 538. Tax forms 2009 Prepayment. Tax forms 2009   You cannot deduct expenses in advance, even if you pay them in advance. Tax forms 2009 This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Tax forms 2009   Expenses such as insurance are generally allocable to a period of time. Tax forms 2009 You can deduct insurance expenses for the year to which they are allocable. Tax forms 2009 Example. Tax forms 2009 In 2013, you signed a 3-year insurance contract. Tax forms 2009 Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. Tax forms 2009 You can deduct in 2014 and 2015 the premium allocable to those years. Tax forms 2009 Dividends received. Tax forms 2009   If you receive dividends from business insurance and you deducted the premiums in prior years, at least part of the dividends generally are income. Tax forms 2009 For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1 under How Much Can I Deduct. Tax forms 2009 Prev  Up  Next   Home   More Online Publications