Tax Credit & Deduction Help

Does my purchase qualify for the Energy Credit?

The easiest way to know if a purchase meets the energy efficiency criteria is if the manufacturer has a certification statement included in the packaging or a certificate that can be downloaded from the company website where it proves that the material you bought qualifies for the credit. Keep the manufacturer's certification document with your tax records. Don't mail the manufacturer's certification to the IRS with your tax return when you claim the credit.

What if my parents claim me as a dependent?

If you answered "Yes" to the question on the Taxpayer Information screen that asks if your parents can claim you as a dependent, then you are not eligible to take an Education Credit on your tax return. Your parents, or whoever claims you as a dependent, are the ones eligible to claim the Education Credit on their tax return.

Why isn't my name listed so I can enter my tuition expenses?

On the Taxpayer Information screen, if you answered "Yes" to the question that asks if you can be claimed as a dependent on your parent's tax return, then you will not be eligible to take an education credit or deduction. Your parents, or whoever claims you as a dependent, is eligible to claim the education credit or deduction for the tuition paid for you whether you or your parents paid the actual tuition.

Why do I need to enter my child care provider information?

If child care provider information is not entered, your e-filed tax return that has a Dependent Care Credit on it may be rejected. If the return is accepted by the IRS, the credit may later be disallowed unless you can prove due diligence in trying to obtain the child care provider information. You need to get your child care provider's Employer Identification number or Social Security number to include on your tax return if you're claiming the Dependent Care Credit.

Why is "Is Student" listed as N/A?

If your child is age 24 or older as of December 31, 2012, the "Is Student" question doesn't apply to your child in calculating the Earned Income Credit so that question is listed as N/A. The "Is Student" question only applies if your child is age 19 through age 23 as of December 31, 2012. If your child was a student during 2012, then your child still could qualify for the Earned Income Credit even though your child is over age 18.

Do I qualify for the Educator Expense Deduction?

Full-time (900 hours during a school year) kindergarten through 12th grade teachers, counselors, principals, or aides can deduct up to $250 for out of pocket expenses that they pay for supplies, books, equipment, and materials used in their classroom. Qualified expenses don't include expenses for home schooling or nonathletic supplies for courses in health or physical education. Don't include expenses that were reimbursed.

What is deductible student loan interest?

If your parents don't claim you as a dependent, then your student loan interest is fully deductible if your adjusted gross income is below $60,000 (single) or $125,000 (married).

If your adjusted gross income is between $60,000 and $75,000 (single) or $125,000 and $150,000 (married), you will get a partial deduction for student loan interest. The maximum amount of deductible interest is $2,500 for 2012.

Interest from loans that you took out to pay for the qualified education expenses for yourself, your spouse, or your dependents, count for deductible student loan interest.

Are my alimony payments deductible?

Alimony payments are deductible if the following requirements are met:
  1. The payments are in cash (check, money order, etc.)
  2. Required by a divorce or separation instrument.
  3. The payments are not for child support.
  4. The payments are not part of the property settlement payments related to the divorce.
  5. You and your (ex)spouse aren't members of the same household and don't file a joint tax return.
  6. You aren't liable to make any payments for any period after the death of your ex-spouse.
One item to note is that if you owe both alimony and child support, and you pay less than the amounts required during the year, then the amounts paid are first applied to your child support obligation before being applied to alimony.

Moving Expenses (Work-Related)

Qualified work-related moving expenses are limited to transportation costs for your family and belongings, packing costs, certain lodging costs, and certain storage costs. You can either deduct your actual automobile expense (gas and oil) or the standard mileage deduction of 23 cents a mile. For lodging costs, you can deduct the lodging expense for the night before you moved, the nights during the move, and the night after you arrive at your new city. For storage costs, you can deduct the first 30 days of storage expense. Other expenses such as meals, temporary living costs, and house hunting trips are not deductible.

To qualify as moving expenses, the move must be job related, meet the 50 mile test, and meet the time test. The 50 mile test is met if the distance from your old home to your new workplace minus the distance from your old home to your old workplace is greater than 50 miles. The time test is met if you work full-time for 39 weeks in your new hometown during the first 12 months after your move.

Are child care expenses paid to a family member eligible for the Child Care Credit?

Yes, if the family member is not your dependent, and you meet all the tests to claim the Child and Dependent Care Credit. Your family member will be responsible for paying taxes on the money earned and will be considered to be self employed.

Can I claim the Child and Dependent Care Credit?

If you paid someone to care for your dependent who was under age 13 (or a disabled dependent age 13 or older) so that you could work or look for work, you may be able to claim the Credit for Child and Dependent Care Expenses.

My ex-spouse claims my child as a dependent, but my child lives with me. Can I still claim the Child and Dependent Care Credit?

If you are the parent who had custody of your child for the greater part of the year (the custodial parent), you can claim the Child and Dependent Care Credit even if your divorce decree allows your ex-spouse to claim the child as a dependent.

Should I choose the American Opportunity Credit, Lifetime Learning Credit, or Education Deduction?

If a student qualifies for the American Opportunity Credit, the American Opportunity Credit is almost always the best option. However, it depends on each taxpayer's situation whether the American Opportunity Credit, Lifetime Learning Credit, or Education Deduction is the most beneficial.

Can I choose the Lifetime Learning Credit for one student and the Education Deduction for a different student?

Yes. The choice of whether to do the Lifetime Learning Credit, American Opportunit Credit, or Education Deduction is made for each student.

What expenses qualify for the Education Credits or Education Deduction?

Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other post-secondary educational institution eligible to participate in the student aid programs administered by the Department of Education.

For the American Opportunity Credit, eligible expenses also include expenses for course materials such as books, supplies and equipment needed for a course of study.

Qualified expenses do not include room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses.

What if I paid part or all of my tuition using a scholarship?

If you pay higher education expenses with scholarship funds, you can't claim the American Opportunity Credit, Lifetime Learning Credit, or Education Deduction for those amounts. If only part of your tuition was covered by a scholarship, you can claim a credit or deduction for the tuition you paid.

Do I need Form 1098-T from my child's college before I can claim the American Opportunity Credit, Lifetime Learning Credit, or Education Deduction?

No. There is no requirement that you receive Form 1098-T before you claim the American Opportunity Credit, Lifetime Learning Credit or the Education Deduction. If you know the amount of tuition paid to the college you can enter that amount on the Additional Tuition Expenses screen in the College Tuition (Form 1098-T) section.

I paid my college tuition with a student loan. Can I claim the American Opportunity or Lifetime Learning Credit or Education Deduction?

Yes, if you meet all of the other eligibility requirements to claim an education credit or deduction. The American Opportunity or Lifetime Learning Credit or Education Deduction is taken in the year in which the expenses are paid, not in the year in which the loan is repaid.

Do I need to claim my child as a dependent to take any of the education credits or deductions?

Yes, you must claim your child as a dependent to take the American Opportunity Credit, Lifetime Learning Credit, or Education Deduction for that child.

What is the Hope Credit, and can I claim the Hope Credit?

The Hope Credit has replaced by the better American Opportunity Credit in 2010.

What is the Lifetime Learning Credit, and can I claim the Lifetime Learning Credit?

A credit of up to $2,000 is available for qualified education expenses paid during a year that the American Opportunity Credit or Education Deduction is not claimed for that particular student. The credit is 20% of qualified expenses up to $10,000 (for a total allowable credit of $2,000).

An eligible student can be you, your spouse, or an eligible dependent. The qualified expenses are for all undergraduate and graduate level education. The credit phases out for Married Filing Jointly taxpayers with adjusted gross income between $104,000 and $124,000. For Single, Head of Household, or Qualifying Widow(er) taxpayers, the adjusted gross income phase out is between $52,000 and $62,000.

What is the Education Deduction?

Up to $4,000 in qualified education expenses can be deducted on your tax return if your modified adjusted gross income is not more than $65,000 ($130,000 if married). If your modified adjusted gross income is higher than $65,000 but less than $80,000 ($160,000 if married), you can deduct up to $2,000 of qualified education expenses. Just enter your qualified education expenses and we'll calculate if you are eligible. If you choose to deduct the education expenses, you can not take the American Opportunity Credit or Lifetime Learning Credit on the same student's education expenses.

Are there income limitations for being able to claim the American Opportunity Credit, Lifetime Learning Credit, or Education Deduction?

The American Opportunity Credit phases out for Married Filing Jointly taxpayers with an adjusted gross income between $160,000 and $180,000. ForSingle, Head of Household or Qualifying Widow(er) taxpayers, the adjusted gross income phase out is between $80,000 and $90,000.

Lifetime Learning Credits phase out for Married Filing Jointly taxpayers with an adjusted gross income between $104,000 and $124,000. For Single, Head of Household or Qualifying Widow(er) taxpayers, the adjusted gross income phase out is between $52,000 and $62,000.

The Education Deduction cannot be taken if your modified adjusted gross income is more than $80,000 ($160,000 if Married).

What is a qualifying child for the Earned Income Credit (EIC)?

A qualifying child for the EIC is a child who meets the following 3 tests:
  1. Is a son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece or nephew)
  2. Lived with you in the United States for more than half of 2012
  3. Was under age 19 at the end of 2012, was under age 24 and a student at the end of 2012, or any age and permanently and totally disabled
A child is considered to have lived with you for all of 2012 if the child was born or died in 2012 and your home was this child's home for the entire time he or she was alive in 2012. Temporary absences for special circumstances, such as for school, vacation, medical care, military service, or detention in a juvenile facility, count as time lived at home.

To be your qualifying child, a child must be younger than you unless the child is permanently and totally disabled.

A child cannot be your qualifying child if he or she files a joint return, unless the return was filed only as a claim for refund.

What if my child lived half the year with me and half the year with my ex-spouse?

In order to claim your child for the Earned Income Credit, your child must have lived with you for more than half of the year. So, if your child lived with you for 6 months and 1 day during 2012, you are eligible to claim your child for the Earned Income Credit.

If your child lived with you for more than 6 months (6 months and a day) and less than 8 months, select 7 months as the time your child lived with you.

What if I'm a member of the military?

If you are a member of the military on extended active duty outside of the United States, your home is considered to be in the United States.

You can use your home state as your resident state for tax purposes even though you may not have lived in your home state during the tax year.

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