graduate tax seminar 2017 - university of texas at …...tax seminar for graduate students...
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TaxSeminarforGraduateStudents
Education-RelatedIncomeandExpensesFebruary7,2018
Disclosure
• Thematerialspresentedintoday’sworkshopareforinformationalpurposesonlyandnotforthepurposeofprovidinglegaloraccountingadvice.Anyinformationcontainedinoraccompanyingthispresentationisnotintendedorwrittentobeusedasadvocatingforthepropertreatmentofareportingpositionuniquetoanindividualperson’scircumstances.
• Itisnotintendedorpresentedtobeused,anditcannotbeused,byanyoneforthepurposeofavoidingpenaltiesthatmaybeimposedbyfederaltaxlaw. Youshouldcontactyourattorneyortaxprofessionaltoobtainadvicewithrespecttothepropertreatmentapplicabletoanyparticularsituation.
• ThegoalofthispresentationistogiveageneraloverviewoftheU.S.federalincometaxregimewithafocusoncertainauthorizedcreditsanddeductions. Useofthisinformationdoesnotcreateanattorney-clientrelationship. AnyopinionsexpressedaretheopinionsoftheindividualauthorandmaynotreflectthepositionofTheUniversity.TheUniversityisnotresponsibleforanypositionstakenonanindividual’sreturn.
Agenda
1. Expectations2. WhatisForm1040?3. HowdoIreportmyincome?4. Forwhicheducationcredits/deductionsamIeligible?5. Exampletaxcalculation6. Briefly:AffordableCareAct7. Additionalresources
Expectations:Thisseminardoesnotcover…
1. ReportingrequirementsforinternationalstudentsØ http://world.utexas.edu/isss/tax
2. Income/deductionsoutsideofeducation-relateditems
ØWewillnottalkaboutdependents,homemortgageinterestdeductions,interestincome,dividendincome,partnershipincome,capitalgains/losses,etc.
3. Wemaybriefly discusshealthcare/taxreform
Form1040
• Personalinformation
• Filingstatus
• PresidentialElectionCampaign
• Exemptions
Education-RelatedIncome
•RA/TAwages(FormW-2)•Scholarshipandfellowshippayments(Form1098-T)•Other?Tutor/Freelance
HowdoIreportmyincome?RA/TAWages(FormW2)
TheUniversityofTexasatAustin
18,000.00 1,800.00
DD6,000.00COLINKOUTNEY
74-6000203
HowdoIreportmyincome?Scholarships/Fellowships
TheUniversityofTexasatAustin
ColinKoutney
10,000.00
30,000.00
X XUTEID
HowdoIreportmyincome?Tax-FreeFellowships/Scholarships
Ascholarshiporfellowshipistax-freeonlyif:
1. Youareacandidateforadegreeataneligibleeducationinstitution,
2. Youusethescholarshiporfellowshiptopayqualifiededucationexpenses,and
3. Itdoesnotrepresentpaymentforteaching,researchorotherservices(fee-for-service)requiredasaconditionforreceivingthescholarship
HowdoIreportmyincome?Tax-FreeFellowships/Scholarships
WhatareQualifiedEducationExpenses?• Forpurposesoftax-freescholarshipsorfellowships,theseareexpensesfor:
• Tuitionandfeesrequiredtoenrollatorattendaneligibleeducationalinstitution(see1098-T),and
• Course-relatedexpenses,suchasfees,books,suppliesandequipmentthatarerequiredforthecoursesattheeligibleeducationalinstitution• TheseitemsMUSTbeREQUIRED ofallstudentsinyourcourseofinstruction
HowdoIreportmyincome?Tax-FreeFellowships/Scholarships
WhatareNOT QualifiedEducationExpenses?
• Roomandboard,• Travel,• Research,• Clericalhelp,or• Equipmentorotherexpensesthatarenotrequiredforenrollmentinorattendanceataneligibleeducationalinstitution
HowdoIreportmyincome?Scholarships/Fellowships
30,000
030,000
30,0000
20,000
10,000
10,00020,000
TaxableScholarships/FellowshipsgotoLine7ofForm1040
SCH20,000 38,000
ForwhichcreditsanddeductionsamIeligible?
Education-RelatedDeductions&Credits
•AmericanOpportunityCredit• LifetimeLearningCredit• Studentloaninterestdeduction• Tuitionandfeesdeduction
Whatisthedifferencebetweenacreditandadeduction?
•Ataxdeduction reducesyourtaxableincome• Itsvalue(yourtaxsavings)willdependonyourtaxrate
•Ataxcredit directlyreducesyourtaxliability• Each$1oftaxcreditreducesyourtaxliabilityby$1
Whatisthedifferencebetweenacreditandadeduction?
Baseline TaxDeduction TaxCredit
Income 1,000 1,000 1,000
TaxDeduction 0 (100) 0
TaxableIncome 1,000 900 1,000
TaxDue(20%) 200 180 200
TaxCredit 0 0 (100)
TotalTaxDue 200 180 100
Whatisthedifferencebetweenacreditandadeduction?
Baseline TaxDeduction TaxCredit
Income 1,000 1,000 1,000
TaxDeduction 0 (100) 0
TaxableIncome 1,000 900 1,000
TaxDue(10%) 100 90 100
TaxCredit 0 0 (100)
TotalTaxDue 100 90 0
Forwhichcredits amIeligible?NoDoubleBenefits!!!!
• Youcannot:• ClaimaLifetimeLearningCreditand AmericanOpportunityCreditduringthesameyear
• Claimacreditbasedonqualifiededucationexpensespaidwithtax-freeeducationalassistance(suchasafellowship/scholarship)
•UseForm8863toclaimeithercredit
ForwhichcreditsamIeligible?
ForwhichcreditsamIeligible?AmericanOpportunityCredit
•AvailableONLYforthefirst4yearsofpostsecondaryeducation(mostuseinundergrad)•Mustbepursuingadegree•Mustbeenrolledatleasthalf-time•Qualifiededucationexpenses• Tuitionandfeesrequiredforthestudent'senrollmentorattendanceataneligibleeducationalinstitution• Books,supplies,andequipmentneededforacourseofstudy,whetherornotthematerialsarepurchasedfromtheeducationalinstitutionasaconditionofenrollmentorattendance
ForwhichcreditsamIeligible?AmericanOpportunityCredit
•Maximumamountofthecreditis$2,500perperson
•Calculation:• 100%creditforthefirst$2,000ofqualifiededucationexpensespaidbytheeligiblestudent,and• 25%creditforthenext$2,000ofqualifiededucationexpensespaidbytheeligiblestudent
• Ifyoupaidatleast$4,000inqualifiededucationexpenses,youcanclaimthefullcredit
ForwhichcreditsamIeligible?LifetimeLearningCredit
•Availableforallyearsofpostsecondaryeducationandforcoursestoacquireorimprovejobskills• Unlimitednumberofyears
• Studentdoesnotneedtobepursuingadegreeorothereducationalcredential•Qualifiededucationexpenses:• Tuitionandfeesrequiredforthestudent'senrollmentorattendanceataneligibleeducationalinstitution• Books,supplies,andequipmentonlyifrequiredtobepaidtotheinstitutionasaconditionofenrollmentorattendance
ForwhichcreditsamIeligible?LifetimeLearningCredit
•Maximumof$2,000perreturn
•Calculation:•20%ofthefirst$10,000ofqualifiededucationexpenses
ForwhichdeductionsamIeligible?StudentLoanInterestDeduction
•QualifiedEducationExpensesforstudentloansaredifferent!!• Tuitionandfees• Roomandboard• Nomorethanthegreaterof(1)themaxlistedbyUTaspartof“costofattendance”or(2)theactualamountpaidtohousingownedandoperatedbytheuniversity
• Requiredbooks,suppliesandequipment• Othernecessaryexpenses(suchastransportation)
ForwhichcreditsanddeductionsamIeligible?StudentLoanInterestDeduction
•Maxbenefitis$2,500• Lesserof$2,500ortheinterestyoupaidintheyear• Checkform1098-E
• Yourstudentloan:• Musthavebeentakenoutsolelytopayqualifiededucationexpenses,and• Cannotbefromarelatedpersonormadeunderaqualifiedemployerplan
• Enrolledatleasthalf-timeinadegreeprogram
ForwhichdeductionsamIeligible?StudentLoanInterestDeduction
Overview:WhatshouldIdo?
•Remember:youcan’tdouble-dip!
• Qualifiededucation-relatedexpensescanonlybeusedtowardonepurpose• Reducingtaxableamountofscholarship/fellowship• LifetimeLearningCreditorAmericanOpportunityCredit• StudentLoanInterestDeduction• Roomandboardcounts!
•A$1credit willreduceyourtaxexpenseby$1whereasa$1deduction willreduceyourtaxexpensebylessthan$1.
HowdoIproceed?
• Ingeneral,acreditisbetterthanadeduction,sowhenattackingyourtaxreturn,lookatyourcreditopportunitiesfirst.
• Let’sdoanexample!
Example:KatieFacts
•Katieissinglewithnochildren.
• Shereceived$30,000fellowshipincome,$25,000RAincomeandpaid$21,000inqualifiededucationexpenses.
• Shedoesnothaveastudentloan.
Example:KatieFacts,Continued
• Somebasics:• Everyoneisentitledtoastandarddeductionof$6,300andpersonalexemptionof$4,000• Taxratescheduleforsingle-filers2015:
IfTaxableIncomeis: TheTaxis:
Below$9,225 10% oftaxableincome
Over$9,225 butbelow$37,450 $922.50+15% ofexcessover$9,225
Over$37,450but below$90,750 $5,156.25+25%ofexcess over$37,450
Over$90,750butbelow$189,300 $18,481.25+28%ofexcessover$90,750
Over$189,300butbelow $411,500 $46,075.25+33%ofexcessover$189,300
Over$411,500butbelow$413,200 $119,401.25+35%ofexcessover $411,500
Greaterthan$413,200 $119,996.25+39.6%ofexcess over$413,200
Example:KatieHowtoreport:• Katieoffsetsherfellowshipwithherqualifiededucationexpenses.
Form1040 Description Amount Calculation
Line7 Income $34,000 $30,000- $21,000+$25,000
Line33 Studentloaninterest $0
Line34 Tuitionandfees $0
Line40 Standarddeduction $6,300
Line42 Personal exemption $4,000
Line43 Taxableincome $23,700 $34,000- $6,300 - $4,000
Line44 Tax $3,094 $922.50+15%[$23,700 - $9,225]
Line50 Educationcredits $0
Line78 Amountdue $3,094
AffordableCareAct• Requiredtohavehealthcareeachmonthof2017(youand yourdependents)
• Eligiblecoverageincludesplansprovidedbyanemployer,HealthInsuranceMarketplacecoverage,andgovernment-sponsoredprograms,suchasMedicareorMedicaid
• Ifyouhadhealthcareforthefullyear,simplychecktheboxonline61andleavetheamountblank
• Employer-providedhealthcoverageisreportedtoyouonform1095-C
AffordableCareAct• Ifyoudidnothavehealthcareforthefullyear,thenyouarerequiredtomakeaSharedResponsibilityPaymentunlessyouqualifyforanexemption• Thepaymentisthegreater of:
• $695peradultand$347.50perchild,or• 2.5%*[householdincome- filingthreshold]
• FileForm8965toreportorclaimexemptions• SeeInstructionsofForm8965forcompletecalculationofSharedResponsibilityPayment
MoreInformation:http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/ACA-Individual-Shared-Responsibility-Provision-Calculating-the-Payment
TaxReform
• StandardDeductionfor2018• Jointfiler:$24,000• Singlefiler:$12,000
• Nopersonalexemptions• Mostindividualprovisionssunsetafter2025
AdditionalResources
• VITA:http://foundcom.org/financial-stability/austin-tax-preparation/
• IRSwebsite:• www.irs.gov• Allformsandinstructions• Publication970includesalleducation-relatedexplanations,creditsanddeductions• AppendixBhasaniceoverviewofthecredits/deductions• Interactivecalculator:http://www.irs.gov/uac/Am-I-Eligible-to-Claim-an-Education-Credit%3F
• Publication17coversindividualtaxesmorebroadly