Adjustments to Income

The three chapters in this part discuss some of the adjustments to income that you can deduct in figuring your adjusted gross income. These chapters cover:

Contributions you make to traditional individual retirement arrangements (IRAs) — chapter 17,
Alimony you pay — chapter 18, and
Student loan interest you pay — chapter 19.

Other adjustments to income are discussed elsewhere. See Table V.

Table V. Other Adjustments to Income

Use this table to find information about other adjustments to income not covered in this part of the publication.

IF you are looking for more information about the deduction for…	THEN see…
certain business expenses of reservists, performing artists, and fee-basis officials	chapter 26.
contributions to a health savings account	Pub. 969, Health Savings Accounts and Other Tax-Favored Health Plans.
moving expenses	Pub. 521, Moving Expenses.
part of your self-employment tax	chapter 22.
self-employed health insurance	chapter 21.
payments to self-employed SEP, SIMPLE, and qualified plans	Pub. 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).
penalty on the early withdrawal of savings	chapter 7.
contributions to an Archer MSA	Pub. 969.
reforestation amortization or expense	chapters 7 and 8 of Pub. 535, Business Expenses.
contributions to Internal Revenue Code section 501(c)(18)(D) pension plans	Pub. 525, Taxable and Nontaxable Income.
expenses from the rental of personal property	chapter 12.
certain required repayments of supplemental unemployment benefits (sub-pay)	chapter 12.
foreign housing costs	chapter 4 of Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
jury duty pay given to your employer	chapter 12.
contributions by certain chaplains to Internal Revenue Code section 403(b) plans	Pub. 517, Social Security and Other Information for Members of the Clergy and Religious Workers.
attorney fees and certain costs for actions involving certain unlawful discrimination claims or awards to whistleblowers	Pub. 525.
domestic production activities deduction	Form 8903, Domestic Production Activities Deduction.

17. Individual Retirement Arrangements (IRAs)

What’s New for 2017

At the time this publication went to print, Congress was considering legislation that would do the following.

Provide additional tax relief for those affected by Hurricane Harvey, Irma, or Maria, and tax relief for those affected by other 2017 disasters, such as the California wildfires.
Extend certain tax benefits that expired at the end of 2016 and that currently can’t be claimed on your 2017 tax return, including the tuition and fees deduction.
Change certain other tax provisions.

To learn whether this legislation was enacted resulting in changes that affect your 2017 tax return, go to Recent Developments at IRS.gov/Pub17.

Modified AGI limit for traditional IRA contributions. For 2017, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:

More than $99,000 but less than $119,000 for a married couple filing a joint return or a qualifying widow(er),
More than $62,000 but less than $72,000 for a single individual or head of household, or
Less than $10,000 for a married individual filing a separate return.

If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work but you aren’t, your deduction is phased out if your modified AGI is more than $186,000 but less than $196,000. If your modified AGI is $196,000 or more, you can’t take a deduction for contributions to a traditional IRA. See How Much Can You Deduct , later.

Modified AGI limit for Roth IRA contributions. For 2017, your Roth IRA contribution limit is reduced (phased out) in the following situations.

Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $186,000. You can’t make a Roth IRA contribution if your modified AGI is $196,000 or more.
Your filing status is single, head of household, or married filing separately and you didn’t live with your spouse at any time in 2017 and your modified AGI is at least $118,000. You can’t make a Roth IRA contribution if your modified AGI is $133,000 or more.
Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You can’t make a Roth IRA contribution if your modified AGI is $10,000 or more.

See Can You Contribute to a Roth IRA , later.

Reminders

2018 limits. You can find information about the 2018 contribution and AGI limits in Pub. 590-A.

Contributions to both traditional and Roth IRAs. For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs , later.

Statement of required minimum distribution. If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. The report or offer must include the date by which the amount must be distributed. The report is due January 31 of the year in which the minimum distribution is required. It can be provided with the year-end fair market value statement that you normally get each year. No report is required for IRAs of owners who have died.

Application of one-rollover-per-year limitation. You can make only one rollover from an IRA to another (or the same) IRA in any 1-year period regardless of the number of IRAs you own. However, you can continue to make unlimited trustee-to-trustee transfers between IRAs because this type of transfer isn’t considered a rollover. Furthermore, there is no limit on the number of rollovers from a traditional IRA to a Roth IRA (also known as conversions). For more information, see Application of one-rollover limitation , later.

IRA interest. Although interest earned from your IRA is generally not taxed in the year earned, it isn’t tax-exempt interest. Tax on your traditional IRA is generally deferred until you take a distribution. Don’t report this interest on your tax return as tax-exempt interest.

Net Investment Income Tax. For purposes of the Net Investment Income Tax (NIIT), net investment income doesn’t include distributions from a qualified retirement plan including IRAs (for example, 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). However, these distributions are taken into account when determining the modified adjusted gross income threshold. Distributions from a nonqualified retirement plan are included in net investment income. See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information.

Form 8606. To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs.

The term “50 or older” is used several times in this chapter. It refers to an IRA owner who is age 50 or older by the end of the tax year.

Introduction

An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement.

This chapter discusses the following topics.

The rules for a traditional IRA (any IRA that isn’t a Roth or SIMPLE IRA).
The Roth IRA, which features nondeductible contributions and tax-free distributions.

Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) aren’t discussed in this chapter. For more information on these plans and employees’ SEP IRAs and SIMPLE IRAs that are part of these plans, see Pub. 560, Retirement Plans for Small Business.

For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Pub. 590-A and Pub. 590-B.

Useful Items – You may want to see:

Publication

560Retirement Plans for Small Business
590-AContributions to Individual Retirement Arrangements (IRAs)
590-BDistributions from Individual Retirement Arrangements (IRAs)

Form (and Instructions)

5329Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
8606Nondeductible IRAs

Traditional IRAs

In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA.” A traditional IRA is any IRA that isn’t a Roth IRA or a SIMPLE IRA.Two advantages of a traditional IRA are:

You may be able to deduct some or all of your contributions to it, depending on your circumstances; and
Generally, amounts in your IRA, including earnings and gains, aren’t taxed until they are distributed.

Who Can Open a Traditional IRA?

You can open and make contributions to a traditional IRA if:

You (or, if you file a joint return, your spouse) received taxable compensation during the year, and
You weren’t age 70½ by the end of the year.

What is compensation?

Generally, compensation is what you earn from working. Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that this amount is reduced by any amount properly shown in box 11 (Nonqualified plans).

Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2.

Compensation also includes commissions and taxable alimony and separate maintenance payments.

Self-employment income.

If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of:

The deduction for contributions made on your behalf to retirement plans, and
The deductible part of your self-employment tax.

Compensation includes earnings from self-employment even if they aren’t subject to self-employment tax because of your religious beliefs.

Nontaxable combat pay.

For IRA purposes, if you were a member of the U.S. Armed Forces, your compensation includes any nontaxable combat pay you receive.

What isn’t compensation?

Compensation doesn’t include any of the following items.

Earnings and profits from property, such as rental income, interest income, and dividend income.
Pension or annuity income.
Deferred compensation received (compensation payments postponed from a past year).
Income from a partnership for which you don’t provide services that are a material income-producing factor.
Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b.
Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs.

When and How Can a Traditional IRA Be Opened?

You can open a traditional IRA at any time. However, the time for making contributions for any year is limited. See When Can Contributions Be Made , later.

You can open different kinds of IRAs with a variety of organizations. You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. You can also open an IRA through your stockbroker. Any IRA must meet Internal Revenue Code requirements.

Kinds of traditional IRAs.

Your traditional IRA can be an individual retirement account or annuity. It can be part of either a SEP or an employer or employee association trust account.

How Much Can Be Contributed?

There are limits and other rules that affect the amount that can be contributed to a traditional IRA. These limits and other rules are explained below.

Community property laws.

Except as discussed later under Kay Bailey Hutchison Spousal IRA limit , each spouse figures his or her limit separately, using his or her own compensation. This is the rule even in states with community property laws.

Brokers’ commissions.

Brokers’ commissions paid in connection with your traditional IRA are subject to the contribution limit.

Trustees’ fees.

Trustees’ administrative fees aren’t subject to the contribution limit.

Qualified reservist repayments.

If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement.

For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Pub. 590-A.

Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. (See Roth IRAs, later.)

General limit.

For 2017, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts.

$5,500 ($6,500 if you are 50 or older).
Your taxable compensation (defined earlier) for the year.

This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. (See Nondeductible Contributions , later.) Qualified reservist repayments don’t affect this limit.

Example 1.

Betty, who is 34 years old and single, earned $24,000 in 2017. Her IRA contributions for 2017 are limited to $5,500.

Example 2.

John, an unmarried college student working part time, earned $3,500 in 2017. His IRA contributions for 2017 are limited to $3,500, the amount of his compensation.

Kay Bailey Hutchison Spousal IRA limit.

For 2017, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts.

$5,500 ($6,500 if you are 50 or older).
The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts.
1. Your spouse’s IRA contribution for the year to a traditional IRA.
2. Any contribution for the year to a Roth IRA on behalf of your spouse.

This means that the total combined contributions that can be made for the year to your IRA and your spouse’s IRA can be as much as $11,000 ($12,000 if only one of you is 50 or older, or $13,000 if both of you are 50 or older).

When Can Contributions Be Made?

As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Contributions must be in the form of money (cash, check, or money order). Property can’t be contributed.

Contributions must be made by due date.

Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions.

Age 70½ rule.

Contributions can’t be made to your traditional IRA for the year in which you reach age 70½ or for any later year.

You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. If you were born on or before June 30, 1947, you can’t contribute for 2017 or any later year.

Designating year for which contribution is made.

If an amount is contributed to your traditional IRA between January 1 and April 17, you should tell the sponsor which year (the current year or the previous year) the contribution is for. If you don’t tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it).

Filing before a contribution is made.

You can file your return claiming a traditional IRA contribution before the contribution is actually made. Generally, the contribution must be made by the due date of your return, not including extensions.

Contributions not required.

You don’t have to contribute to your traditional IRA for every tax year, even if you can.

How Much Can You Deduct?

Generally, you can deduct the lesser of:

The contributions to your traditional IRA for the year, or
The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if it applies).

However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. See Limit if Covered by Employer Plan , later.

You may be able to claim a credit for contributions to your traditional IRA. For more information, see chapter 38.

Trustees’ fees.

Trustees’ administrative fees that are billed separately and paid in connection with your traditional IRA aren’t deductible as IRA contributions. However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). See chapter 28.

Brokers’ commissions.

Brokers’ commissions are part of your IRA contribution and, as such, are deductible subject to the limits.

Full deduction.

If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of:

$5,500 ($6,500 if you are age 50 or older in 2017).
100% of your compensation.

This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf.

Kay Bailey Hutchison Spousal IRA.

In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts.

$5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2017).
The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts.
1. The IRA deduction for the year of the spouse with the greater compensation.
2. Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation.
3. Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation.

This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation.

Note.

If you were divorced or legally separated (and didn’t remarry) before the end of the year, you can’t deduct any contributions to your spouse’s IRA. After a divorce or legal separation, you can deduct only contributions to your own IRA. Your deductions are subject to the rules for single individuals.

Covered by an employer retirement plan.

If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. This is discussed later under Limit if Covered by Employer Plan . Limits on the amount you can deduct don’t affect the amount that can be contributed. See Nondeductible Contributions , later.

Are You Covered by an Employer Plan?

The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. The “Retirement plan” box should be checked if you were covered.

Reservists and volunteer firefighters should also see Situations in Which You Aren’t Covered by an Employer Plan , later.

If you aren’t certain whether you were covered by your employer’s retirement plan, you should ask your employer.

Federal judges.

For purposes of the IRA deduction, federal judges are covered by an employer retirement plan.

For Which Year(s) Are You Covered?

Special rules apply to determine the tax years for which you are covered by an employer plan. These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan.

Tax year.

Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. For almost all people, the tax year is the calendar year.

Defined contribution plan.

Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year.

A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans.

Defined benefit plan.

If you are eligible to participate in your employer’s defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. This rule applies even if you:

Declined to participate in the plan,
Didn’t make a required contribution, or
Didn’t perform the minimum service required to accrue a benefit for the year.

A defined benefit plan is any plan that isn’t a defined contribution plan. Defined benefit plans include pension plans and annuity plans.

No vested interest.

If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual.

Situations in Which You Aren’t Covered

Unless you are covered under another employer plan, you aren’t covered by an employer plan if you are in one of the situations described below.

Social security or railroad retirement.

Coverage under social security or railroad retirement isn’t coverage under an employer retirement plan.

Benefits from a previous employer’s plan.

If you receive retirement benefits from a previous employer’s plan, you aren’t covered by that plan.

Reservists.

If the only reason you participate in a plan is because you are a member of a reserve unit of the armed forces, you may not be covered by the plan. You aren’t covered by the plan if both of the following conditions are met.

The plan you participate in is established for its employees by:
1. The United States,
2. A state or political subdivision of a state, or
3. An instrumentality of either (a) or (b) above.
You didn’t serve more than 90 days on active duty during the year (not counting duty for training).

Volunteer firefighters.

If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. You aren’t covered by the plan if both of the following conditions are met.

The plan you participate in is established for its employees by:
1. The United States,
2. A state or political subdivision of a state, or
3. An instrumentality of either (a) or (b) above.
Your accrued retirement benefits at the beginning of the year won’t provide more than $1,800 per year at retirement.

Limit if Covered by Employer Plan

If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status.

Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. These amounts vary depending on your filing status.

To determine if your deduction is subject to phaseout, you must determine your modified AGI and your filing status. See Filing status and Modified adjusted gross income (AGI) , later. Then use Table 17-1 or Table 17-2 to determine if the phaseout applies.

Social security recipients.

Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Pub. 590-A if, for the year, all of the following apply.

You received social security benefits.
You received taxable compensation.
Contributions were made to your traditional IRA.
You or your spouse was covered by an employer retirement plan.

Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits.

Deduction phaseout.

If you are covered by an employer retirement plan and you didn’t receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1.

Table 17-1. Effect of Modified AGI¹ on Deduction if You Are Covered by Retirement Plan at Work

If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.

IF your filing status is…	AND your modified AGI is…	THEN you can take…
Single or Head of household	$62,000 or less	a full deduction.
	more than $62,000 but less than $72,000	a partial deduction.
	$72,000 or more	no deduction.
Married filing jointly or Qualifying widow(er)	$99,000 or less	a full deduction.
	more than $99,000 but less than $119,000	a partial deduction.
	$119,000 or more	no deduction.
Married filing separately²	less than $10,000	a partial deduction.
Married filing separately²	$10,000 or more	no deduction.
¹Modified AGI (adjusted gross income). See Modified adjusted gross income (AGI) , later.
²If you didn’t live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” column).

If your spouse is covered.

If you aren’t covered by an employer retirement plan, but your spouse is, and you didn’t receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2.

Filing status.

Your filing status depends primarily on your marital status. For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. If you need more information on filing status, see chapter 2.

Lived apart from spouse.

If you didn’t live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single.

Table 17-2. Effect of Modified AGI¹ on Deduction if You Are NOT Covered by Retirement Plan at Work

If you aren’t covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.

IF your filing status is…	AND your modified AGI is…	THEN you can take…
Single, Head of household, or Qualifying widow(er)	any amount	a full deduction.
Married filing jointly or separately with a spouse who isn’tcovered by a plan at work	any amount	a full deduction.
Married filing jointly with a spouse who is covered by a plan at work	$186,000 or less	a full deduction.
	more than $186,000 but less than $196,000	a partial deduction.
	$196,000 or more	no deduction.
Married filing separately with a spouse who is covered by a plan at work²	less than $10,000	a partial deduction.
	$10,000 or more	no deduction.
¹Modified AGI (adjusted gross income). See Modified adjusted gross income (AGI) , later.
²You are entitled to the full deduction if you didn’t live with your spouse at any time during the year.

Modified adjusted gross income (AGI).

How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. If you made contributions to your IRA for 2017 and received a distribution from your IRA in 2017, see Pub. 590-A. You may be able to use Worksheet 17-1 to figure your modified AGI.

Don’t assume that your modified AGI is the same as your compensation. Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions.

Form 1040.

If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts.

IRA deduction.
Student loan interest deduction.
Domestic production activities deduction.
Foreign earned income exclusion.
Foreign housing exclusion or deduction.
Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989.
Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses.

This is your modified AGI.

At the time this publication was prepared for printing, Congress was considering legislation that would extend the deduction for tuition and fees, which expired at the end of 2016. To see if the legislation was enacted, go to Recent Developments at IRS.gov/Pub17.

Form 1040A.

If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts.

IRA deduction.
Student loan interest deduction.
Exclusion of qualified savings bond interest shown on Form 8815.

This is your modified AGI.

Both contributions for 2017 and distributions in 2017.

If all three of the following apply, any IRA distributions you received in 2017 may be partly tax free and partly taxable.

You received distributions in 2017 from one or more traditional IRAs.
You made contributions to a traditional IRA for 2017.
Some of those contributions may be nondeductible contributions.

If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. To do this, you can use Worksheet 1-1, Figuring the Taxable Part of Your IRA Distribution, in Pub. 590-B.

If at least one of the above doesn’t apply, figure your modified AGI using Worksheet 17-1.

How to figure your reduced IRA deduction.

You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Pub. 590-A. Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead.

Worksheet 17-1. Figuring Your Modified AGI

Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes.

1.	Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17	1.
2.	Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18	2.
3.	Enter any domestic production activities deduction from Form 1040, line 35	3.
4.	Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18	4.
5.	Enter any foreign housing deduction from Form 2555, line 50	5.
6.	Enter any excludable savings bond interest from Form 8815, line 14	6.
7.	Enter any excluded employer-provided adoption benefits from Form 8839, line 28	7.
8.	Add lines 1 through 7. This is your modified AGI for traditional IRA purposes	8.

Reporting Deductible Contributions

If you file Form 1040, enter your IRA deduction on line 32 of that form. If you file Form 1040A, enter your IRA deduction on line 17. You can’t deduct IRA contributions on Form 1040EZ.

Nondeductible Contributions

Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution.

Example.

Mike is 30 years old and single. In 2017, he was covered by a retirement plan at work. His salary was $67,000. His modified AGI was $80,000. Mike made a $5,500 IRA contribution for 2017. Because he was covered by a retirement plan and his modified AGI was over $72,000, he can’t deduct his $5,500 IRA contribution. He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next.

Form 8606.

To designate contributions as nondeductible, you must file Form 8606.

You don’t have to designate a contribution as nondeductible until you file your tax return. When you file, you can even designate otherwise deductible contributions as nondeductible.

You must file Form 8606 to report nondeductible contributions even if you don’t have to file a tax return for the year.

A Form 8606 isn’t used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. See Form 8606 under Distributions Fully or Partly Taxable, later.

Failure to report nondeductible contributions.

If you don’t report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made.

Penalty for overstatement.

If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause.

Penalty for failure to file Form 8606.

You will have to pay a $50 penalty if you don’t file a required Form 8606, unless you can prove that the failure was due to reasonable cause.
Tax on earnings on nondeductible contributions.

As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. See When Can You Withdraw or Use IRA Assets , later.

Cost basis.

You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions.

Inherited IRAs

If you inherit a traditional IRA, you are called a beneficiary. A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive.

Inherited from spouse.

If you inherit a traditional IRA from your spouse, you generally have the following three choices. You can:

Treat it as your own IRA by designating yourself as the account owner.
Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a:
1. Qualified employer plan,
2. Qualified employee annuity plan (section 403(a) plan),
3. Tax-sheltered annuity plan (section 403(b) plan), or
4. Deferred compensation plan of a state or local government (section 457 plan).
Treat yourself as the beneficiary rather than treating the IRA as your own.

Treating it as your own.

You will be considered to have chosen to treat the IRA as your own if:

Contributions (including rollover contributions) are made to the inherited IRA, or
You don’t take the required minimum distribution for a year as a beneficiary of the IRA.

You will only be considered to have chosen to treat the IRA as your own if:

You are the sole beneficiary of the IRA, and
You have an unlimited right to withdraw amounts from it.

However, if you receive a distribution from your deceased spouse’s IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution isn’t a required distribution, even if you aren’t the sole beneficiary of your deceased spouse’s IRA.

Inherited from someone other than spouse.

If you inherit a traditional IRA from anyone other than your deceased spouse, you can’t treat the inherited IRA as your own. This means that you can’t make any contributions to the IRA. It also means you can’t roll over any amounts into or out of the inherited IRA. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.

For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later.

Can You Move Retirement Plan Assets?

You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. You can make the following kinds of transfers.

Transfers from one trustee to another.
Transfers incident to a divorce.

Transfers to Roth IRAs.

Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. You can also move assets from a qualified retirement plan to a Roth IRA. See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later.

Trustee-to-Trustee Transfer

A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee’s request, isn’t a rollover. This includes the situation where the current trustee issues a check to the new trustee but gives it to you to deposit. Because there is no distribution to you, the transfer is tax free. Because it isn’t a rollover, it isn’t affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Pub. 590-A.

Rollovers

Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. The contribution to the second retirement plan is called a “rollover contribution.”

Note.

An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan.

Kinds of rollovers to a traditional IRA.

You can roll over amounts from the following plans into a traditional IRA:

A traditional IRA,

An employer’s qualified retirement plan for its employees,

A deferred compensation plan of a state or local government (section 457 plan), or

A tax-sheltered annuity plan (section 403(b) plan).

Treatment of rollovers.

You can’t deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans .

Kinds of rollovers from a traditional IRA.

You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). Qualified plans may, but aren’t required to, accept such rollovers.

Time limit for making a rollover contribution.

You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer’s plan.

The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A.

Extension of rollover period.

If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A.

Rollover From One IRA Into Another

You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Because this is a rollover, you can’t deduct the amount that you reinvest in an IRA.

Waiting period between rollovers.

Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you can’t, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also can’t make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover.

The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. Rules apply to the number of rollovers you can have with your traditional IRAs. See Application of one-rollover limitation next.

Application of one-rollover limitation.

You can make only one rollover from an IRA to another (or the same) IRA in any 1-year period, regardless of the number of IRAs you own. The limit applies by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs, as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. However, trustee-to-trustee transfers between IRAs aren’t limited and rollovers from traditional IRAs to Roth IRAs (conversions) aren’t limited.

Example.

John has three traditional IRAs: IRA-1, IRA-2, and IRA-3. John didn’t take any distributions from his IRAs in 2017. On January 1, 2018, John took a distribution from IRA-1 and rolled it over into IRA-2 on the same day. For 2018, John can’t roll over any other 2018 IRA distribution, including a rollover distribution involving IRA-3. This wouldn’t apply to a trustee-to-trustee transfer or a Roth IRA conversion.

Partial rollovers.

If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes .

Required distributions.

Amounts that must be distributed during a particular year under the required distribution rules (discussed later) aren’t eligible for rollover treatment.

Inherited IRAs.

If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. See Treating it as your own , earlier.

Not inherited from spouse.

If you inherit a traditional IRA from someone other than your spouse, you can’t roll it over or allow it to receive a rollover contribution. You must withdraw the IRA assets within a certain period. For more information, see When Must You Withdraw Assets? in chapter 1 of Pub. 590-B.

Reporting rollovers from IRAs.

Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows.

Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. If the total distribution wasn’t rolled over, enter the taxable portion of the part that wasn’t rolled over on Form 1040, line 15b, or Form 1040A, line 11b. Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. See your tax return instructions.

If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2018, attach a statement explaining what you did.

Rollover From Employer’s Plan Into an IRA

You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse’s):

Employer’s qualified pension, profit-sharing, or stock bonus plan;

Annuity plan;
Tax-sheltered annuity plan (section 403(b) plan); or

Governmental deferred compensation plan (section 457 plan).

A qualified plan is one that meets the requirements of the Internal Revenue Code.

Eligible rollover distribution.

Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following.

A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions)).
A hardship distribution.
Any of a series of substantially equal periodic distributions paid at least once a year over:
1. Your lifetime or life expectancy,
2. The lifetimes or life expectancies of you and your beneficiary, or
3. A period of 10 years or more.
Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains.
A loan treated as a distribution because it doesn’t satisfy certain requirements either when made or later (such as upon default), unless the participant’s accrued benefits are reduced (offset) to repay the loan.
Dividends on employer securities.
The cost of life insurance coverage.

Your rollover into a traditional IRA may include both amounts that would be taxable and amounts that wouldn’t be taxable if they were distributed to you, but not rolled over. To the extent the distribution is rolled over into a traditional IRA, it isn’t includible in your income.

Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. See Form 8606 under Distributions Fully or Partly Taxable, later.

Rollover by nonspouse beneficiary.

A direct transfer from a deceased employee’s qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee’s spouse. The IRA is treated as an inherited IRA. For more information about inherited IRAs, see Inherited IRAs , earlier.

Reporting rollovers from employer plans.

Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. This amount should be shown in box 1 of Form 1099-R. From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Enter the remaining amount, even if zero, on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Also, enter “Rollover” next to Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b.

Transfers Incident to Divorce

If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. The transfer is tax free. For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A.

Converting From Any Traditional IRA to a Roth IRA

Allowable conversions.

You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. If properly (and timely) rolled over, the 10% additional tax on early distributions won’t apply. However, a part or all of the conversion contribution from your traditional IRA is included in your gross income.

Required distributions.

You can’t convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later).

Income.

You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you hadn’t converted them into a Roth IRA. These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA.

You don’t include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later.

You must file Form 8606 to report 2017 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2017 (unless you recharacterized the entire amount) and to figure the amount to include in income.

If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. See chapter 4.

Recharacterizations

You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. This is called recharacterizing the contribution. See Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A for more detailed information.

How to recharacterize a contribution.

To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. If you recharacterize your contribution, you must do all three of the following.

Include in the transfer any net income allocable to the contribution. If there was a loss, the net income you must transfer may be a negative amount.
Report the recharacterization on your tax return for the year during which the contribution was made.
Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA.

No deduction allowed.

You can’t deduct the contribution to the first IRA. Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA.

Required notifications.

To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. You must make the notifications by the date of the transfer. Only one notification is required if both IRAs are maintained by the same trustee. The notification(s) must include all of the following information.

The type and amount of the contribution to the first IRA that is to be recharacterized.
The date on which the contribution was made to the first IRA and the year for which it was made.
A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA.
The name of the trustee of the first IRA and the name of the trustee of the second IRA.
Any additional information needed to make the transfer.

Reporting a recharacterization.

If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. You must treat the contribution as having been made to the second IRA.

When Can You Withdraw or Use IRA Assets?

There are rules limiting use of your IRA assets and distributions from it. Violation of the rules generally results in additional taxes in the year of violation. See What Acts Result in Penalties or Additional Taxes , later.

Contributions returned before the due date of return.

If you made IRA contributions in 2017, you can withdraw them tax free by the due date of your return. If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. You can do this if, for each contribution you withdraw, both of the following conditions apply.

You didn’t take a deduction for the contribution.
You withdraw any interest or other income earned on the contribution. You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. If there was a loss, the net income earned on the contribution may be a negative amount.

Note.

To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Pub. 590-A.

Earnings includible in income.

You must include in income any earnings on the contributions you withdraw. Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them.

Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes, later.
Early distributions tax.

The 10% additional tax on distributions made before you reach age 59½ doesn’t apply to these tax-free withdrawals of your contributions. However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax.

When Must You Withdraw IRA Assets? (Required Minimum Distributions)

You can’t keep funds in a traditional IRA indefinitely. Eventually they must be distributed. If there are no distributions, or if the distributions aren’t large enough, you may have to pay a 50% excise tax on the amount not distributed as required. See Excess Accumulations (Insufficient Distributions) , later. The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent’s IRA.

Required minimum distribution.

The amount that must be distributed each year is referred to as the required minimum distribution.

Distributions not eligible for rollover.

Amounts that must be distributed (required minimum distributions) during a particular year aren’t eligible for rollover treatment.

IRA owners.

If you are the owner of a traditional IRA, you generally must start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date.

Distributions by the required beginning date.

You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). If you don’t (or didn’t) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year.

If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date.

Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date.

Distributions after the required beginning date.

The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year.
Beneficiaries.

If you are the beneficiary of a decedent’s traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions.

More information.

For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent’s IRA, see When Must You Withdraw Assets? in chapter 1 of Pub. 590-B.

Are Distributions Taxable?

In general, distributions from a traditional IRA are taxable in the year you receive them.

Exceptions.

Exceptions to distributions from traditional IRAs being taxable in the year you receive them are:

Rollovers,
Qualified charitable distributions (QCD), discussed later,
Tax-free withdrawals of contributions, discussed earlier, and
The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable.

Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it isn’t an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A.

Qualified charitable distributions (QCD).

A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax deductible contributions. See Qualified Charitable Distributionsin Pub. 590-B for more information.

Ordinary income.

Distributions from traditional IRAs that you include in income are taxed as ordinary income.

No special treatment.

In figuring your tax, you can’t use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans.

Distributions Fully or Partly Taxable

Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions.

Fully taxable.

If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. Because you have no basis in your IRA, any distributions are fully taxable when received. See Reporting taxable distributions on your return , later.

Partly taxable.

If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. These nondeductible contributions aren’t taxed when they are distributed to you. They are a return of your investment in your IRA.

Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable.

Form 8606.

You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. Using the form, you will figure the nontaxable distributions for 2017 and your total IRA basis for 2017 and earlier years.

Note.

If you are required to file Form 8606, but you aren’t required to file an income tax return, you still must file Form 8606. Send it to the IRS at the time and place you would otherwise file an income tax return.

Distributions reported on Form 1099-R.

If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., or a similar statement. IRA distributions are shown in boxes 1 and 2a of Form 1099-R. The number or letter codes in box 7 tell you what type of distribution you received from your IRA.

Withholding.

Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. See chapter 4.

IRA distributions delivered outside the United States.

In general, if you are a U.S. citizen or resident alien and your home address is outside the United States or its possessions, you can’t choose exemption from withholding on distributions from your traditional IRA.

Reporting taxable distributions on your return.

Report fully taxable distributions, including early distributions, on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. You can’t report distributions on Form 1040EZ.

What Acts Result in Penalties or Additional Taxes?

The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you don’t follow the rules.

There are additions to the regular tax for using your IRA funds in prohibited transactions. There are also additional taxes for the following activities.

Investing in collectibles.
Making excess contributions.
Taking early distributions.
Allowing excess amounts to accumulate (failing to take required distributions).

There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required.

Prohibited Transactions

Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person.

Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent).

The following are examples of prohibited transactions with a traditional IRA.

Borrowing money from it.
Selling property to it.
Using it as security for a loan.
Buying property for personal use (present or future) with IRA funds.

Effect on an IRA account.

Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year.

Effect on you or your beneficiary.

If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. The distribution may be subject to additional taxes or penalties.

Taxes on prohibited transactions.

If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction isn’t corrected.

More information.

For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Pub. 590-A.

Investment in Collectibles

If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early distributions, discussed later.

Collectibles.

These include:

Artworks,

Rugs,
Antiques,
Metals,
Gems,

Stamps,

Coins,
Alcoholic beverages, and

Certain other tangible personal property.

Exception.

Your IRA can invest in one-, one-half-, one-quarter-, or one-tenth-ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.

Excess Contributions

Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of:

The maximum deductible amount for the year (for 2017, this is $5,500 ($6,500 if you are 50 or older)); or
Your taxable compensation for the year.

Tax on excess contributions.

In general, if the excess contributions for a year aren’t withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. The tax can’t be more than 6% of the combined value of all your IRAs as of the end of your tax year.

Excess contributions withdrawn by due date of return.

You won’t have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. You must complete your withdrawal by the date your tax return for that year is due, including extensions.

How to treat withdrawn contributions.

Don’t include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met.

No deduction was allowed for the excess contribution.
You withdraw the interest or other income earned on the excess contribution.

You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. If there was a loss, the net income you must withdraw may be a negative amount.

How to treat withdrawn interest or other income.

You must include in your gross income the interest or other income that was earned on the excess contribution. Report it on your return for the year in which the excess contribution was made. Your withdrawal of interest or other income may be subject to an additional 10% tax onearly distributions, discussed later.

Excess contributions withdrawn after due date of return.

In general, you must include all distributions (withdrawals) from your traditional IRA in your gross income. However, if the following conditions are met, you can withdraw excess contributions from your IRA and not include the amount withdrawn in your gross income.

Total contributions (other than rollover contributions) for 2017 to your IRA weren’t more than $5,500 ($6,500 if you are 50 or older).
You didn’t take a deduction for the excess contribution being withdrawn.

The withdrawal can take place at any time, even after the due date, including extensions, for filing your tax return for the year.

Excess contribution deducted in an earlier year.

If you deducted an excess contribution in an earlier year for which the total contributions weren’t more than the maximum deductible amount for that year (see the following table), you can still remove the excess from your traditional IRA and not include it in your gross income. To do this, file Form 1040X for that year and don’t deduct the excess contribution on the amended return. Generally, you can file an amended return within 3 years after you filed your return, or 2 years from the time the tax was paid, whichever is later.

Year(s)	Contribution limit	Contribution limit if age 50 or older at the end of the year
2013 through 2016	$5,500	$6,500
2008 through 2012	$5,000	$6,000
2006 or 2007	$4,000	$5,000
2005	$4,000	$4,500
2002 through 2004	$3,000	$3,500
1997 through 2001	$2,000	—
before 1997	$2,250	—

Excess due to incorrect rollover information.

If an excess contribution in your traditional IRA is the result of a rollover and the excess occurred because the information the plan was required to give you was incorrect, you can withdraw the excess contribution. The limits mentioned above are increased by the amount of the excess that is due to the incorrect information. You will have to amend your return for the year in which the excess occurred to correct the reporting of the rollover amounts in that year. Don’t include in your gross income the part of the excess contribution caused by the incorrect information.

Early Distributions

You must include early distributions of taxable amounts from your traditional IRA in your gross income. Early distributions are also subject to an additional 10% tax. See the discussion of Form 5329 under Reporting Additional Taxes , later, to figure and report the tax.

Early distributions defined.

Early distributions generally are amounts distributed from your traditional IRA account or annuity before you are age 59½.

Age 59½ rule.

Generally, if you are under age 59½, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your traditional IRA. Distributions before you are age 59½ are called early distributions.

The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.

Exceptions.

There are several exceptions to the age 59½ rule. Even if you receive a distribution before you are age 59½, you may not have to pay the 10% additional tax if you are in one of the following situations.

You have unreimbursed medical expenses that are more than 10% of your adjusted gross income.
The distributions aren’t more than the cost of your medical insurance due to a period of unemployment.
You are totally and permanently disabled.
You are the beneficiary of a deceased IRA owner.
You are receiving distributions in the form of an annuity.
The distributions aren’t more than your qualified higher education expenses.
You use the distributions to buy, build, or rebuild a first home.
The distribution is due to an IRS levy of the qualified plan.
The distribution is a qualified reservist distribution.

Most of these exceptions are explained under Early Distributions in What Acts Result in Penalties or Additional Taxes? in chapter 1 of Pub. 590-B.

Note.

Distributions that are timely and properly rolled over, as discussed earlier, aren’t subject to either regular income tax or the 10% additional tax. Certain withdrawals of excess contributions after the due date of your return are also tax free and therefore not subject to the 10% additional tax. (See Excess contributions withdrawn after due date of return , earlier.) This also applies to transfers incident to divorce, as discussed earlier.

Receivership distributions.

Early distributions (with or without your consent) from savings institutions placed in receivership are subject to this tax unless one of the exceptions listed earlier applies. This is true even if the distribution is from a receiver that is a state agency.

Additional 10% tax.

The additional tax on early distributions is 10% of the amount of the early distribution that you must include in your gross income. This tax is in addition to any regular income tax resulting from including the distribution in income.

Nondeductible contributions.

The tax on early distributions doesn’t apply to the part of a distribution that represents a return of your nondeductible contributions (basis).

More information.

For more information on early distributions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Pub. 590-B.

Excess Accumulations (Insufficient Distributions)

You can’t keep amounts in your traditional IRA indefinitely. Generally, you must begin receiving distributions by April 1 of the year following the year in which you reach age 70½. The required minimum distribution for any year after the year in which you reach age 70½ must be made by December 31 of that later year.

Tax on excess.

If distributions are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required.

Request to waive the tax.

If the excess accumulation is due to reasonable error, and you have taken, or are taking, steps to remedy the insufficient distribution, you can request that the tax be waived. If you believe you qualify for this relief, attach a statement of explanation and complete Form 5329 as instructed under Waiver of tax in the Instructions for Form 5329.

Exemption from tax.

If you are unable to take required distributions because you have a traditional IRA invested in a contract issued by an insurance company that is in state insurer delinquency proceedings, the 50% excise tax doesn’t apply if the conditions and requirements of Revenue Procedure 92-10 are satisfied.

More information.

For more information on excess accumulations, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Pub. 590-B.

Reporting Additional Taxes

Generally, you must use Form 5329 to report the tax on excess contributions, early distributions, and excess accumulations. If you must file Form 5329, you can’t use Form 1040A or Form 1040EZ.

Filing a tax return.

If you must file an individual income tax return, complete Form 5329 and attach it to your Form 1040. Enter the total additional taxes due on Form 1040, line 59.

Not filing a tax return.

If you don’t have to file a tax return but do have to pay one of the additional taxes mentioned earlier, file the completed Form 5329 with the IRS at the time and place you would have filed your Form 1040. Be sure to include your address on page 1 and your signature and date on page 2. Enclose, but don’t attach, a check or money order payable to the “United States Treasury” for the tax you owe, as shown on Form 5329. Enter your social security number and “2017 Form 5329” on your check or money order.

Form 5329 not required.

You don’t have to use Form 5329 if either of the following situations exists.

Distribution code 1 (early distribution) is correctly shown in box 7 of all your Forms 1099-R. If you don’t owe any other additional tax on a distribution, multiply the taxable part of the early distribution by 10% and enter the result on Form 1040, line 59. Put “No” to the left of the line to indicate that you don’t have to file Form 5329. However, if you owe this tax and also owe any other additional tax on a distribution, don’t enter this 10% additional tax directly on your Form 1040. You must file Form 5329 to report your additional taxes.
If you rolled over part or all of a distribution from a qualified retirement plan, the part rolled over isn’t subject to the tax on early distributions.

Roth IRAs

Regardless of your age, you may be able to establish and make nondeductible contributions to a retirement plan called a Roth IRA.

Contributions not reported.

You don’t report Roth IRA contributions on your return.

What Is a Roth IRA?

A Roth IRA is an individual retirement plan that, except as explained in this chapter, is subject to the rules that apply to a traditional IRA (defined earlier). It can be either an account or an annuity. Individual retirement accounts and annuities are described under How Can a Traditional IRA Be Opened? in chapter 1 of Pub. 590-A.

To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA.

Unlike a traditional IRA, you can’t deduct contributions to a Roth IRA. But, if you satisfy the requirements, qualified distributions (discussed later) are tax free. Contributions can be made to your Roth IRA after you reach age 70½ and you can leave amounts in your Roth IRA as long as you live.

When Can a Roth IRA Be Opened?

You can open a Roth IRA at any time. However, the time for making contributions for any year is limited. See When Can You Make Contributions , later, under Can You Contribute to a Roth IRA.

Can You Contribute to a Roth IRA?

Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than:

$196,000 for married filing jointly or qualifying widow(er);
$133,000 for single, head of household, or married filing separately and you didn’t live with your spouse at any time during the year; or
$10,000 for married filing separately and you lived with your spouse at any time during the year.

You may be eligible to claim a credit for contributions to your Roth IRA. For more information, see chapter 38.

Is there an age limit for contributions?

Contributions can be made to your Roth IRA regardless of your age.

Can you contribute to a Roth IRA for your spouse?

You can contribute to a Roth IRA for your spouse provided the contributions satisfy the Kay Bailey Hutchison Spousal IRA limit (discussed in How Much Can Be Contributed? under Traditional IRAs), you file jointly, and your modified AGI is less than $196,000.

Compensation.

Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments.

Modified AGI.

Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return with some adjustments. Use Worksheet 17-2 below to determine your modified AGI.

Worksheet 17-2. Modified Adjusted Gross Income for Roth IRA Purposes

Use this worksheet to figure your modified adjusted gross income for Roth IRA purposes.

1.	Enter your adjusted gross income from Form 1040, line 38, or Form 1040A, line 22		1.
2.	Enter any income resulting from the conversion of an IRA (other than a Roth IRA) to a Roth IRA (included on Form 1040, line 15b, or Form 1040A, line 11b) and a rollover from a qualified retirement plan to a Roth IRA (included on Form 1040, line 16b, or Form 1040A, line 12b)		2.
3.	Subtract line 2 from line 1		3.
4.	Enter any traditional IRA deduction from Form 1040, line 32, or Form 1040A, line 17		4.
5.	Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18		5.
6.	Enter any domestic production activities deduction from Form 1040, line 35		6.
7.	Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18		7.
8.	Enter any foreign housing deduction from Form 2555, line 50		8.
9.	Enter any excludable savings bond interest from Form 8815, line 14		9.
10.	Enter any excluded employer-provided adoption benefits from Form 8839, line 28		10.
11.	Add the amounts on lines 3 through 10		11.
12.	Enter: • $196,000 if married filing jointly or qualifying widow(er) • $10,000 if married filing separately and you lived with your spouse at any time during the year • $133,000 for all others		12.
		Is the amount on line 11 more than the amount on line 12? If yes, then see the Note below. If no, then the amount on line 11 is your modified AGI for Roth IRA purposes.
	Note. If the amount on line 11 is more than the amount on line 12 and you have other income or loss items, such as social security income or passive activity losses, that are subject to AGI-based phaseouts, you can refigure your AGI solely for the purpose of figuring your modified AGI for Roth IRA purposes. (If you receive social security benefits, use Worksheet 1 in Appendix B of Pub. 590-A to refigure your AGI.) Then go to line 3 above in this Worksheet 17-2 to refigure your modified AGI. If you don’t have other income or loss items subject to AGI-based phaseouts, your modified AGI for Roth IRA purposes is the amount on line 11.

How Much Can Be Contributed?

The contribution limit for Roth IRAs generally depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs.

Roth IRAs only.

If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of the following amounts.

$5,500 ($6,500 if you are 50 or older in 2017).
Your taxable compensation.

However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under Contribution limit reduced .

Roth IRAs and traditional IRAs.

If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions for the year to all IRAs other than Roth IRAs. Employer contributions under a SEP or SIMPLE IRA plan don’t affect this limit.

This means that your contribution limit is generally the lesser of the following amounts.

$5,500 ($6,500 if you are 50 or older in 2017) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs.

Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs.

However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained next under Contribution limit reduced.

Contribution limit reduced.

If your modified AGI is above a certain amount, your contribution limit is gradually reduced. Use Table 17-3 to determine if this reduction applies to you.

Table 17-3. Effect of Modified AGI on Roth IRA Contribution

This table shows whether your contribution to a Roth IRA is affected by the amount of your modified adjusted gross income (modified AGI).

IF you have taxable compensation and your filing status is…	AND your modified AGI is…	THEN…
Married filing jointly, or Qualifying widow(er)	less than $186,000	you can contribute up to $5,500 ($6,500 if you are 50 or older in 2017).
	at least $186,000 but less than $196,000	the amount you can contribute is reduced as explained under Contribution limit reduced in chapter 2 of Pub. 590-A.
	$196,000 or more	you can’t contribute to a Roth IRA.
Married filing separately and you lived with your spouse at any time during the year	zero (-0-)	you can contribute up to $5,500 ($6,500 if you are 50 or older in 2017).
	more than zero (-0-) but less than $10,000	the amount you can contribute is reduced as explained under Contribution limit reduced in chapter 2 of Pub. 590-A.
	$10,000 or more	you can’t contribute to a Roth IRA.
Single, Head of household, or Married filing separately and you didn’t live with your spouse at any time during the year	less than $118,000	you can contribute up to $5,500 ($6,500 if you are 50 or older in 2017).
	at least $118,000 but less than $133,000	the amount you can contribute is reduced as explained under Contribution limit reduced in chapter 2 of Pub. 590-A.
	$133,000 or more	you can’t contribute to a Roth IRA.

Figuring the reduction.

If the amount you can contribute to your Roth IRA is reduced, see Worksheet 2-2 underCan You Contribute to a Roth IRA? in chapter 2 of Pub. 590-A for how to figure the reduction.

When Can You Make Contributions?

You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions).

You can make contributions for 2017 by the due date (not including extensions) for filing your 2017 tax return.

What if You Contribute Too Much?

A 6% excise tax applies to any excess contribution to a Roth IRA.

Excess contributions.

These are the contributions to your Roth IRAs for a year that equal the total of:

Amounts contributed for the tax year to your Roth IRAs (other than amounts properly and timely rolled over from a Roth IRA or properly converted from a traditional IRA or rolled over from a qualified retirement plan, as described later) that are more than your contribution limit for the year; plus
Any excess contributions for the preceding year, reduced by the total of:
1. Any distributions out of your Roth IRAs for the year; plus
2. Your contribution limit for the year minus your contributions to all your IRAs for the year.

Withdrawal of excess contributions.

For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. This treatment applies only if any earnings on the contributions are also withdrawn. The earnings are considered to have been earned and received in the year the excess contribution was made.

Applying excess contributions.

If contributions to your Roth IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year.

Can You Move Amounts Into a Roth IRA?

You may be able to convert amounts from either a traditional, SEP, or SIMPLE IRA into a Roth IRA. You may be able to roll amounts over from a qualified retirement plan to a Roth IRA. You may be able to recharacterize contributions made to one IRA as having been made directly to a different IRA. You can roll amounts over from a designated Roth account or from one Roth IRA to another Roth IRA.

Conversions

You can convert a traditional IRA to a Roth IRA. The conversion is treated as a rollover, regardless of the conversion method used. Most of the rules for rollovers, described earlier under Rollover From One IRA Into Another under Traditional IRAs, apply to these rollovers. However, the 1-year waiting period doesn’t apply.

Conversion methods.

You can convert amounts from a traditional IRA to a Roth IRA in any of the following ways.

Rollover. You can receive a distribution from a traditional IRA and roll it over (contribute it) to a Roth IRA within 60 days after the distribution.
Trustee-to-trustee transfer. You can direct the trustee of the traditional IRA to transfer an amount from the traditional IRA to the trustee of the Roth IRA.

Same trustee transfer. If the trustee of the traditional IRA also maintains the Roth IRA, you can direct the trustee to transfer an amount from the traditional IRA to the Roth IRA.

Same trustee.

Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract.

Rollover from a qualified retirement plan into a Roth IRA.

You can roll over into a Roth IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse’s):

Employer’s qualified pension, profit-sharing, or stock bonus plan;

Annuity plan;
Tax-sheltered annuity plan (section 403(b) plan); or

Governmental deferred compensation plan (section 457 plan).

Any amount rolled over is subject to the same rules as those for converting a traditional IRA into a Roth IRA. Also, the rollover contribution must meet the rollover requirements that apply to the specific type of retirement plan.

Income.

You must include in your gross income distributions from a qualified retirement plan that you would have had to include in income if you hadn’t rolled them over into a Roth IRA. You don’t include in gross income any part of a distribution from a qualified retirement plan that is a return of basis (after-tax contributions) to the plan that were taxable to you when paid. These amounts are normally included in income on your return for the year you rolled them over from the employer plan to a Roth IRA.

If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. See Pub. 505, Tax Withholding and Estimated Tax.

For more information, see Rollover From Employer’s Plan Into a Roth IRA in chapter 2 of Pub. 590-A.

Converting from a SIMPLE IRA.

Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained earlier under Converting From Any Traditional IRA to a Roth IRA under Traditional IRAs.

However, you can’t convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer.

More information.

For more detailed information on conversions, see Can You Move Amounts Into a Roth IRA? in chapter 2 in Pub. 590-A.

Rollover From a Roth IRA

You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA. Most of the rules for rollovers, explained earlier under Rollover From One IRA Into Another under Traditional IRAs, apply to these rollovers.

Rollover from designated Roth account.

A rollover from a designated Roth account can only be made to another designated Roth account or to a Roth IRA. For more information about designated Roth accounts, seechapter 10.

Are Distributions Taxable?

You don’t include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). You also don’t include distributions from your Roth IRA that you roll over tax free into another Roth IRA. You may have to include part of other distributions in your income. See Ordering rules for distributions , later.

What are qualified distributions?

A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.

It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
The payment or distribution is:
1. Made on or after the date you reach age 59½,
2. Made because you are disabled,
3. Made to a beneficiary or to your estate after your death, or
4. To pay up to $10,000 (lifetime limit) of certain qualified first-time homebuyer amounts. See First homeunder What Acts Result in Penalties or Additional Taxes?in chapter 1 of Pub. 590-B for more information.

Additional tax on distributions of conversion and certain rollover contributions within 5-year period.

If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or roll over an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income. A separate 5-year period applies to each conversion and rollover. See Ordering rules for distributions , later, to determine the amount, if any, of the distribution that is attributable to the part of the conversion or rollover contribution that you had to include in income.

Additional tax on other early distributions.

Unless an exception applies, you must pay the 10% additional tax on the taxable part of any distributions that aren’t qualified distributions. See Pub. 590-B for more information.

Ordering rules for distributions.

If you receive a distribution from your Roth IRA that isn’t a qualified distribution, part of it may be taxable. There is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA. Regular contributions are distributed first. See Ordering Rules for Distributionsunder Are Distributions Taxable? in chapter 2 of Pub. 590-B for more information.

Must you withdraw or use Roth IRA assets?

You aren’t required to take distributions from your Roth IRA at any age. The minimum distribution rules that apply to traditional IRAs don’t apply to Roth IRAs while the owner is alive. However, after the death of a Roth IRA owner, certain minimum distribution rules that apply to traditional IRAs also apply to Roth IRAs.

More information.

For more detailed information on Roth IRAs, see chapter 2 of Pub. 590-A and Pub. 590-B.

18. Alimony

What’s New

At the time this publication went to print, Congress was considering legislation that would do the following.

Provide additional tax relief for those affected by Hurricane Harvey, Irma, or Maria, and tax relief for those affected by other 2017 disasters, such as the California wildfires.
Extend certain tax benefits that expired at the end of 2016 and that currently can’t be claimed on your 2017 tax return.
Change certain other tax provisions.

To learn whether this legislation was enacted resulting in changes that affect your 2017 tax return, go to Recent Developments at IRS.gov/Pub17.

Introduction

This chapter discusses the rules that apply if you pay or receive alimony. It covers the following topics.

What payments are alimony.
What payments are not alimony, such as child support.
How to deduct alimony you paid.
How to report alimony you received as income.
Whether you must recapture the tax benefits of alimony. Recapture means adding back in your income all or part of a deduction you took in a prior year.

Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. It doesn’t include voluntary payments that aren’t made under a divorce or separation instrument.

Alimony is deductible by the payer, and the recipient must include it in income. Although this chapter is generally written for the payer of the alimony, the recipient can also use the information to determine whether an amount received is alimony.

To be alimony, a payment must meet certain requirements. There are some differences between the requirements that apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. The general requirements that apply to payments regardless of when the divorce or separation agreement was executed and the specific requirements that apply to post-1984 (and, in certain cases, some pre-1985 instruments) are discussed in this chapter. If you are looking for information on the specific requirements that apply to pre-1985 instruments, get and keep a copy of the 2004 version of Pub. 504. That was the last year the information on pre-1985 instruments was included in Pub. 504.

Use Table 18-1 in this chapter as a guide to determine whether certain payments are considered alimony.

Definitions.

The following definitions apply throughout this chapter.

Spouse or former spouse.

Unless otherwise stated, the term “spouse” includes former spouse.

Divorce or separation instrument.

The term “divorce or separation instrument” means:

A decree of divorce or separate maintenance or a written instrument incident to that decree;
A written separation agreement; or
A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement).

Useful Items – You may want to see:

Publication

504 Divorced or Separated Individuals

General Rules

The following rules apply to alimony regardless of when the divorce or separation instrument was executed.

Payments not alimony.

Not all payments under a divorce or separation instrument are alimony. Alimony doesn’t include:

Child support;
Noncash property settlements;
Payments that are your spouse’s part of community income, as explained under Community Propertyin Pub. 504;
Payments to keep up the payer’s property; or
Use of the payer’s property.

Payments to a third party.

Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. These include payments for your spouse’s medical expenses, housing costs (rent, utilities, etc.), taxes, tuition, etc. The payments are treated as received by your spouse and then paid to the third party.

Life insurance premiums.

Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy.

Payments for jointly owned home.

If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse, some of your payments may be alimony.

Mortgage payments.

If you must pay all the mortgage payments (principal and interest) on a jointly owned home, and they otherwise qualify as alimony, you can deduct half of the total payments as alimony. If you itemize deductions and the home is a qualified home, you can claim half of the interest in figuring your deductible interest. Your spouse must report half of the payments as alimony received. If your spouse itemizes deductions and the home is a qualified home, he or she can claim half of the interest on the mortgage in figuring deductible interest.

Taxes and insurance.

If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct half of these payments as alimony. Your spouse must report half of these payments as alimony received. If you and your spouse itemize deductions, you can each claim half of the real estate taxes and none of the home insurance.

If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are alimony. But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance.

Other payments to a third party.

If you made other third-party payments, see Pub. 504 to see whether any part of the payments qualifies as alimony.

Instruments Executed After 1984

The following rules for alimony apply to payments under divorce or separation instruments executed after 1984.

Exception for instruments executed before 1985.

There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985.

A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply.
A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that:
1. Changes the amount or period of payment, or
2. Adds or deletes any contingency or condition.

For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, get the 2004 version of Pub. 504 at IRS.gov/Pub504.

Example 1.

In November 1984, you and your former spouse executed a written separation agreement. In February 1985, a decree of divorce was substituted for the written separation agreement. The decree of divorce didn’t change the terms for the alimony you pay your former spouse. The decree of divorce is treated as executed before 1985. Alimony payments under this decree aren’t subject to the rules for payments under instruments executed after 1984.

Example 2.

Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. In this example, the decree of divorce isn’t treated as executed before 1985. The alimony payments are subject to the rules for payments under instruments executed after 1984.

Alimony requirements.

A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses don’t file a joint return with each other and all the following requirements are met.

The payment is in cash.
The instrument doesn’t designate the payment as not alimony.
The spouses aren’t members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
The payment isn’t treated as child support.

Each of these requirements is discussed next.

Cash payment requirement.

Only cash payments, including checks and money orders, qualify as alimony. The following don’t qualify as alimony.

Transfers of services or property (including a debt instrument of a third party or an annuity contract).
Execution of a debt instrument by the payer.
The use of the payer’s property.

Payments to a third party.

Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. See Payments to a third party under General Rules, earlier.

Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met.

The payments are in lieu of payments of alimony directly to your spouse.
The written request states that both spouses intend the payments to be treated as alimony.
You receive the written request from your spouse before you file your return for the year you made the payments.

Payments designated as not alimony.

You and your spouse can designate that otherwise qualifying payments aren’t alimony. You do this by including a provision in your divorce or separation instrument that states the payments aren’t deductible as alimony by you and are excludable from your spouse’s income. For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order.

Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. The copy must be attached each year the designation applies.

Spouses can’t be members of the same household.

Payments to your spouse while you are members of the same household aren’t alimony if you are legally separated under a decree of divorce or separate maintenance. A home you formerly shared is considered one household, even if you physically separate yourselves in the home.

You aren’t treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment.

Exception.

If you aren’t legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made.

Table 18-1. Alimony Requirements (Instruments Executed After 1984)

Payments ARE alimony if all of the following are true:	Payments are NOT alimony if any of the following are true:
Payments are required by a divorce or separation instrument.	Payments aren’t required by a divorce or separation instrument.
Payer and recipient spouse don’t file a joint return with each other.	Payer and recipient spouse file a joint return with each other.
Payment is in cash (including checks or money orders).	Payment is: · Not in cash, · A noncash property settlement, · Spouse’s part of community income, or · To keep up the payer’s property.
Payment isn’t designated in the instrument as not alimony.	Payment is designated in the instrument as not alimony.
Spouses legally separated under a decree of divorce or separate maintenance aren’t members of the same household.	Spouses legally separated under a decree of divorce or separate maintenance are members of the same household.
Payments aren’t required after death of the recipient spouse.	Payments are required after death of the recipient spouse.
Payment isn’t treated as child support.	Payment is treated as child support.
These payments are deductible by the payer and includible in income by the recipient.	These payments are neither deductible by the payer nor includible in income by the recipient.

Liability for payments after death of recipient spouse.

If any part of payments you make must continue to be made for any period after your spouse’s death, that part of your payments isn’t alimony, whether made before or after the death. If all of the payments would continue, then none of the payments made before or after the death are alimony.

The divorce or separation instrument doesn’t have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law.

Example.

You must pay your former spouse $10,000 in cash each year for 10 years. Your divorce decree states that the payments will end upon your former spouse’s death. You must also pay your former spouse or your former spouse’s estate $20,000 in cash each year for 10 years. The death of your spouse wouldn’t end these payments under state law.

The $10,000 annual payments may qualify as alimony. The $20,000 annual payments that don’t end upon your former spouse’s death aren’t alimony.

Substitute payments.

If you must make any payments in cash or property after your spouse’s death as a substitute for continuing otherwise qualifying payments before the death, the otherwise qualifying payments aren’t alimony. To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that weren’t alimony. Whether or not such payments will be treated as not alimony depends on all the facts and circumstances.

Example 1.

Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 6 years or upon your former spouse’s death, if earlier.

Your former spouse has custody of your minor children. The decree provides that if any child is still a minor at your spouse’s death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. The trust income and corpus (principal) are to be used for your children’s benefit.

These facts indicate that the payments to be made after your former spouse’s death are a substitute for $10,000 of the $30,000 annual payments. Of each of the $30,000 annual payments, $10,000 isn’t alimony.

Example 2.

Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 15 years or upon your former spouse’s death, if earlier. The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 − $300,000).

These facts indicate that the lump-sum payment to be made after your former spouse’s death is a substitute for the full amount of the $30,000 annual payments. None of the annual payments are alimony. The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment.

Child support.

A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument isn’t alimony. The amount of child support may vary over time. Child support payments aren’t deductible by the payer and aren’t taxable to the recipient.

Specifically designated as child support.

A payment will be treated as specifically designated as child support to the extent that the payment is reduced either:

On the happening of a contingency relating to your child, or
At a time that can be clearly associated with the contingency.

A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support.

Contingency relating to your child.

A contingency relates to your child if it depends on any event relating to that child. It doesn’t matter whether the event is certain or likely to occur. Events relating to your child include the child’s:

Becoming employed,
Dying,
Leaving the household,
Leaving school,
Marrying, or
Reaching a specified age or income level.

Clearly associated with a contingency.

Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations.

The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority.
The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. This certain age must be the same for each child, but needn’t be a whole number of years.

In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child.

Either you or the IRS can overcome the presumption in the two situations above. This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony.

How To Deduct Alimony Paid

You can deduct alimony you paid, whether or not you itemize deductions on your return. You must file Form 1040. You can’t use Form 1040A, Form 1040EZ, or Form 1040NR.

Enter the amount of alimony you paid on Form 1040, line 31a. In the space provided on line 31b, enter the recipient’s social security number (SSN) or individual taxpayer identification number (ITIN).

If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Show the SSN or ITIN and amount paid to each additional recipient on an attached statement. Enter your total payments on line 31a.

If you don’t provide your spouse’s SSN or ITIN, you may have to pay a $50 penalty and your deduction may be disallowed. For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1.

How To Report Alimony Received

Report alimony you received as income on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. You can’t use Form 1040A, Form 1040EZ, or Form 1040NR-EZ.

You must give the person who paid the alimony your SSN or ITIN. If you don’t, you may have to pay a $50 penalty.

Recapture Rule

If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Your spouse can deduct in the third year part of the alimony payments he or she previously included in income.

The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Don’t include any time in which payments were being made under temporary support orders. The second and third years are the next 2 calendar years, whether or not payments are made during those years.

The reasons for a reduction or end of alimony payments that can require a recapture include:

A change in your divorce or separation instrument,
A failure to make timely payments,
A reduction in your ability to provide support, or
A reduction in your spouse’s support needs.

When to apply the recapture rule.

You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year.

When you figure a decrease in alimony, don’t include the following amounts.

Payments made under a temporary support order.
Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment.
Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year.

Figuring the recapture.

You can use Worksheet 1 in Pub. 504 to figure recaptured alimony.

Including the recapture in income.

If you must include a recaptured amount in income, show it on Form 1040, line 11 (“Alimony received”). Cross out “received” and enter “recapture.” On the dotted line next to the amount, enter your spouse’s last name and SSN or ITIN.

Deducting the recapture.

If you can deduct a recaptured amount, show it on Form 1040, line 31a (“Alimony paid”). Cross out “paid” and enter “recapture.” In the space provided, enter your spouse’s SSN or ITIN.

19. Education- Related Adjustments

Introduction

This chapter discusses the education-related adjustments you can deduct in figuring your adjusted gross income.

This chapter covers the student loan interest deduction, tuition and fees deduction, and the deduction for educator expenses.

Useful Items – You may want to see:

Publication

970Tax Benefits for Education

What’s New

At the time this publication went to print, Congress was considering legislation that would do the following.

Provide additional tax relief for those affected by Hurricane Harvey, Irma, or Maria, and tax relief for those affected by other 2017 disasters, such as the California wildfires.
Extend certain tax benefits that expired at the end of 2016 and that currently can’t be claimed on your 2017 tax return.
Change certain other tax provisions.

To learn whether this legislation was enacted resulting in changes that affect your 2017 tax return, go to Recent Developments at IRS.gov/Pub17.

Student loan interest deduction.

For 2017, the amount of your student loan interest deduction is gradually reduced (phased out) if your MAGI is between $65,000 and $80,000 ($135,000 and $165,000 if you file a joint return). You can’t claim the deduction if your MAGI is $80,000 or more ($165,000 or more if you file a joint return).

Tuition and fees deduction.

The tuition and fees deduction has expired and you can no longer take this deduction. If extended (see Caution above), information about this deduction will be available in the Recent Developments at IRS.gov/Pub17.

Student Loan Interest Deduction

Generally, personal interest you pay, other than certain mortgage interest, isn’t deductible on your tax return. However, if your modified adjusted gross income (MAGI) is less than $80,000 ($165,000 if filing a joint return), you may be allowed a special deduction for paying interest on a student loan (also known as an education loan) used for higher education. For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. This deduction can reduce the amount of your income subject to tax by up to $2,500. Table 19-1 summarizes the features of the student loan interest deduction.

Table 19-1. Student Loan Interest Deduction at a Glance Don’t rely on this table alone. Refer to the text for more details.

Feature	Description
Maximum benefit	You can reduce your income subject to tax by up to $2,500.
Loan qualifications	Your student loan:
	•	Must have been taken out solely to pay qualified education expenses, and
	•	Can’t be from a related person or made under a qualified employer plan.
Student qualifications	The student must be:
	•	You, your spouse, or your dependent (as defined later for this purpose); and
	•	Enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution.
Limit on modified adjusted gross income (MAGI)	$165,000 if married filing a joint return; $80,000 if single, head of household, or qualifying widow(er).

Student Loan Interest Defined

Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntary interest payments.

Qualified Student Loan

This is a loan you took out solely to pay qualified education expenses (defined later) that were:

For you, your spouse, or a person who was your dependent (as defined later for this purpose) when you took out the loan;
Paid or incurred within a reasonable period of time before or after you took out the loan; and
For education provided during an academic period for an eligible student.

Loans from the following sources aren’t qualified student loans.

A related person.
A qualified employer plan.

Your dependent.

Generally, your dependent is someone who is either a:

Qualifying child, or
Qualifying relative.

You can find more information about dependents in chapter 3.

For this purpose, the term “dependent” also includes any person you could have claimed as a dependent on your return except that:

You, or your spouse if filing jointly, could be claimed as a dependent of another taxpayer;
The person filed a joint return; or
The person had gross income for the year that was equal to or more than the exemption amount for the year ($4,050 for 2017).

Reasonable period of time.

Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program.

Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met.

The expenses relate to a specific academic period.
The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period.

If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances.

Academic period.

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. If an educational institution uses credit hours or clock hours and doesn’t have academic terms, each payment period can be treated as an academic period.

Eligible student.

An eligible student is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential.

Enrolled at least half-time.

A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study.

The standard for what is half of the normal full-time work load is determined by each eligible educational institution. However, the standard may not be lower than any of those established by the U.S. Department of Education under the Higher Education Act of 1965.

Related person.

You can’t deduct interest on a loan you get from a related person. Related persons include:

Your spouse;
Your brothers and sisters;
Your half brothers and half sisters;
Your ancestors (parents, grandparents, etc.);
Your lineal descendants (children, grandchildren, etc.); and
Certain corporations, partnerships, trusts, and exempt organizations.

Qualified employer plan.

You can’t deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan.

Qualified Education Expenses

For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution. They include amounts paid for the following items.

Tuition and fees.
Room and board.
Books, supplies, and equipment.
Other necessary expenses (such as transportation).

The cost of room and board qualifies only to the extent it isn’t more than:

The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student; or
If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.

Eligible educational institution.

An eligible educational institution is generally any accredited public, nonprofit, or proprietary (privately owned profit-making) college, university, vocational school, or other postsecondary educational institution. Also, the institution must be eligible to participate in a student aid program administered by the U.S. Department of Education. Virtually all accredited postsecondary institutions meet this definition.

An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in the U.S. Department of Education’s Federal Student Aid (FSA) programs.

For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training.

An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. The deductibility of interest on the loan isn’t affected by the institution’s subsequent loss of eligibility.

The educational institution should be able to tell you if it is an eligible educational institution.

Adjustments to qualified education expenses.

You must reduce your qualified education expenses by certain tax-free items (such as the tax-free part of scholarships and fellowship grants). See chapter 4 of Pub. 970 for details.

Include as Interest

In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest.

Loan origination fee.

In general, this is a one-time fee charged by the lender when a loan is made. To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. A loan origination fee treated as interest accrues over the life of the loan.

Capitalized interest.

This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan.

Interest on revolving lines of credit.

This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. SeeQualified Education Expenses , earlier.

Interest on refinanced and consolidated student loans.

This includes interest on a loan used solely to refinance a qualified student loan of the same borrower. It also includes a single consolidation loan used solely to refinance two or more qualified student loans of the same borrower.

If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you can’t deduct any interest paid on the refinanced loan.

Don’t Include as Interest

You can’t claim a student loan interest deduction for any of the following items.

Interest you paid on a loan if, under the terms of the loan, you aren’t legally obligated to make interest payments.
Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs.
Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. For more information, see Student Loan Repayment Assistancein chapter 5 of Pub. 970.

Can You Claim the Deduction?

Generally, you can claim the deduction if all of the following requirements are met.

Your filing status is any filing status except married filing separately.

No one else is claiming an exemption for you on his or her tax return.
You are legally obligated to pay interest on a qualified student loan.

You paid interest on a qualified student loan.

Interest paid by others.

If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. See chapter 4 of Pub. 970 for more information.

No Double Benefit Allowed

You can’t deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, home mortgage interest).

How Much Can You Deduct?

Your student loan interest deduction is generally the smaller of:

$2,500, or
The interest you paid during the tax year.

However, the amount determined above is phased out (gradually reduced) if your MAGI is between $65,000 and $80,000 ($135,000 and $165,000 if you file a joint return). You can’t take a student loan interest deduction if your MAGI is $80,000 or more ($165,000 or more if you file a joint return). For details on figuring your MAGI, see chapter 4 of Pub. 970.

How Do You Figure the Deduction?

Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the Form 1040 or Form 1040A instructions. However, if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1 in chapter 4 of Pub. 970.

To help you figure your student loan interest deduction, you should receive Form 1098-E, Student Loan Interest Statement. Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2017 on one or more qualified student loans must send Form 1098-E (or an acceptable substitute) to each borrower by January 31, 2018.

For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. However, if you pay qualifying interest that isn’t included on Form 1098-E, you can also deduct those amounts. For information on allocating payments between interest and principal, see chapter 4 of Pub. 970.

To claim the deduction, enter the allowable amount on Form 1040, line 33; or Form 1040A, line 18.

Educator Expenses

If you were an eligible educator in 2017, you can deduct up to $250 of qualified expenses you paid in 2017 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. If you file Form 1040A, you can deduct these expenses on line 16. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses.

Eligible educator.

An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year.

Qualified expenses.

Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense doesn’t have to be required to be considered necessary.

Qualified expenses also include those expenses you incur while participating in professional development courses related to the curriculum in which you provide instruction. It also includes those expenses related to those students for whom you provide that instruction.

Qualified expenses don’t include expenses for home schooling or for nonathletic supplies for courses in health or physical education. You must reduce your qualified expenses by the following amounts.

Excludable U.S. series EE and I savings bond interest from Form 8815.
Nontaxable qualified state tuition program earnings.
Nontaxable earnings from Coverdell education savings accounts.
Any reimbursements you received for those expenses that weren’t reported to you on your Form W-2, box 1.

Educator expenses over limit.

If you were an educator in 2017 and you had qualified expenses that you can’t take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit.

Adjustments to Income

Table V. Other Adjustments to Income

17. Individual Retirement Arrangements (IRAs)

What’s New for 2017

Reminders

Introduction

Useful Items – You may want to see:

Traditional IRAs

Who Can Open a Traditional IRA?

When and How Can a Traditional IRA Be Opened?

How Much Can Be Contributed?

When Can Contributions Be Made?

How Much Can You Deduct?

Note.

Are You Covered by an Employer Plan?

For Which Year(s) Are You Covered?

Situations in Which You Aren’t Covered

Limit if Covered by Employer Plan

Table 17-1. Effect of Modified AGI1 on Deduction if You Are Covered by Retirement Plan at Work

Table 17-2. Effect of Modified AGI1 on Deduction if You Are NOT Covered by Retirement Plan at Work

Worksheet 17-1. Figuring Your Modified AGI

Reporting Deductible Contributions

Nondeductible Contributions

Inherited IRAs

Can You Move Retirement Plan Assets?

Trustee-to-Trustee Transfer

Rollovers

Note.

Rollover From One IRA Into Another

Rollover From Employer’s Plan Into an IRA

Transfers Incident to Divorce

Converting From Any Traditional IRA to a Roth IRA

Recharacterizations

When Can You Withdraw or Use IRA Assets?

Note.

When Must You Withdraw IRA Assets? (Required Minimum Distributions)

Are Distributions Taxable?

Distributions Fully or Partly Taxable

Note.

What Acts Result in Penalties or Additional Taxes?

Prohibited Transactions

Investment in Collectibles

Excess Contributions

Early Distributions

Note.

Excess Accumulations (Insufficient Distributions)

Reporting Additional Taxes

Roth IRAs

What Is a Roth IRA?

When Can a Roth IRA Be Opened?

Can You Contribute to a Roth IRA?

Worksheet 17-2. Modified Adjusted Gross Income for Roth IRA Purposes

How Much Can Be Contributed?

Table 17-3. Effect of Modified AGI on Roth IRA Contribution

When Can You Make Contributions?

What if You Contribute Too Much?

Can You Move Amounts Into a Roth IRA?

Conversions

Rollover From a Roth IRA

Are Distributions Taxable?

18. Alimony

What’s New

Introduction

Useful Items – You may want to see:

General Rules

Instruments Executed After 1984

Table 18-1. Alimony Requirements (Instruments Executed After 1984)

How To Deduct Alimony Paid

How To Report Alimony Received

Recapture Rule

19. Education- Related Adjustments

Introduction

Useful Items – You may want to see:

What’s New

Student Loan Interest Deduction

Student Loan Interest Defined

Qualified Student Loan

Qualified Education Expenses

Include as Interest

Don’t Include as Interest

Table 17-1. Effect of Modified AGI¹ on Deduction if You Are Covered by Retirement Plan at Work

Table 17-2. Effect of Modified AGI¹ on Deduction if You Are NOT Covered by Retirement Plan at Work