Adjusted Gross Income

Line 24 - Educator expenses.   If you were an eligible educator in 2002, you may deduct up to $250 of qualified expenses you paid in 2002. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

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 does not have to be required to be considered necessary.

Qualified expenses do not 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 these expenses that were not reported to you in box 1 of your Form W-2.

Line 25 - IRA deduction.  

If you made any nondeductible contributions to a traditional individual retirement arrangement (IRA) for 2002, you must report them on Form 8606.

If you made contributions to a traditional IRA for 2002, you may be able to take an IRA deduction. But you must have had earned income to do so. A statement should be sent to you by June 2, 2003, that shows all contributions to your traditional IRA for 2002.

Were You Covered by a Retirement Plan?   If you were covered by a retirement plan (qualified pension, profit-sharing (including 401(k)), annuity, SEP, SIMPLE, etc.) at work or through self-employment, your IRA deduction may be reduced or eliminated. But you can still make contributions to an IRA even if you cannot deduct them. In any case, the income earned on your IRA contributions is not taxed until it is paid to you.

The Retirement plan box in box 13 of your W-2 form should be checked if you were covered by a plan at work even if you were not vested in the plan. You are also covered by a plan if you were self-employed and had a SEP, SIMPLE, or qualified retirement plan.

If you were covered by a retirement plan and you file Form 8815 or you exclude employer-provided adoption benefits, see Pub. 590 to figure the amount, if any, of your IRA deduction.

Special Rule for Married Individuals. If you checked filing status box 3, 4, or 5 and you were not covered by a retirement plan but your spouse was, you are considered covered by a plan unless you lived apart from your spouse for all of 2002.

See Pub. 590 for more details.

Line 26 - Student loan interest deduction.   Student Loan Deduction Worksheet

Student Loan Interest Deduction Worksheet - Line 26 (keep for your records)

Before you begin: Complete Form 1040NR, lines 27 through 32, if they apply to you. Figure any amount to be entered on the dotted line next to line 33 (see the instructions for line 33 on page 14). See the instructions for line 26 on this page.
1.	Enter the total interest you paid in 2002 on qualified student loans (defined below). Do not enter more than $2,500			1.
2.	Enter the amount from Form 1040NR, line 23	2.
3.	Enter the total of the amounts from Form 1040NR, line 24, line 25, and lines 27 through 32, plus any amount you entered on the dotted line next to line 33	3.
4.	Subtract line 3 from line 2	4.
5.	Is line 4 more than $50,000?
	No. Skip lines 5 and 6, enter -0- on line 7, and go to line 8.
	Yes. Subtract $50,000 from line 4	5.
6.	Divide line 5 by $15,000. Enter the result as a decimal (rounded to at least three places). If the result is 1.000 or more, enter 1.000			6.
7.	Multiply line 1 by line 6			7.
8.	Student loan interest deduction. Subtract line 7 from line 1. Enter the result here and on Form 1040NR, line 26. Do not include this amount in figuring any other deduction on your return (such as on Schedule A (Form 1040NR), Schedule C (Form 1040), Schedule E (Form 1040), etc.)			8.

You may take this deduction only if all four of the following apply.

1. You paid interest in 2002 on a qualified student loan (see below).
2. You checked filing status box 1, 2, or 6.
3. Your modified adjusted gross income (AGI) is less than $65,000. Use lines 2 through 4 of the worksheet on this page to figure your modified AGI.
4. You are not claimed as a dependent on someone's (such as your parent's) 2002 tax return.

Use the worksheet on this page to figure your student loan interest deduction.

Qualified Student Loan.   This is any loan you took out to pay the qualified higher education expenses for yourself, your spouse, or anyone who was your dependent when the loan was taken out. The person for whom the expenses were paid must have been an eligible student (see page 14). However, a loan is not a qualified student loan if (a) any of the proceeds were used for other purposes or (b) the loan was from either a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan. To find out who is a related person, see Pub. 970.

Qualified higher education expenses   generally include tuition, fees, room and board, and related expenses such as books and supplies. The expenses must be for education in a degree, certificate, or similar program at an eligible educational institution. An eligible educational institution includes most colleges, universities, and certain vocational schools. You must reduce the expenses by the following benefits.

• Employer-provided educational assistance benefits that are not included in box 1 of your W-2 form(s).
• 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 scholarship, educational assistance allowance, or other payment (but not gifts, inheritances, etc.) excluded from income.

For more details on these expenses, see Pub. 970.

An eligible student is a person who:

• Was enrolled in a degree, certificate, or other program (including a program of study abroad that was approved for credit by the institution at which the student was enrolled) leading to a recognized educational credential at an eligible educational institution and
• Carried at least half the normal full-time workload for the course of study he or she was pursuing.

Line 27 - Archer MSA deduction.   If you made a contribution to an Archer MSA for 2002, you may be able to take this deduction. See Form 8853 for details.

Line 28 - Moving expenses.   Employees and self-employed persons (including partners) can deduct certain moving expenses. The move must be in connection with employment that generates effectively connected income.

If you moved in connection with your job or business or started a new job, you may be able to take this deduction. But your new workplace must be at least 50 miles farther from your old home than your old home was from your old workplace. If you had no former workplace, your new workplace must be at least 50 miles from your old home. The deduction is generally limited to moves to or within the United States or its possessions. If you meet these requirements, see Pub. 521. Use Form 3903 to figure the amount to enter on this line.

Line 29 - Self-employed health insurance deduction.   If you were self-employed and had a net profit for the year, you may be able to deduct part of the amount paid for health insurance for yourself, your spouse, and dependents. The insurance plan must be established under your business. But if you were also eligible to participate in any subsidized health plan maintained by your or your spouse's employer for any month or part of a month in 2002, amounts paid for health insurance coverage for that month cannot be used to figure the deduction. For example, if you were eligible to participate in a subsidized health plan maintained by your spouse's employer from September 30 through December 31, you cannot use amounts paid for health insurance coverage for September through December to figure your deduction. For more details, see Pub. 535.

If you qualify to take the deduction, use the worksheet below to figure the amount you can deduct.

Exception.   Use Pub. 535 instead of the worksheet below to find out how to figure your deduction if either of the following applies.

• You had more than one source of income subject to self-employment tax.
• You are using amounts paid for qualified long-term care insurance to figure the deduction.

Line 30 - Self-employed SEP, SIMPLE, and qualified plans.   If you were self-employed or a partner, you may be able to take this deduction. See Pub. 560 or, if you were a minister, Pub. 517.

Line 31 - Penalty on early withdrawal of savings.   The Form 1099-INT or Form 1099-OID you received will show the amount of any penalty you were charged.

Line 32 - Scholarship and fellowship grants excluded.   If you received a scholarship or fellowship grant and were a degree candidate, enter amounts used for tuition and course-related expenses (fees, books, supplies, and equipment), but only to the extent the amounts are included on line 12. See the examples in the instructions for line 12 beginning on page 9.

Line 33.   Include in the total on line 33 any of the following adjustments that are related to your effectively connected income. To find out if you can take the deduction, see the form or publication indicated. On the dotted line next to line 33, enter the amount of your deduction and identify it as indicated.

• Deduction for clean-fuel vehicles (see Pub. 535). Identify as Clean-Fuel.
• Performing-arts-related expenses (see Form 2106 or 2106-EZ). Identify as QPA.
• Reforestation amortization (see Pub. 535). Identify as RFST.
• Repayment of supplemental unemployment benefits under the Trade Act of 1974 (see Pub. 525). Identify as Sub-Pay TRA.
• Contributions to section 501(c)(18) pension plans (see Pub. 525). Identify as 501(c)(18).
• Contributions by certain chaplains to section 403(b) plans (see Pub. 517). Identify as 403(b).

Line 34 - Adjusted gross income.   If line 34 is less than zero, you may have a net operating loss that you can carry to another tax year. See Form 1045 and its instructions for details.

Tax Computation on Income Effectively Connected With A U.S. Trade or Business

Line 36 - Itemized deductions.   Enter the total itemized deductions from line 17 of Schedule A on page 3 of the form.

Note:   Residents of India who were students or business apprentices may be able to take the standard deduction instead of their itemized deductions. See Pub. 519 for details.

Line 38 - Deduction for exemptions.   You can claim exemptions only to the extent of your income that is effectively connected with a U.S. trade or business.

Individuals.   If you are a nonresident alien individual, multiply $3,000 by the total number of exemptions entered on line 7d. (If you were a resident of Japan or the Republic of Korea (South Korea), you must figure the exemptions for your spouse and children according to the proportion your U.S. income bears to your total income. You must also complete item I on page 5 of the form. For details, see Pub. 519.) But use the worksheet on this page to figure the amount, if any, to enter on line 38 if your adjusted gross income from line 35 is more than $137,300 if you checked filing status box 1 or 2; $103,000 if you checked filing status box 3, 4, or 5; $206,000 if you checked filing status box 6.

Estates.   If you are filing for an estate, enter $600 on line 38.

Trusts.   If you are filing for a trust whose governing instrument requires it to distribute all of its income currently, enter $300 on line 38. If you are filing for a qualified disability trust (defined in section 642(b)(2)(C)(ii)), enter $3,000 on line 38. But if the qualified disability trust's modified AGI (determined under section 67(e) without regard to section 642(b)) is more than $137,300, use the worksheet on this page to figure the amount to enter on line 38. If you are filing for any other trust, enter $100 on line 38.

A qualified disability trust must enter Section 642(b)(2)(C) on the dotted line next to line 38.

Line 40 - Tax.   Use one of the following methods to figure your tax. Also, include in the total on line 40 any tax from Forms 8814 and 4972. Be sure to check the appropriate box(es).

Tax Table or Tax Rate Schedules. If you are filing for an estate or trust, use the Tax Rate Schedules on page 39.

Individuals. If your taxable income (line 39) is less than $100,000, you must use the Tax Table, which starts on page 27, to figure your tax. Be sure you use the correct column. If you checked filing status box 3, 4, or 5, you must use the Married filing separately column. If your taxable income is $100,000 or more, use the Tax Rate Schedules on page 39.

Exception.   Do not use the Tax Table or Tax Rate Schedules to figure your tax if either 1 or 2 below applies.

1. You are required to figure your tax using Form 8615, Schedule D (Form 1040), or the Capital Gain Tax Worksheet on page 16.
2. You use Schedule J (Form 1040) (for farm income) to figure your tax.

Form 8615. You must generally use Form 8615 to figure the tax for any child who was under age 14 at the end of 2002, and who had more than $1,500 of investment income, such as taxable interest, ordinary dividends, or capital gains (including capital gain distributions), that is effectively connected with a U.S. trade or business. But if neither of the child's parents was alive on December 31, 2002, do not use Form 8615 to figure the child's tax.

A child born on January 1, 1989, is considered to be age 14 at the end of 2002. Do not use Form 8615 for such a child.

Schedule D (Form 1040). If you had a net capital gain on Schedule D (both lines 16 and 17 of that schedule are gains) and the amount on Form 1040NR, line 39, is more than zero, use Part IV of Schedule D to figure your tax.

Capital Gain Tax Worksheet. If you received capital gain distributions but you are not required to file Schedule D (Form 1040), use the worksheet on page 16 to figure your tax.

Schedule J (Form 1040). If you had income from farming, your tax may be less if you choose to figure it using income averaging on Schedule J.

Line 41 - Alternative minimum tax.   The tax law gives special treatment to some kinds of income and allows special deductions and credits for some kinds of expenses. If you benefit from these provisions, you may have to pay a minimum amount of tax through the alternative minimum tax. This tax is figured on Form 6251 for individuals. If you are filing for an estate or trust, see Schedule I (Form 1041) and its instructions to find out if you owe this tax.

If you have any of the adjustments or preferences from the list below or you are claiming a net operating loss deduction or the foreign tax credit, you must complete Form 6251. Otherwise, to see if you should complete Form 6251, add the amount on line 37 of Form 1040NR to the amounts on lines 3 and 15 of Schedule A (Form 1040NR). If the total is more than the dollar amount shown below that applies to you, fill in Form 6251.

• $35,750 if you checked filing status box 1 or 2.
• $24,500 if you checked filing status box 3, 4, or 5.
• $49,000 if you checked filing status box 6.

Disposition of U.S. Real Property Interests. If you disposed of a U.S. real property interest at a gain, you must make a special computation to see if you owe this tax. For details, see the Instructions for Form 6251.

Adjustments and Preferences:

• Accelerated depreciation.
• Stock by exercising an incentive stock option and you did not dispose of the stock in the same year.
• Tax-exempt interest from private activity bonds.
• Intangible drilling, circulation, research, experimental, or mining costs.
• Amortization of pollution-control facilities or depletion.
• Income or (loss) from tax-shelter farm activities or passive activities.
• Percentage-of-completion income from long-term contracts.
• Alternative minimum tax adjustments from an estate, trust, electing large partnership, or cooperative.
• Section 1202 exclusion.

Form 6251 should be filled in for a child who was under age 14 at the end of 2002 if the child's adjusted gross income from Form 1040NR, line 35, exceeds the child's earned income by more than $5,500.

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