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2012 1040 Ez

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2012 1040 ez 4. 2012 1040 ez   Figuring Depreciation Under MACRS Table of Contents Introduction Useful Items - You may want to see: Which Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS?Rent-to-own dealer. 2012 1040 ez Rent-to-own contract. 2012 1040 ez What Is the Placed in Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies?Recovery Periods Under GDS Recovery Periods Under ADS Additions and Improvements Which Convention Applies? Which Depreciation Method Applies?Depreciation Methods for Farm Property Electing a Different Method How Is the Depreciation Deduction Figured?Using the MACRS Percentage Tables Figuring the Deduction Without Using the Tables Figuring the Deduction for Property Acquired in a Nontaxable Exchange Figuring the Deduction for a Short Tax Year How Do You Use General Asset Accounts?Grouping Property Figuring Depreciation for a GAA Disposing of GAA Property Terminating GAA Treatment Electing To Use a GAA When Do You Recapture MACRS Depreciation? Introduction The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. 2012 1040 ez MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). 2012 1040 ez Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. 2012 1040 ez To be sure you can use MACRS to figure depreciation for your property, see What Method Can You Use To Depreciate Your Property in chapter 1. 2012 1040 ez This chapter explains how to determine which MACRS depreciation system applies to your property. 2012 1040 ez It also discusses other information you need to know before you can figure depreciation under MACRS. 2012 1040 ez This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. 2012 1040 ez It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. 2012 1040 ez Finally, it explains when and how to recapture MACRS depreciation. 2012 1040 ez Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car  Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. 2012 1040 ez Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. 2012 1040 ez You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. 2012 1040 ez If you placed your property in service in 2013, complete Part III of Form 4562 to report depreciation using MACRS. 2012 1040 ez Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. 2012 1040 ez If you placed your property in service before 2013 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III. 2012 1040 ez Required use of ADS. 2012 1040 ez   You must use ADS for the following property. 2012 1040 ez Listed property used 50% or less in a qualified business use. 2012 1040 ez See chapter 5 for information on listed property. 2012 1040 ez Any tangible property used predominantly outside the United States during the year. 2012 1040 ez Any tax-exempt use property. 2012 1040 ez Any tax-exempt bond-financed property. 2012 1040 ez All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. 2012 1040 ez Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. 2012 1040 ez If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property. 2012 1040 ez Electing ADS. 2012 1040 ez   Although your property may qualify for GDS, you can elect to use ADS. 2012 1040 ez The election generally must cover all property in the same property class that you placed in service during the year. 2012 1040 ez However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. 2012 1040 ez Once you make this election, you can never revoke it. 2012 1040 ez   You make the election by completing line 20 in Part III of Form 4562. 2012 1040 ez Which Property Class Applies Under GDS? The following is a list of the nine property classifications under GDS and examples of the types of property included in each class. 2012 1040 ez These property classes are also listed under column (a) in section B, Part III, of Form 4562. 2012 1040 ez For detailed information on property classes, see Appendix B, Table of Class Lives and Recovery Periods, in this publication. 2012 1040 ez 3-year property. 2012 1040 ez Tractor units for over-the-road use. 2012 1040 ez Any race horse over 2 years old when placed in service. 2012 1040 ez (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age. 2012 1040 ez ) Any other horse (other than a race horse) over 12 years old when placed in service. 2012 1040 ez Qualified rent-to-own property (defined later). 2012 1040 ez 5-year property. 2012 1040 ez Automobiles, taxis, buses, and trucks. 2012 1040 ez Computers and peripheral equipment. 2012 1040 ez Office machinery (such as typewriters, calculators, and copiers). 2012 1040 ez Any property used in research and experimentation. 2012 1040 ez Breeding cattle and dairy cattle. 2012 1040 ez Appliances, carpets, furniture, etc. 2012 1040 ez , used in a residential rental real estate activity. 2012 1040 ez Certain geothermal, solar, and wind energy property. 2012 1040 ez 7-year property. 2012 1040 ez Office furniture and fixtures (such as desks, files, and safes). 2012 1040 ez Agricultural machinery and equipment. 2012 1040 ez Any property that does not have a class life and has not been designated by law as being in any other class. 2012 1040 ez Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2014. 2012 1040 ez Any natural gas gathering line placed in service after April 11, 2005. 2012 1040 ez See Natural gas gathering line and electric transmission property , later. 2012 1040 ez 10-year property. 2012 1040 ez Vessels, barges, tugs, and similar water transportation equipment. 2012 1040 ez Any single purpose agricultural or horticultural structure. 2012 1040 ez Any tree or vine bearing fruits or nuts. 2012 1040 ez Qualified small electric meter and qualified smart electric grid system (defined later) placed in service on or after October 3, 2008. 2012 1040 ez 15-year property. 2012 1040 ez Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). 2012 1040 ez Any retail motor fuels outlet (defined later), such as a convenience store. 2012 1040 ez Any municipal wastewater treatment plant. 2012 1040 ez Any qualified leasehold improvement property (defined later) placed in service before January 1, 2014. 2012 1040 ez Any qualified restaurant property (defined later) placed in service before January 1, 2014. 2012 1040 ez Initial clearing and grading land improvements for gas utility property. 2012 1040 ez Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. 2012 1040 ez See Natural gas gathering line and electric transmission property , later. 2012 1040 ez Any natural gas distribution line placed in service after April 11, 2005 and before January 1, 2011. 2012 1040 ez Any qualified retail improvement property placed in service before January 1, 2014. 2012 1040 ez 20-year property. 2012 1040 ez Farm buildings (other than single purpose agricultural or horticultural structures). 2012 1040 ez Municipal sewers not classified as 25-year property. 2012 1040 ez Initial clearing and grading land improvements for electric utility transmission and distribution plants. 2012 1040 ez 25-year property. 2012 1040 ez This class is water utility property, which is either of the following. 2012 1040 ez Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property. 2012 1040 ez Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996. 2012 1040 ez Residential rental property. 2012 1040 ez This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. 2012 1040 ez A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. 2012 1040 ez It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. 2012 1040 ez If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. 2012 1040 ez Nonresidential real property. 2012 1040 ez This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27. 2012 1040 ez 5 years. 2012 1040 ez Qualified rent-to-own property. 2012 1040 ez   Qualified rent-to-own property is property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract. 2012 1040 ez It is tangible personal property generally used in the home for personal use. 2012 1040 ez It includes computers and peripheral equipment, televisions, videocassette recorders, stereos, camcorders, appliances, furniture, washing machines and dryers, refrigerators, and other similar consumer durable property. 2012 1040 ez Consumer durable property does not include real property, aircraft, boats, motor vehicles, or trailers. 2012 1040 ez   If some of the property you rent to others under a rent-to-own agreement is of a type that may be used by the renters for either personal or business purposes, you still can treat this property as qualified property as long as it does not represent a significant portion of your leasing property. 2012 1040 ez However, if this dual-use property does represent a significant portion of your leasing property, you must prove that this property is qualified rent-to-own property. 2012 1040 ez Rent-to-own dealer. 2012 1040 ez   You are a rent-to-own dealer if you meet all the following requirements. 2012 1040 ez You regularly enter into rent-to-own contracts (defined below) in the ordinary course of your business for the use of consumer property. 2012 1040 ez A substantial portion of these contracts end with the customer returning the property before making all the payments required to transfer ownership. 2012 1040 ez The property is tangible personal property of a type generally used within the home for personal use. 2012 1040 ez Rent-to-own contract. 2012 1040 ez   This is any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which— Is titled “Rent-to-Own Agreement,” “Lease Agreement with Ownership Option,” or other similar language. 2012 1040 ez Provides a beginning date and a maximum period of time, not to exceed 156 weeks or 36 months from the beginning date, for which the contract can be in effect (including renewals or options to extend). 2012 1040 ez Provides for regular periodic (weekly or monthly) payments that can be either level or decreasing. 2012 1040 ez If the payments are decreasing, no payment can be less than 40% of the largest payment. 2012 1040 ez Provides for total payments that generally exceed the normal retail price of the property plus interest. 2012 1040 ez Provides for total payments that do not exceed $10,000 for each item of property. 2012 1040 ez Provides that the customer has no legal obligation to make all payments outlined in the contract and that, at the end of each weekly or monthly payment period, the customer can either continue to use the property by making the next payment or return the property in good working order with no further obligations and no entitlement to a return of any prior payments. 2012 1040 ez Provides that legal title to the property remains with the rent-to-own dealer until the customer makes either all the required payments or the early purchase payments required under the contract to acquire legal title. 2012 1040 ez Provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, or otherwise dispose of the property until all contract payments have been made. 2012 1040 ez Motorsports entertainment complex. 2012 1040 ez   This is a racing track facility permanently situated on land that hosts one or more racing events for automobiles, trucks, or motorcycles during the 36-month period after the first day of the month in which the facility is placed in service. 2012 1040 ez The events must be open to the public for the price of admission. 2012 1040 ez Qualified smart electric grid system. 2012 1040 ez   A qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service after October 3, 2008, by a taxpayer who is a supplier of electrical energy or a provider of electrical energy services. 2012 1040 ez Smart grid property includes electronics and related equipment that is capable of: Sensing, collecting, and monitoring data of or from all portions of a utility's electric distribution grid, Providing real-time, two-way communications to monitor or to manage the grid, and Providing real-time analysis of an event prediction based on collected data that can be used to provide electric distribution system reliability, quality, and performance. 2012 1040 ez Retail motor fuels outlet. 2012 1040 ez   Real property is a retail motor fuels outlet if it is used to a substantial extent in the retail marketing of petroleum or petroleum products (whether or not it is also used to sell food or other convenience items) and meets any one of the following three tests. 2012 1040 ez It is not larger than 1,400 square feet. 2012 1040 ez 50% or more of the gross revenues generated from the property are derived from petroleum sales. 2012 1040 ez 50% or more of the floor space in the property is devoted to petroleum marketing sales. 2012 1040 ez A retail motor fuels outlet does not include any facility related to petroleum and natural gas trunk pipelines. 2012 1040 ez Qualified leasehold improvement property. 2012 1040 ez    Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. 2012 1040 ez   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor's death or in any of the following types of transactions. 2012 1040 ez A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or reacquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor's or distributor's basis in the property. 2012 1040 ez Examples include the following. 2012 1040 ez A complete liquidation of a subsidiary. 2012 1040 ez A transfer to a corporation controlled by the transferor. 2012 1040 ez An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. 2012 1040 ez Qualified restaurant property. 2012 1040 ez   Qualified restaurant property is any section 1250 property that is a building placed in service after December 31, 2008, and before January 1, 2014. 2012 1040 ez Also, more than 50% of the building's square footage must be devoted to preparation of meals and seating for on-premises consumption of prepared meals. 2012 1040 ez Qualified smart electric meter. 2012 1040 ez   A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of electric energy or a provider of electric energy services and which is capable of being used by you as part of a system that: Measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day; Provides for the exchange of information between the supplier or provider and the customer's smart electric meter in support of time-based rates or other forms of demand response; Provides data to the supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and Provides all commercial and residential customers of such supplier or provider with net metering. 2012 1040 ez Net metering means allowing a customer a credit, if any, as complies with applicable federal and state laws and regulations for providing electricity to the supplier or provider. 2012 1040 ez Natural gas gathering line and electric transmission property. 2012 1040 ez   Any natural gas gathering line placed in service after April 11, 2005, is treated as 7-year property, and electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity and any natural gas distribution line placed in service after April 11, 2005, are treated as 15-year property, if the following requirements are met. 2012 1040 ez The original use of the property must have begun with you after April 11, 2005. 2012 1040 ez Original use means the first use to which the property is put, whether or not by you. 2012 1040 ez Therefore, property used by any person before April 12, 2005, is not original use. 2012 1040 ez Original use includes additional capital expenditures you incurred to recondition or rebuild your property. 2012 1040 ez However, original use does not include the cost of reconditioned or rebuilt property you acquired. 2012 1040 ez Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20% of the total cost of the property. 2012 1040 ez The property must not be placed in service under a binding contract in effect before April 12, 2005. 2012 1040 ez The property must not be self-constructed property (property you manufacture, construct, or produce for your own use), if you began the manufacture, construction, or production of the property before April 12, 2005. 2012 1040 ez Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into by you or a related party before the manufacture, construction, or production of the property is considered to be manufactured, constructed, or produced by you. 2012 1040 ez What Is the Placed in Service Date? You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. 2012 1040 ez The placed in service date for your property is the date the property is ready and available for a specific use. 2012 1040 ez It is therefore not necessarily the date it is first used. 2012 1040 ez If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. 2012 1040 ez See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples illustrating when property is placed in service. 2012 1040 ez What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. 2012 1040 ez For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . 2012 1040 ez Reduce that amount by any credits and deductions allocable to the property. 2012 1040 ez The following are examples of some credits and deductions that reduce basis. 2012 1040 ez Any deduction for section 179 property. 2012 1040 ez Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations. 2012 1040 ez Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005, and before January 1, 2014. 2012 1040 ez Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005, and before January 1, 2014. 2012 1040 ez Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006, and before January 1, 2014 . 2012 1040 ez Any deduction for removal of barriers to the disabled and the elderly. 2012 1040 ez Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. 2012 1040 ez Any special depreciation allowance. 2012 1040 ez Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. 2012 1040 ez For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. 2012 1040 ez Enter the basis for depreciation under column (c) in Part III of Form 4562. 2012 1040 ez For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . 2012 1040 ez Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. 2012 1040 ez It is determined based on the depreciation system (GDS or ADS) used. 2012 1040 ez Recovery Periods Under GDS Under GDS, property that is not qualified Indian reservation property is depreciated over one of the following recovery periods. 2012 1040 ez Property Class Recovery Period 3-year property   3 years 1   5-year property   5 years     7-year property   7 years     10-year property   10 years     15-year property   15 years 2   20-year property   20 years     25-year property   25 years 3   Residential rental property   27. 2012 1040 ez 5 years     Nonresidential real property   39 years 4   15 years for qualified rent-to-own property placed in service before August 6, 1997. 2012 1040 ez 239 years for property that is a retail motor fuels outlet placed in service before August 20, 1996 (31. 2012 1040 ez 5 years if placed in service before May 13, 1993), unless you elected to depreciate it over 15 years. 2012 1040 ez 320 years for property placed in service before June 13, 1996, or under a binding contract in effect before June 10, 1996. 2012 1040 ez 431. 2012 1040 ez 5 years for property placed in service before May 13, 1993 (or before January 1, 1994, if the purchase or construction of the property is under a binding contract in effect before May 13, 1993, or if construction began before May 13, 1993). 2012 1040 ez The GDS recovery periods for property not listed above can be found in Appendix B, Table of Class Lives and Recovery Periods. 2012 1040 ez Residential rental property and nonresidential real property are defined earlier under Which Depreciation System (GDS or ADS) Applies. 2012 1040 ez Enter the appropriate recovery period on Form 4562 under column (d) in section B of Part III, unless already shown (for 25-year property, residential rental property, and nonresidential real property). 2012 1040 ez Office in the home. 2012 1040 ez   If your home is a personal-use single family residence and you begin to use part of your home as an office, depreciate that part of your home as nonresidential real property over 39 years (31. 2012 1040 ez 5 years if you began using it for business before May 13, 1993). 2012 1040 ez However, if your home is an apartment in an apartment building that you own and the building is residential rental property as defined earlier under Which Depreciation System (GDS or ADS) Applies , depreciate the part used as an office as residential rental property over 27. 2012 1040 ez 5 years. 2012 1040 ez See Publication 587 for a discussion of the tests you must meet to claim expenses, including depreciation, for the business use of your home. 2012 1040 ez Home changed to rental use. 2012 1040 ez   If you begin to rent a home that was your personal home before 1987, you depreciate it as residential rental property over 27. 2012 1040 ez 5 years. 2012 1040 ez Indian Reservation Property The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before 2014 are shorter than those listed earlier. 2012 1040 ez The following table shows these shorter recovery periods. 2012 1040 ez Property Class Recovery  Period 3-year property 2 years 5-year property 3 years 7-year property 4 years 10-year property 6 years 15-year property 9 years 20-year property 12 years Nonresidential real property 22 years Nonresidential real property is defined earlier under Which Property Class Applies Under GDS . 2012 1040 ez Use this chart to find the correct percentage table to use for qualified Indian reservation property. 2012 1040 ez IF your recovery period is: THEN use the following table in Appendix A: 2 years A-21 3 years A-1, A-2, A-3, A-4, or A-5 4 years A-22 6 years A-23 9 years A-14, A-15, A-16, A-17, or A-18 12 years A-14, A-15, A-16, A-17, or A-18 22 years A-24 Qualified property. 2012 1040 ez   Property eligible for the shorter recovery periods are 3-, 5-, 7-, 10-, 15-, and 20-year property and nonresidential real property. 2012 1040 ez You must use this property predominantly in the active conduct of a trade or business within an Indian reservation. 2012 1040 ez The rental of real property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Indian reservation. 2012 1040 ez   The following property is not qualified property. 2012 1040 ez Property used or located outside an Indian reservation on a regular basis, other than qualified infrastructure property. 2012 1040 ez Property acquired directly or indirectly from a related person. 2012 1040 ez Property placed in service for purposes of conducting or housing class I, II, or III gaming activities. 2012 1040 ez These activities are defined in section 4 of the Indian Regulatory Act (25 U. 2012 1040 ez S. 2012 1040 ez C. 2012 1040 ez 2703). 2012 1040 ez Any property you must depreciate under ADS. 2012 1040 ez Determine whether property is qualified without regard to the election to use ADS and after applying the special rules for listed property not used predominantly for qualified business use (discussed in chapter 5). 2012 1040 ez Qualified infrastructure property. 2012 1040 ez   Item (1) above does not apply to qualified infrastructure property located outside the reservation that is used to connect with qualified infrastructure property within the reservation. 2012 1040 ez Qualified infrastructure property is property that meets all the following rules. 2012 1040 ez It is qualified property, as defined earlier, except that it is outside the reservation. 2012 1040 ez It benefits the tribal infrastructure. 2012 1040 ez It is available to the general public. 2012 1040 ez It is placed in service in connection with the active conduct of a trade or business within a reservation. 2012 1040 ez Infrastructure property includes, but is not limited to, roads, power lines, water systems, railroad spurs, and communications facilities. 2012 1040 ez Related person. 2012 1040 ez   For purposes of item (2) above, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 for a description of related persons. 2012 1040 ez Indian reservation. 2012 1040 ez   The term Indian reservation means a reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U. 2012 1040 ez S. 2012 1040 ez C. 2012 1040 ez 1452(d)) or section 4(10) of the Indian Child Welfare Act of 1978 (25 U. 2012 1040 ez S. 2012 1040 ez C. 2012 1040 ez 1903(10)). 2012 1040 ez Section 3(d) of the Indian Financing Act of 1974 defines reservation to include former Indian reservations in Oklahoma. 2012 1040 ez For a definition of the term “former Indian reservations in Oklahoma,” see Notice 98-45 in Internal Revenue Bulletin 1998-35. 2012 1040 ez Recovery Periods Under ADS The recovery periods for most property generally are longer under ADS than they are under GDS. 2012 1040 ez The following table shows some of the ADS recovery periods. 2012 1040 ez Property Recovery  Period Rent-to-own property 4 years Automobiles and light duty trucks 5 years Computers and peripheral equipment 5 years High technology telephone station equipment installed on customer premises 5 years High technology medical equipment 5 years Personal property with no class life 12 years Natural gas gathering lines 14 years Single purpose agricultural and horticultural structures 15 years Any tree or vine bearing fruit or nuts 20 years Initial clearing and grading land  improvements for gas utility property 20 years Initial clearing and grading land  improvements for electric utility  transmission and distribution plants 25 years Electric transmission property used in the transmission at 69 or more kilovolts of electricity 30 years Natural gas distribution lines 35 years Any qualified leasehold improvement property 39 years Any qualified restaurant property 39 years Nonresidential real property 40 years Residential rental property 40 years Section 1245 real property not listed in Appendix B 40 years Railroad grading and tunnel bore 50 years The ADS recovery periods for property not listed above can be found in the tables in Appendix B. 2012 1040 ez Rent-to-own property, qualified leasehold improvement property, qualified restaurant property, residential rental property, and nonresidential real property are defined earlier under Which Property Class Applies Under GDS . 2012 1040 ez Tax-exempt use property subject to a lease. 2012 1040 ez   The ADS recovery period for any property leased under a lease agreement to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership) cannot be less than 125% of the lease term. 2012 1040 ez Additions and Improvements An addition or improvement you make to depreciable property is treated as separate depreciable property. 2012 1040 ez See How Do You Treat Repairs and Improvements in chapter 1 for a definition of improvements. 2012 1040 ez Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. 2012 1040 ez The recovery period begins on the later of the following dates. 2012 1040 ez The date you place the addition or improvement in service. 2012 1040 ez The date you place in service the property to which you made the addition or improvement. 2012 1040 ez If the improvement you make is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property, the GDS recovery period is 15 years (39 years under ADS). 2012 1040 ez Example. 2012 1040 ez You own a rental home that you have been renting out since 1981. 2012 1040 ez If you put an addition on the home and place the addition in service this year, you would use MACRS to figure your depreciation deduction for the addition. 2012 1040 ez Under GDS, the property class for the addition is residential rental property and its recovery period is 27. 2012 1040 ez 5 years because the home to which the addition is made would be residential rental property if you had placed it in service this year. 2012 1040 ez Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. 2012 1040 ez The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. 2012 1040 ez The mid-month convention. 2012 1040 ez   Use this convention for nonresidential real property, residential rental property, and any railroad grading or tunnel bore. 2012 1040 ez   Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. 2012 1040 ez This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of. 2012 1040 ez   Your use of the mid-month convention is indicated by the “MM” already shown under column (e) in Part III of Form 4562. 2012 1040 ez The mid-quarter convention. 2012 1040 ez   Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. 2012 1040 ez   Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. 2012 1040 ez This means that 1½ months of depreciation is allowed for the quarter the property is placed in service or disposed of. 2012 1040 ez   If you use this convention, enter “MQ” under column (e) in Part III of Form 4562. 2012 1040 ez    For purposes of determining whether the mid-quarter convention applies, the depreciable basis of property you placed in service during the tax year reflects the reduction in basis for amounts expensed under section 179 and the part of the basis of property attributable to personal use. 2012 1040 ez However, it does not reflect any reduction in basis for any special depreciation allowance. 2012 1040 ez The half-year convention. 2012 1040 ez   Use this convention if neither the mid-quarter convention nor the mid-month convention applies. 2012 1040 ez   Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. 2012 1040 ez This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of. 2012 1040 ez   If you use this convention, enter “HY” under column (e) in Part III of Form 4562. 2012 1040 ez Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. 2012 1040 ez The 200% declining balance method over a GDS recovery period. 2012 1040 ez The 150% declining balance method over a GDS recovery period. 2012 1040 ez The straight line method over a GDS recovery period. 2012 1040 ez The straight line method over an ADS recovery period. 2012 1040 ez For property placed in service before 1999, you could have elected the 150% declining balance method using the ADS recovery periods for certain property classes. 2012 1040 ez If you made this election, continue to use the same method and recovery period for that property. 2012 1040 ez Table 4–1 lists the types of property you can depreciate under each method. 2012 1040 ez It also gives a brief explanation of the method, including any benefits that may apply. 2012 1040 ez Depreciation Methods for Farm Property If you place personal property in service in a farming business after 1988, you generally must depreciate it under GDS using the 150% declining balance method unless you are a farmer who must depreciate the property under ADS using the straight line method or you elect to depreciate the property under GDS or ADS using the straight line method. 2012 1040 ez You can depreciate real property using the straight line method under either GDS or ADS. 2012 1040 ez Fruit or nut trees and vines. 2012 1040 ez   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a recovery period of 10 years. 2012 1040 ez ADS required for some farmers. 2012 1040 ez   If you elect not to apply the uniform capitalization rules to any plant produced in your farming business, you must use ADS. 2012 1040 ez You must use ADS for all property you place in service in any year the election is in effect. 2012 1040 ez See the regulations under section 263A of the Internal Revenue Code for information on the uniform capitalization rules that apply to farm property. 2012 1040 ez Electing a Different Method As shown in Table 4–1 , you can elect a different method for depreciation for certain types of property. 2012 1040 ez You must make the election by the due date of the return (including extensions) for the year you placed the property in service. 2012 1040 ez However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 1040 ez Attach the election to the amended return and write “Filed pursuant to section 301. 2012 1040 ez 9100-2” on the election statement. 2012 1040 ez File the amended return at the same address you filed the original return. 2012 1040 ez Once you make the election, you cannot change it. 2012 1040 ez If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. 2012 1040 ez However, you can make the election on a property-by-property basis for nonresidential real and residential rental property. 2012 1040 ez 150% election. 2012 1040 ez   Instead of using the 200% declining balance method over the GDS recovery period for nonfarm property in the 3-, 5-, 7-, and 10-year property classes, you can elect to use the 150% declining balance method. 2012 1040 ez Make the election by entering “150 DB” under column (f) in Part III of Form 4562. 2012 1040 ez Straight line election. 2012 1040 ez   Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period. 2012 1040 ez Make the election by entering  “S/L” under column (f) in Part III of Form 4562. 2012 1040 ez Election of ADS. 2012 1040 ez   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. 2012 1040 ez ADS uses the straight line method of depreciation over fixed ADS recovery periods. 2012 1040 ez Most ADS recovery periods are listed in Appendix B, or see the table under Recovery Periods Under ADS , earlier. 2012 1040 ez   Make the election by completing line 20 in Part III of Form 4562. 2012 1040 ez Farm property. 2012 1040 ez   Instead of using the 150% declining balance method over a GDS recovery period for property you use in a farming business (other than real property), you can elect to depreciate it using either of the following methods. 2012 1040 ez The straight line method over a GDS recovery period. 2012 1040 ez The straight line method over an ADS recovery period. 2012 1040 ez Table 4-1. 2012 1040 ez Depreciation Methods Note. 2012 1040 ez The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. 2012 1040 ez Method Type of Property Benefit GDS using 200% DB • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% DB • All farm property (except real property) • All 15- and 20-year property (except qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014) • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction1 GDS using SL • Nonresidential real property • Qualified leasehold improvement property placed in service before January 1, 2014 • Qualified restaurant property placed in service before January 1, 2014 • Qualified retail improvement property placed in service before January 1, 2014 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-, 5-, 7-, 10-, 15-, and 20-year property2 • Property for which you elected section 168(k)(4) • Provides for equal yearly deductions (except for the first and last years) ADS using SL • Listed property used 50% or less for business • Property used predominantly outside the U. 2012 1040 ez S. 2012 1040 ez  • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method4 • Provides for equal yearly deductions (except for the first and last years) 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(b)(5) of the Internal Revenue Code. 2012 1040 ez 3See section 168(g)(6) of the Internal Revenue Code 4See section 168(g)(7) of the Internal Revenue Code How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed in service date, basis amount, recovery period, convention, and depreciation method that applies to your property. 2012 1040 ez Then, you are ready to figure your depreciation deduction. 2012 1040 ez You can figure it using a percentage table provided by the IRS, or you can figure it yourself without using the table. 2012 1040 ez Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. 2012 1040 ez These percentage tables are in Appendix A near the end of this publication. 2012 1040 ez Which table to use. 2012 1040 ez    Appendix A contains the MACRS Percentage Table Guide, which is designed to help you locate the correct percentage table to use for depreciating your property. 2012 1040 ez The percentage tables immediately follow the guide. 2012 1040 ez Rules Covering the Use of the Tables The following rules cover the use of the percentage tables. 2012 1040 ez You must apply the rates in the percentage tables to your property's unadjusted basis. 2012 1040 ez You cannot use the percentage tables for a short tax year. 2012 1040 ez See Figuring the Deduction for a Short Tax Year, later, for information on the short tax year rules. 2012 1040 ez Once you start using the percentage tables for any item of property, you generally must continue to use them for the entire recovery period of the property. 2012 1040 ez You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to that property that is depreciated as a separate item of property. 2012 1040 ez Basis adjustments other than those made due to the items listed in (4) include an increase in basis for the recapture of a clean-fuel deduction or credit and a reduction in basis for a casualty loss. 2012 1040 ez Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. 2012 1040 ez   If you increase the basis of your property because of the recapture of part or all of a deduction for clean-fuel vehicles or the credit for clean-fuel vehicle refueling property placed in service before January 1, 2006, you cannot continue to use the percentage tables. 2012 1040 ez For the year of the adjustment and the remaining recovery period, you must figure the depreciation deduction yourself using the property's adjusted basis at the end of the year. 2012 1040 ez See Figuring the Deduction Without Using the Tables, later. 2012 1040 ez Basis adjustment due to casualty loss. 2012 1040 ez   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. 2012 1040 ez For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. 2012 1040 ez See Figuring the Deduction Without Using the Tables, later. 2012 1040 ez Example. 2012 1040 ez On October 26, 2012, Sandra Elm, a calendar year taxpayer, bought and placed in service in her business a new item of 7-year property. 2012 1040 ez It cost $39,000 and she elected a section 179 deduction of $24,000. 2012 1040 ez She also took a special depreciation allowance of $7,500 [50% of $15,000 ($39,000 − $24,000)]. 2012 1040 ez Her unadjusted basis after the section 179 deduction and special depreciation allowance was $7,500 ($15,000 − $7,500). 2012 1040 ez She figured her MACRS depreciation deduction using the percentage tables. 2012 1040 ez For 2012, her MACRS depreciation deduction was $268. 2012 1040 ez In July 2013, the property was vandalized and Sandra had a deductible casualty loss of $3,000. 2012 1040 ez She must adjust the property's basis for the casualty loss, so she can no longer use the percentage tables. 2012 1040 ez Her adjusted basis at the end of 2013, before figuring her 2013 depreciation, is $4,232. 2012 1040 ez She figures that amount by subtracting the 2012 MACRS depreciation of $268 and the casualty loss of $3,000 from the unadjusted basis of $7,500. 2012 1040 ez She must now figure her depreciation for 2013 without using the percentage tables. 2012 1040 ez Figuring the Unadjusted Basis of Your Property You must apply the table rates to your property's unadjusted basis each year of the recovery period. 2012 1040 ez Unadjusted basis is the same basis amount you would use to figure gain on a sale, but you figure it without reducing your original basis by any MACRS depreciation taken in earlier years. 2012 1040 ez However, you do reduce your original basis by other amounts, including the following. 2012 1040 ez Any amortization taken on the property. 2012 1040 ez Any section 179 deduction claimed. 2012 1040 ez Any special depreciation allowance taken on the property. 2012 1040 ez For business property you purchase during the year, the unadjusted basis is its cost minus these and other applicable adjustments. 2012 1040 ez If you trade property, your unadjusted basis in the property received is the cash paid plus the adjusted basis of the property traded minus these adjustments. 2012 1040 ez MACRS Worksheet You can use this worksheet to help you figure your depreciation deduction using the percentage tables. 2012 1040 ez Use a separate worksheet for each item of property. 2012 1040 ez Then, use the information from this worksheet to prepare Form 4562. 2012 1040 ez Do not use this worksheet for automobiles. 2012 1040 ez Use the Depreciation Worksheet for Passenger Automobiles in chapter 5. 2012 1040 ez MACRS Worksheet Part I   1. 2012 1040 ez MACRS system (GDS or ADS)   2. 2012 1040 ez Property class   3. 2012 1040 ez Date placed in service   4. 2012 1040 ez Recovery period   5. 2012 1040 ez Method and convention   6. 2012 1040 ez Depreciation rate (from tables)   Part II   7. 2012 1040 ez Cost or other basis* $     8. 2012 1040 ez Business/investment use   %   9. 2012 1040 ez Multiply line 7 by line 8   $ 10. 2012 1040 ez Total claimed for section 179 deduction and other items   $ 11. 2012 1040 ez Subtract line 10 from line 9. 2012 1040 ez This is your tentative basis for depreciation   $ 12. 2012 1040 ez Multiply line 11 by . 2012 1040 ez 50 if the 50% special depreciation allowance applies. 2012 1040 ez This is your special depreciation allowance. 2012 1040 ez Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   $ 13. 2012 1040 ez Subtract line 12 from line 11. 2012 1040 ez This is your basis for depreciation     14. 2012 1040 ez Depreciation rate (from line 6)     15. 2012 1040 ez Multiply line 13 by line 14. 2012 1040 ez This is your MACRS depreciation deduction   $ *If real estate, do not include cost (basis) of land. 2012 1040 ez The following example shows how to figure your MACRS depreciation deduction using the percentage tables and the MACRS worksheet. 2012 1040 ez Example. 2012 1040 ez You bought office furniture (7-year property) for $10,000 and placed it in service on August 11, 2013. 2012 1040 ez You use the furniture only for business. 2012 1040 ez This is the only property you placed in service this year. 2012 1040 ez You did not elect a section 179 deduction and the property is not qualified property for purposes of claiming a special depreciation allowance so your property's unadjusted basis is its cost, $10,000. 2012 1040 ez You use GDS and the half-year convention to figure your depreciation. 2012 1040 ez You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-1. 2012 1040 ez Multiply your property's unadjusted basis each year by the percentage for 7-year property given in Table A-1. 2012 1040 ez You figure your depreciation deduction using the MACRS worksheet as follows. 2012 1040 ez MACRS Worksheet Part I 1. 2012 1040 ez MACRS system (GDS or ADS) GDS 2. 2012 1040 ez Property class 7-year 3. 2012 1040 ez Date placed in service 8/11/13 4. 2012 1040 ez Recovery period 7-Year 5. 2012 1040 ez Method and convention 200%DB/Half-Year 6. 2012 1040 ez Depreciation rate (from tables) . 2012 1040 ez 1429 Part II 7. 2012 1040 ez Cost or other basis* $10,000     8. 2012 1040 ez Business/investment use 100 %   9. 2012 1040 ez Multiply line 7 by line 8   $10,000 10. 2012 1040 ez Total claimed for section 179 deduction and other items   -0- 11. 2012 1040 ez Subtract line 10 from line 9. 2012 1040 ez This is your tentative basis for depreciation   $10,000 12. 2012 1040 ez Multiply line 11 by . 2012 1040 ez 50 if the 50% special depreciation allowance applies. 2012 1040 ez This is your special depreciation allowance. 2012 1040 ez Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   -0- 13. 2012 1040 ez Subtract line 12 from line 11. 2012 1040 ez This is your basis for depreciation   $10,000 14. 2012 1040 ez Depreciation rate (from line 6)   . 2012 1040 ez 1429 15. 2012 1040 ez Multiply line 13 by line 14. 2012 1040 ez This is your MACRS depreciation deduction   $1,429 *If real estate, do not include cost (basis) of land. 2012 1040 ez If there are no adjustments to the basis of the property other than depreciation, your depreciation deduction for each subsequent year of the recovery period will be as follows. 2012 1040 ez Year   Basis Percentage Deduction 2014 $ 10,000 24. 2012 1040 ez 49%   $2,449   2015   10,000 17. 2012 1040 ez 49   1,749   2016   10,000 12. 2012 1040 ez 49   1,249   2017   10,000 8. 2012 1040 ez 93   893   2018   10,000 8. 2012 1040 ez 92   892   2019   10,000 8. 2012 1040 ez 93   893   2020   10,000 4. 2012 1040 ez 46   446   Examples The following examples are provided to show you how to use the percentage tables. 2012 1040 ez In both examples, assume the following. 2012 1040 ez You use the property only for business. 2012 1040 ez You use the calendar year as your tax year. 2012 1040 ez You use GDS for all the properties. 2012 1040 ez Example 1. 2012 1040 ez You bought a building and land for $120,000 and placed it in service on March 8. 2012 1040 ez The sales contract showed that the building cost $100,000 and the land cost $20,000. 2012 1040 ez It is nonresidential real property. 2012 1040 ez The building's unadjusted basis is its original cost, $100,000. 2012 1040 ez You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-7a. 2012 1040 ez March is the third month of your tax year, so multiply the building's unadjusted basis, $100,000, by the percentages for the third month in Table A-7a. 2012 1040 ez Your depreciation deduction for each of the first 3 years is as follows: Year   Basis Percentage Deduction 1st $ 100,000 2. 2012 1040 ez 033%   $2,033   2nd   100,000 2. 2012 1040 ez 564   2,564   3rd   100,000 2. 2012 1040 ez 564   2,564   Example 2. 2012 1040 ez During the year, you bought a machine (7-year property) for $4,000, office furniture (7-year property) for $1,000, and a computer (5-year property) for $5,000. 2012 1040 ez You placed the machine in service in January, the furniture in September, and the computer in October. 2012 1040 ez You do not elect a section 179 deduction and none of these items is qualified property for purposes of claiming a special depreciation allowance. 2012 1040 ez You placed property in service during the last 3 months of the year, so you must first determine if you have to use the mid-quarter convention. 2012 1040 ez The total bases of all property you placed in service during the year is $10,000. 2012 1040 ez The $5,000 basis of the computer, which you placed in service during the last 3 months (the fourth quarter) of your tax year, is more than 40% of the total bases of all property ($10,000) you placed in service during the year. 2012 1040 ez Therefore, you must use the mid-quarter convention for all three items. 2012 1040 ez You refer to the MACRS Percentage Table Guide in Appendix A to determine which table you should use under the mid-quarter convention. 2012 1040 ez The machine is 7-year property placed in service in the first quarter, so you use Table A-2. 2012 1040 ez The furniture is 7-year property placed in service in the third quarter, so you use Table A-4. 2012 1040 ez Finally, because the computer is 5-year property placed in service in the fourth quarter, you use Table A-6. 2012 1040 ez Knowing what table to use for each property, you figure the depreciation for the first 2 years as follows. 2012 1040 ez Year Property Basis Percentage Deduction 1st Machine $4,000 25. 2012 1040 ez 00 $1,000   2nd Machine 4,000 21. 2012 1040 ez 43 857   1st Furniture 1,000 10. 2012 1040 ez 71 107   2nd Furniture 1,000 25. 2012 1040 ez 51 255   1st Computer 5,000 5. 2012 1040 ez 00 250   2nd Computer 5,000 38. 2012 1040 ez 00 1,900   Sale or Other Disposition Before the Recovery Period Ends If you sell or otherwise dispose of your property before the end of its recovery period, your depreciation deduction for the year of the disposition will be only part of the depreciation amount for the full year. 2012 1040 ez You have disposed of your property if you have permanently withdrawn it from use in your business or income-producing activity because of its sale, exchange, retirement, abandonment, involuntary conversion, or destruction. 2012 1040 ez After you figure the full-year depreciation amount, figure the deductible part using the convention that applies to the property. 2012 1040 ez Half-year convention used. 2012 1040 ez   For property for which you used a half-year convention, the depreciation deduction for the year of the disposition is half the depreciation determined for the full year. 2012 1040 ez Mid-quarter convention used. 2012 1040 ez   For property for which you used the mid-quarter convention, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter in which you disposed of the property. 2012 1040 ez Quarter Percentage First 12. 2012 1040 ez 5% Second 37. 2012 1040 ez 5 Third 62. 2012 1040 ez 5 Fourth 87. 2012 1040 ez 5 Example. 2012 1040 ez On December 2, 2010, you placed in service an item of 5-year property costing $10,000. 2012 1040 ez You did not claim a section 179 deduction and the property does not qualify for a special depreciation allowance. 2012 1040 ez Your unadjusted basis for the property was $10,000. 2012 1040 ez You used the mid-quarter convention because this was the only item of business property you placed in service in 2010 and it was placed in service during the last 3 months of your tax year. 2012 1040 ez Your property is in the 5-year property class, so you used Table A-5 to figure your depreciation deduction. 2012 1040 ez Your deductions for 2010, 2011, and 2012 were $500 (5% of $10,000), $3,800 (38% of $10,000), and $2,280 (22. 2012 1040 ez 80% of $10,000). 2012 1040 ez You disposed of the property on April 6, 2013. 2012 1040 ez To determine your depreciation deduction for 2013, first figure the deduction for the full year. 2012 1040 ez This is $1,368 (13. 2012 1040 ez 68% of $10,000). 2012 1040 ez April is in the second quarter of the year, so you multiply $1,368 by 37. 2012 1040 ez 5% to get your depreciation deduction of $513 for 2013. 2012 1040 ez Mid-month convention used. 2012 1040 ez   If you dispose of residential rental or nonresidential real property, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by a fraction. 2012 1040 ez The numerator of the fraction is the number of months (including partial months) in the year that the property is considered in service. 2012 1040 ez The denominator is 12. 2012 1040 ez Example. 2012 1040 ez On July 2, 2011, you purchased and placed in service residential rental property. 2012 1040 ez The property cost $100,000, not including the cost of land. 2012 1040 ez You used Table A-6 to figure your MACRS depreciation for this property. 2012 1040 ez You sold the property on March 2, 2013. 2012 1040 ez You file your tax return based on the calendar year. 2012 1040 ez A full year of depreciation for 2013 is $3,636. 2012 1040 ez This is $100,000 multiplied by . 2012 1040 ez 03636 (the percentage for the seventh month of the third recovery year) from Table A-6 . 2012 1040 ez You then apply the mid-month convention for the 2½ months of use in 2013. 2012 1040 ez Treat the month of disposition as one-half month of use. 2012 1040 ez Multiply $3,636 by the fraction, 2. 2012 1040 ez 5 over 12, to get your 2013 depreciation deduction of $757. 2012 1040 ez 50. 2012 1040 ez Figuring the Deduction Without Using the Tables Instead of using the rates in the percentage tables to figure your depreciation deduction, you can figure it yourself. 2012 1040 ez Before making the computation each year, you must reduce your adjusted basis in the property by the depreciation claimed the previous year. 2012 1040 ez Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables. 2012 1040 ez Declining Balance Method When using a declining balance method, you apply the same depreciation rate each year to the adjusted basis of your property. 2012 1040 ez You must use the applicable convention for the first tax year and you must switch to the straight line method beginning in the first year for which it will give an equal or greater deduction. 2012 1040 ez The straight line method is explained later. 2012 1040 ez You figure depreciation for the year you place property in service as follows. 2012 1040 ez Multiply your adjusted basis in the property by the declining balance rate. 2012 1040 ez Apply the applicable convention. 2012 1040 ez You figure depreciation for all other years (before the year you switch to the straight line method) as follows. 2012 1040 ez Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years. 2012 1040 ez Multiply this new adjusted basis by the same declining balance rate used in earlier years. 2012 1040 ez If you dispose of property before the end of its recovery period, see Using the Applicable Convention, later, for information on how to figure depreciation for the year you dispose of it. 2012 1040 ez Figuring depreciation under the declining balance method and switching to the straight line method is illustrated in Example 1 , later, under Examples. 2012 1040 ez Declining balance rate. 2012 1040 ez   You figure your declining balance rate by dividing the specified declining balance percentage (150% or 200% changed to a decimal) by the number of years in the property's recovery period. 2012 1040 ez For example, for 3-year property depreciated using the 200% declining balance method, divide 2. 2012 1040 ez 00 (200%) by 3 to get 0. 2012 1040 ez 6667, or a 66. 2012 1040 ez 67% declining balance rate. 2012 1040 ez For 15-year property depreciated using the 150% declining balance method, divide 1. 2012 1040 ez 50 (150%) by 15 to get 0. 2012 1040 ez 10, or a 10% declining balance rate. 2012 1040 ez   The following table shows the declining balance rate for each property class and the first year for which the straight line method gives an equal or greater deduction. 2012 1040 ez Property Class Method Declining Balance Rate Year 3-year 200% DB 66. 2012 1040 ez 667% 3rd 5-year 200% DB 40. 2012 1040 ez 0 4th 7-year 200% DB 28. 2012 1040 ez 571 5th 10-year 200% DB 20. 2012 1040 ez 0 7th 15-year 150% DB 10. 2012 1040 ez 0 7th 20-year 150% DB 7. 2012 1040 ez 5 9th Straight Line Method When using the straight line method, you apply a different depreciation rate each year to the adjusted basis of your property. 2012 1040 ez You must use the applicable convention in the year you place the property in service and the year you dispose of the property. 2012 1040 ez You figure depreciation for the year you place property in service as follows. 2012 1040 ez Multiply your adjusted basis in the property by the straight line rate. 2012 1040 ez Apply the applicable convention. 2012 1040 ez You figure depreciation for all other years (including the year you switch from the declining balance method to the straight line method) as follows. 2012 1040 ez Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years (under any method). 2012 1040 ez Determine the depreciation rate for the year. 2012 1040 ez Multiply the adjusted basis figured in (1) by the depreciation rate figured in (2). 2012 1040 ez If you dispose of property before the end of its recovery period, see Using the Applicable Convention , later, for information on how to figure depreciation for the year you dispose of it. 2012 1040 ez Straight line rate. 2012 1040 ez   You determine the straight line depreciation rate for any tax year by dividing the number 1 by the years remaining in the recovery period at the beginning of that year. 2012 1040 ez When figuring the number of years remaining, you must take into account the convention used in the year you placed the property in service. 2012 1040 ez If the number of years remaining is less than 1, the depreciation rate for that tax year is 1. 2012 1040 ez 0 (100%). 2012 1040 ez Using the Applicable Convention The applicable convention (discussed earlier under Which Convention Applies ) affects how you figure your depreciation deduction for the year you place your property in service and for the year you dispose of it. 2012 1040 ez It determines how much of the recovery period remains at the beginning of each year, so it also affects the depreciation rate for property you depreciate under the straight line method. 2012 1040 ez See Straight line rate in the previous discussion. 2012 1040 ez Use the applicable convention as explained in the following discussions. 2012 1040 ez Half-year convention. 2012 1040 ez   If this convention applies, you deduct a half-year of depreciation for the first year and the last year that you depreciate the property. 2012 1040 ez You deduct a full year of depreciation for any other year during the recovery period. 2012 1040 ez   Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. 2012 1040 ez If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. 2012 1040 ez If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final 6 months of the recovery period is the amount of your unrecovered basis in the property. 2012 1040 ez Mid-quarter convention. 2012 1040 ez   If this convention applies, the depreciation you can deduct for the first year you depreciate the property depends on the quarter in which you place the property in service. 2012 1040 ez   A quarter of a full 12-month tax year is a period of 3 months. 2012 1040 ez The first quarter in a year begins on the first day of the tax year. 2012 1040 ez The second quarter begins on the first day of the fourth month of the tax year. 2012 1040 ez The third quarter begins on the first day of the seventh month of the tax year. 2012 1040 ez The fourth quarter begins on the first day of the tenth month of the tax year. 2012 1040 ez A calendar year is divided into the following quarters. 2012 1040 ez Quarter Months First January, February, March Second April, May, June Third July, August, September Fourth October, November, December   Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by the percentage listed below for the quarter you place the property in service. 2012 1040 ez Quarter Percentage First 87. 2012 1040 ez 5% Second 62. 2012 1040 ez 5 Third 37. 2012 1040 ez 5 Fourth 12. 2012 1040 ez 5   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter you dispose of the property. 2012 1040 ez Quarter Percentage First 12. 2012 1040 ez 5% Second 37. 2012 1040 ez 5 Third 62. 2012 1040 ez 5 Fourth 87. 2012 1040 ez 5   If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final quarter of the recovery period is the amount of your unrecovered basis in the property. 2012 1040 ez Mid-month convention. 2012 1040 ez   If this convention applies, the depreciation you can deduct for the first year that you depreciate the property depends on the month in which you place the property in service. 2012 1040 ez Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by a fraction. 2012 1040 ez The numerator of the fraction is the number of full months in the year that the property is in service plus ½ (or 0. 2012 1040 ez 5). 2012 1040 ez The denominator is 12. 2012 1040 ez   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. 2012 1040 ez If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final month of the recovery period is the amount of your unrecovered basis in the property. 2012 1040 ez Example. 2012 1040 ez You use the calendar year and place nonresidential real property in service in August. 2012 1040 ez The property is in service 4 full months (September, October, November, and December). 2012 1040 ez Your numerator is 4. 2012 1040 ez 5 (4 full months plus 0. 2012 1040 ez 5). 2012 1040 ez You multiply the depreciation for a full year by 4. 2012 1040 ez 5/12, or 0. 2012 1040 ez 375. 2012 1040 ez Examples The following examples show how to figure depreciation under MACRS without using the percentage tables. 2012 1040 ez Figures are rounded for purposes of the examples. 2012 1040 ez Assume for all the examples that you use a calendar year as your tax year. 2012 1040 ez Example 1—200% DB method and half-year convention. 2012 1040 ez In February, you placed in service depreciable property with a 5-year recovery period and a basis of $1,000. 2012 1040 ez You do not elect to take the section 179 deduction and the property does not qualify for a special depreciation allowance. 2012 1040 ez You use GDS and the 200% declining balance (DB) method to figure your depreciation. 2012 1040 ez When the straight line (SL) method results in an equal or larger deduction, you switch to the SL method. 2012 1040 ez You did not place any property in service in the last 3 months of the year, so you must use the half-year convention. 2012 1040 ez First year. 2012 1040 ez You figure the depreciation rate under the 200% DB method by dividing 2 (200%) by 5 (the number of years in the recovery period). 2012 1040 ez The result is 40%. 2012 1040 ez You multiply the adjusted basis of the property ($1,000) by the 40% DB rate. 2012 1040 ez You apply the half-year convention by dividing the result ($400) by 2. 2012 1040 ez Depreciation for the first year under the 200% DB method is $200. 2012 1040 ez You figure the depreciation rate under the straight line (SL) method by dividing 1 by 5, the number of years in the recovery period. 2012 1040 ez The result is 20%. 2012 1040 ez You multiply the adjusted basis of the property ($1,000) by the 20% SL rate. 2012 1040 ez You apply the half-year convention by dividing the result ($200) by 2. 2012 1040 ez Depreciation for the first year under the SL method is $100. 2012 1040 ez The DB method provides a larger deduction, so you deduct the $200 figured under the 200% DB method. 2012 1040 ez Second year. 2012 1040 ez You reduce the adjusted basis ($1,000) by the depreciation claimed in the first year ($200). 2012 1040 ez You multiply the result ($800) by the DB rate (40%). 2012 1040 ez Depreciation for the second year under the 200% DB method is $320. 2012 1040 ez You figure the SL depreciation rate by dividing 1 by 4. 2012 1040 ez 5, the number of years remaining in the recovery period. 2012 1040 ez (Based on the half-year convention, you used only half a year of the recovery period in the first year. 2012 1040 ez ) You multiply the reduced adjusted basis ($800) by the result (22. 2012 1040 ez 22%). 2012 1040 ez Depreciation under the SL method for the second year is $178. 2012 1040 ez The DB method provides a larger deduction, so you deduct the $320 figured under the 200% DB method. 2012 1040 ez Third year. 2012 1040 ez You reduce the adjusted basis ($800) by the depreciation claimed in the second year ($320). 2012 1040 ez You multiply the result ($480) by the DB rate (40%). 2012 1040 ez Depreciation for the third year under the 200% DB method is $192. 2012 1040 ez You figure the SL depreciation rate by dividing 1 by 3. 2012 1040 ez 5. 2012 1040 ez You multiply the reduced adjusted basis ($480) by the result (28. 2012 1040 ez 57%). 2012 1040 ez Depreciation under the SL method for the third year is $137. 2012 1040 ez The DB method provides a larger deduction, so you deduct the $192 figured under the 200% DB method. 2012 1040 ez Fourth year. 2012 1040 ez You reduce the adjusted basis ($480) by the de
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How Much Can I Deduct for Each Exemption I Claim?

There are two types of exemptions, personal exemptions and exemptions for dependents. You usually can claim exemptions for yourself, your spouse and each person you can claim as a dependent. 

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  • Marital status, relationship to the dependent and the amount of support provided
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Page Last Reviewed or Updated: 14-Feb-2014

The 2012 1040 Ez

2012 1040 ez 2. 2012 1040 ez   Fuel Tax Credits and Refunds Table of Contents Gasoline and Aviation Gasoline Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation)Sales by Registered Ultimate Vendors Diesel-Water Fuel Emulsion Kerosene for Use in AviationSales by Registered Ultimate Vendors Other Fuels (Including Alternative Fuels) Refunds of Second TaxOptional reporting. 2012 1040 ez Providing information. 2012 1040 ez Definitions of Nontaxable UsesCustom application of fertilizer and pesticide. 2012 1040 ez Fuel used between airfield and farm. 2012 1040 ez Fuel not used for farming. 2012 1040 ez Vehicles not considered highway vehicles. 2012 1040 ez Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture CreditHow to Claim the Credit Filing Claims Claiming A Refund Claiming a Credit on Form 4136 Including the Credit or Refund in Income Federal excise taxes are imposed on certain fuels as discussed in chapter 1. 2012 1040 ez This chapter lists the nontaxable uses of each fuel and defines the nontaxable uses. 2012 1040 ez Information on the refund of second tax is included. 2012 1040 ez This chapter also explains credits and refunds for the biodiesel or renewable diesel mixture credits, and the alternative fuel mixture and alternative fuel credits. 2012 1040 ez Information on how to make a claim for credit or refund is included in this chapter and in the instructions for: Form 720, Form 4136, and Form 8849. 2012 1040 ez Exported taxable fuel. 2012 1040 ez   The claim rates for exported taxable fuel are listed on Schedule C (Form 720), Schedule 1 (Form 8849), and Form 4136. 2012 1040 ez Taxpayers making a claim for exported taxable fuel must include with their records proof of exportation. 2012 1040 ez Proof of exportation includes: A copy of the export bill of lading issued by the delivering carrier, A certificate by the agent or representative of the export carrier showing actual exportation of the fuel, A certificate of lading signed by a customs officer of the foreign country to which the fuel is exported, or A statement of the foreign consignee showing receipt of the fuel. 2012 1040 ez Gasoline and Aviation Gasoline Ultimate Purchasers. 2012 1040 ez   The following are the uses of gasoline (defined earlier) for which a credit or refund may be allowable to an ultimate purchaser. 2012 1040 ez On a farm for farming purposes (credit only). 2012 1040 ez Off-highway business use. 2012 1040 ez Export. 2012 1040 ez In a boat engaged in commercial fishing. 2012 1040 ez In certain intercity and local buses. 2012 1040 ez In a school bus. 2012 1040 ez Exclusive use by a qualified blood collector organization. 2012 1040 ez In a highway vehicle owned by the United States that is not used on a highway. 2012 1040 ez Exclusive use by a nonprofit educational organization (see Sales by registered ultimate vendors and Credit Card Purchases, later). 2012 1040 ez Exclusive use by a state, political subdivision of a state, or the District of Columbia (see Sales by registered ultimate vendors and Credit Card Purchases, later). 2012 1040 ez In an aircraft or vehicle owned by an aircraft museum. 2012 1040 ez   The following are the uses of aviation gasoline for which a credit or refund may be allowable to an ultimate purchaser. 2012 1040 ez On a farm for farming purposes (credit only). 2012 1040 ez Export. 2012 1040 ez In foreign trade. 2012 1040 ez Certain helicopter and fixed-wing air ambulance uses. 2012 1040 ez In commercial aviation (other than foreign trade). 2012 1040 ez Exclusive use by a qualified blood collector organization. 2012 1040 ez Exclusive use by a nonprofit education organization (see Sales by registered ultimate vendors and Credit card purchases, later). 2012 1040 ez Exclusive use by a state, political subdivision of a state, or the District of Columbia (see Sales by registered ultimate vendors and Credit and purchases, later). 2012 1040 ez In an aircraft owned by an aircraft museum. 2012 1040 ez In military aircraft. 2012 1040 ez Claims by persons who paid the tax to the government. 2012 1040 ez   Except for sales to nonprofit educational organizations and states and local governments, a credit or refund is allowable to the person that paid the tax to the government if the gasoline was sold to the ultimate purchaser (including an exporter) by either that person or by a retailer and the fuel was exported; used or sold for use as supplies for vessels or aircraft, including military aircraft, commercial fishing, and foreign trade; sold to a qualified blood collector organization; or used or sold for use in the production of Other Fuels. 2012 1040 ez See Filing Claims, later. 2012 1040 ez Sales by registered ultimate vendors. 2012 1040 ez   This is an ultimate vendor that sells gasoline or aviation gasoline to any of the following and that is purchased without the use of a credit card. 2012 1040 ez A state or local government for its exclusive use (including essential government use by an Indian tribal government). 2012 1040 ez A nonprofit educational organization for its exclusive use. 2012 1040 ez   The registered ultimate vendor may make the claim if the ultimate purchaser did not use a credit card and waives its right to the credit or refund by providing the registered ultimate vendor with a certificate. 2012 1040 ez A sample certificate is included as Model Certificate M in the Appendix. 2012 1040 ez The registered ultimate vendor must have the certificate at the time the credit or refund is claimed. 2012 1040 ez   The ultimate vendor must be registered by the IRS. 2012 1040 ez See Registration Requirements, earlier. 2012 1040 ez Credit card purchases. 2012 1040 ez   If gasoline and aviation gasoline are purchased with a credit card issued to a state or local government for its exclusive use (including essential government use by an Indian tribal government), or a nonprofit educational organization for its exclusive use, the person who extended credit to the ultimate purchaser (the credit card issuer) is treated as the person that paid the tax and makes the claim if the credit card issuer: Is registered by the IRS, Has established that the amount of tax has not been collected from the person who purchased the gasoline or has obtained written consent from the ultimate purchaser to the allowance of the credit or refund, and Has repaid or agreed to repay the amount of the tax to the ultimate vendor, has obtained the written consent of the ultimate vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax. 2012 1040 ez   If the requirements above are not met by the credit card issuer, the credit card issuer must collect the tax from the ultimate purchaser and only the ultimate purchaser may make the claim. 2012 1040 ez How to make the claim. 2012 1040 ez   If the claim is made by the credit card issuer, see Schedule C  (Form 720) or Schedule 8 (Form 8849). 2012 1040 ez Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation) For conditions to an allowance of a credit or refund on exported dyed diesel fuel and dyed kerosene, see Exported taxable fuel, earlier. 2012 1040 ez Ultimate purchasers. 2012 1040 ez   The following are nontaxable uses of diesel fuel and kerosene (defined earlier) for which a credit or refund may be allowable to an ultimate purchaser. 2012 1040 ez On a farm for farming purposes. 2012 1040 ez Off-highway business use. 2012 1040 ez Export. 2012 1040 ez In a qualified local bus. 2012 1040 ez In a school bus. 2012 1040 ez Other than as a fuel in a propulsion engine of a diesel-powered highway vehicle (such as home heating oil). 2012 1040 ez Exclusive use by a qualified blood collector organization. 2012 1040 ez In a highway vehicle owned by the United States that is not used on a highway. 2012 1040 ez Exclusive use by a nonprofit educational organization (see Sales by Registered Ultimate Vendors and Credit Card Purchases, later). 2012 1040 ez Exclusive use by a state, political subdivision of a state, or the District of Columbia (see Sales by Registered Ultimate Vendors and Credit Card Purchases, later). 2012 1040 ez In a vehicle owned by an aircraft museum. 2012 1040 ez As a fuel in a propulsion engine of a diesel-powered train. 2012 1040 ez Sales by Registered Ultimate Vendors The following are the sales for which a credit or refund may be allowable to the registered ultimate vendor only. 2012 1040 ez Undyed diesel fuel or undyed kerosene sold for the exclusive use by a state or local government (if credit card rules (defined later) do not apply), Undyed kerosene sold from a blocked pump (defined below), or Undyed diesel fuel or undyed kerosene used in certain intercity and local buses, only if the ultimate purchaser waives its right to the credit or refund by providing the registered ultimate vendor with a waiver. 2012 1040 ez Registered ultimate vendor (state use). 2012 1040 ez   This is a person that sells undyed diesel fuel or undyed kerosene to a state or local government for its exclusive use (including essential government use by an Indian tribal government). 2012 1040 ez The diesel fuel or kerosene must be purchased by the state without the use of a credit card, issued to the state by the credit card issuer, in order for the ultimate vendor to make the claim. 2012 1040 ez The ultimate vendor must be registered by the IRS. 2012 1040 ez See Registration Requirements, earlier. 2012 1040 ez Registered ultimate vendor (blocked pump). 2012 1040 ez   This is an ultimate vendor that sells undyed kerosene from a blocked pump. 2012 1040 ez   A credit or refund may be allowable to a registered ultimate vendor (blocked pump) if the vendor sold to a buyer undyed kerosene from a blocked pump for use other than as a fuel in a diesel-powered highway vehicle and the vendor had no reason to believe the kerosene would not be used in that manner. 2012 1040 ez Blocked pump. 2012 1040 ez   A blocked pump is a fuel pump that meets all the following requirements. 2012 1040 ez It is used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use. 2012 1040 ez It is at a fixed location. 2012 1040 ez It is identified with a legible and conspicuous notice stating, “UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY. 2012 1040 ez ” It meets either of the following conditions. 2012 1040 ez It cannot reasonably be used to dispense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train. 2012 1040 ez It is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer's request for undyed kerosene for use other than as a fuel in a diesel-powered highway vehicle or train. 2012 1040 ez Registered ultimate vendor (certain intercity and local buses). 2012 1040 ez   This is an ultimate vendor that sells undyed diesel fuel or undyed kerosene to the ultimate purchaser for use in certain intercity and local buses. 2012 1040 ez   The registered ultimate vendor may make the claim if the ultimate purchaser waives its right to the credit or refund by providing the registered ultimate vendor with a waiver. 2012 1040 ez A sample waiver is included as Model Waiver N in the Appendix. 2012 1040 ez The registered ultimate vendor must have the waiver at the time the credit or payment is claimed. 2012 1040 ez Credit Card Purchases. 2012 1040 ez   If undyed diesel fuel or kerosene is purchased with a credit card issued to a state, the person who extended credit to the state (the credit card issuer) is treated as the person that paid the tax and makes the claim if the credit card issuer: Is registered by the IRS, Has established that the amount of tax has not been collected from the person who purchased the diesel fuel or kerosene, or has obtained written consent from the ultimate purchaser to the allowance of the credit or refund, and Has repaid or agreed to repay the amount of the tax to the ultimate vendor, has obtained the written consent of the ultimate vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax. 2012 1040 ez   If the requirements above are not met by the credit card issuer, the credit card issuer must collect the tax from the ultimate purchaser and only the ultimate purchaser may make the claim. 2012 1040 ez Diesel-Water Fuel Emulsion A claim for credit or refund may be made for the nontaxable use of a diesel-water fuel emulsion and for undyed diesel fuel used to produce a diesel-water fuel emulsion. 2012 1040 ez The claim rate for nontaxable use of a diesel-water fuel emulsion taxed at $. 2012 1040 ez 198 per gallon is $. 2012 1040 ez 197 (if exported, the claim rate is $. 2012 1040 ez 198). 2012 1040 ez The following are the nontaxable uses for a diesel-water fuel emulsion for which a credit or refund may be allowable to an ultimate purchaser. 2012 1040 ez On a farm for farming purposes. 2012 1040 ez Off-highway business use. 2012 1040 ez Export. 2012 1040 ez In a qualified local bus. 2012 1040 ez In a school bus. 2012 1040 ez Other than as fuel in the propulsion engine of a train or diesel-powered highway vehicle (but not off-highway use). 2012 1040 ez Exclusive use by a qualified blood collector organization. 2012 1040 ez In a highway vehicle owned by the United States that is not used on a highway. 2012 1040 ez Exclusive use by a nonprofit educational organization. 2012 1040 ez Exclusive use by a state, political subdivision of a state, or the District of Columbia. 2012 1040 ez In an aircraft or vehicle owned by an aircraft museum. 2012 1040 ez Blender claims. 2012 1040 ez   The claim rate for undyed diesel fuel taxed at $. 2012 1040 ez 244 and used to produce a diesel-water fuel emulsion is $. 2012 1040 ez 046 per gallon of diesel fuel so used. 2012 1040 ez The blender must be registered by the IRS in order to make the claim. 2012 1040 ez The blender must attach a statement to the claim certifying that: The diesel-water fuel emulsion contains at least 14% water, The emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003, Undyed diesel fuel taxed at $. 2012 1040 ez 244 was used to produce the diesel-water fuel emulsion, and The diesel-water fuel emulsion was used or sold for use in the blender's trade or business. 2012 1040 ez Kerosene for Use in Aviation Ultimate purchasers. 2012 1040 ez   Ultimate purchasers of kerosene used in certain aviation uses may make a claim if the rate of tax on their use is less than the rate of tax that was charged on the kerosene. 2012 1040 ez   The ultimate purchaser of the kerosene used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia) is eligible to make a claim if the ultimate purchaser certifies that the right to make the claim has not been waived. 2012 1040 ez Generally, the ultimate purchaser is the aircraft operator. 2012 1040 ez   The following are the nontaxable uses of kerosene used in noncommercial aviation for which a credit or refund may be allowable to the ultimate purchaser. 2012 1040 ez On a farm for farming purposes. 2012 1040 ez Certain helicopter and fixed-wing aircraft uses. 2012 1040 ez Exclusive use by a qualified blood collector organization. 2012 1040 ez Exclusive use by a nonprofit educational organization. 2012 1040 ez In an aircraft owned by an aircraft museum. 2012 1040 ez In military aircraft. 2012 1040 ez Kerosene for use partly in commercial aviation and partly in nonexempt, noncommercial aviation. 2012 1040 ez   If the fuel is used partly for use in commercial aviation and partly for use in nonexempt, noncommercial aviation, the operator may identify, either at the time of purchase or after the kerosene has been used, the amount that will be (or has been) used in commercial aviation. 2012 1040 ez At the same time, the operator would either make the claim or waive the right to make the claim for credit or refund of the kerosene for use in commercial and nonexempt, noncommercial aviation. 2012 1040 ez   If the operator does not identify the amount of kerosene that will be (or has been) used in commercial aviation, the operator may provide a certificate to the ultimate vendor similar to Model Certificate Q in the Appendix. 2012 1040 ez For kerosene purchased with the certificate, used in commercial aviation, and taxed at $. 2012 1040 ez 244 per gallon, use of the certificate will be treated as a waiver of the right to claim a credit or refund for the $. 2012 1040 ez 025 per gallon part of the tax. 2012 1040 ez The ultimate vendor may make this claim. 2012 1040 ez The operator may make a claim for the $. 2012 1040 ez 175 tax per gallon of the kerosene, but cannot waive the right to make the claim for the $. 2012 1040 ez 175 tax per gallon. 2012 1040 ez Sales by Registered Ultimate Vendors Kerosene for use in commercial aviation or noncommercial aviation. 2012 1040 ez   The registered ultimate vendor of kerosene for use in commercial aviation (other than foreign trade) or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia) may make this claim if the ultimate purchaser waives its right to the credit or payment by providing the registered ultimate vendor with a waiver. 2012 1040 ez A sample waiver is included as Model Waiver L in the Appendix. 2012 1040 ez The registered ultimate vendor must have the waiver at the time the credit or payment is claimed. 2012 1040 ez   Noncommercial aviation means any use of an aircraft not described as commercial aviation. 2012 1040 ez For the definition of commercial aviation, see Commercial aviation on page 11. 2012 1040 ez Kerosene for use in nonexempt, noncommercial aviation. 2012 1040 ez   Only the registered ultimate vendor may claim a credit or payment for sales of kerosene for use in nonexempt, noncommercial aviation. 2012 1040 ez The ultimate vendor must be registered by the IRS (activity letter UA) and have the required certificate from the ultimate purchaser. 2012 1040 ez A sample certificate is included as Model Certificate Q in the Appendix. 2012 1040 ez The registered ultimate vendor must have the certificate at the time the credit or payment is claimed. 2012 1040 ez Kerosene for use in aviation by a state or local government. 2012 1040 ez   Only the registered ultimate vendor may claim a credit or payment for sales of kerosene for use in aviation to a state or local government for its exclusive use (including essential government use by an Indian tribal government). 2012 1040 ez The kerosene for use in aviation must be purchased by the state without the use of a credit card in order for the ultimate vendor to make the claim. 2012 1040 ez The ultimate vendor must be registered by the IRS (activity letter UV) and have the required certificate from the ultimate purchaser. 2012 1040 ez A sample certificate is included as Model Certificate P in the Appendix. 2012 1040 ez The registered ultimate vendor must have the certificate at the time the credit or payment is claimed. 2012 1040 ez Credit card purchases. 2012 1040 ez   If taxed kerosene for use in aviation is purchased with a credit card issued to a state, the person who extended credit to the state (the credit card issuer) is treated as the person that paid the tax and makes the claim if the credit card issuer: Is registered by the IRS, Has established that the amount of tax has not been collected from the person who purchased the kerosene, or has obtained written consent from the ultimate purchaser to the allowance of the credit or refund, and Has repaid or agreed to repay the amount of the tax to the ultimate vendor, has obtained the written consent of the ultimate vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax. 2012 1040 ez   If the requirements above are not met by the credit card issuer, the credit card issuer must collect the tax from the ultimate purchaser and only the ultimate purchaser may make the claim. 2012 1040 ez Other Fuels (Including Alternative Fuels) Credit or refund for nontaxable use of taxed Other Fuels may be allowable to an ultimate purchaser. 2012 1040 ez While tax is generally imposed on delivery, Other Fuels are taxed prior to delivery in the case of certain bulk sales described in chapter 1. 2012 1040 ez The following are the nontaxable uses of Other Fuels for which a credit or refund may be allowable to the ultimate purchaser. 2012 1040 ez On a farm for farming purposes. 2012 1040 ez Off-highway business use. 2012 1040 ez In a boat engaged in commercial fishing. 2012 1040 ez In certain intercity and local buses. 2012 1040 ez In a school bus. 2012 1040 ez In a qualified local bus. 2012 1040 ez Exclusive use by a qualified blood collector organization. 2012 1040 ez Exclusive use by a nonprofit educational organization. 2012 1040 ez Exclusive use by a state, political subdivision of a state, or the District of Columbia. 2012 1040 ez In an aircraft or vehicle owned by an aircraft museum. 2012 1040 ez Use in any boat operated by the United States for its exclusive use or any vessel of war of any foreign nation. 2012 1040 ez See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit, later. 2012 1040 ez Refunds of Second Tax The tax on dyed diesel fuel for inland waterways fuel use applies at the rate listed on Form 720. 2012 1040 ez This is in addition to all other taxes imposed on the sale or use of the fuel. 2012 1040 ez The section 4081(e) refund (discussed below) cannot be claimed. 2012 1040 ez If the tax is paid and reported to the government on more than one taxable event for a taxable fuel under section 4081, the person paying the “second tax” may claim a refund (without interest) of that tax if certain conditions and reporting requirements are met. 2012 1040 ez No credit against any tax is allowed for this tax. 2012 1040 ez For information about taxable events, see the discussions under Gasoline, Diesel Fuel and Kerosene and Kerosene for Use in Aviation in chapter 1. 2012 1040 ez Conditions to allowance of refund. 2012 1040 ez   A claim for refund of the tax is allowed only if all the following conditions are met. 2012 1040 ez A tax on the fuel was paid to the government and not credited or refunded (the “first tax”). 2012 1040 ez After the first tax was imposed, another tax was imposed on the same fuel and was paid to the government (the “second tax”). 2012 1040 ez The person that paid the second tax filed a timely claim for refund containing the information required (see Refund claim, later). 2012 1040 ez The person that paid the first tax has met the reporting requirements, discussed next. 2012 1040 ez Reporting requirements. 2012 1040 ez   Generally, the person that paid the first tax must file a “First Taxpayer's Report” with its Form 720 for the quarter to which the report relates. 2012 1040 ez A model first taxpayer's report is shown in the Appendix as Model Certificate B. 2012 1040 ez The report must contain all information needed to complete the model. 2012 1040 ez   By the due date for filing the Form 720, you must also send a separate copy of the report to the following address. 2012 1040 ez Department of the Treasury Internal Revenue Service  Cincinnati, OH 45999-0555 Write “EXCISE – FIRST TAXPAYER'S REPORT” across the top of that copy. 2012 1040 ez Optional reporting. 2012 1040 ez   A first taxpayer's report is not required for the tax imposed on: Removal at a terminal rack, Nonbulk entries into the United States, and Removals or sales by blenders. 2012 1040 ez However, if the person liable for the tax expects that another tax will be imposed on that fuel, that person should (but is not required to) file a first taxpayer's report. 2012 1040 ez Providing information. 2012 1040 ez   The first taxpayer must give a copy of the report to the buyer of the fuel within the bulk transfer/terminal system or to the owner of the fuel immediately before the first tax was imposed, if the first taxpayer is not the owner at that time. 2012 1040 ez If an optional report is filed, a copy should (but is not required to) be given to the buyer or owner. 2012 1040 ez   A person that receives a copy of the first taxpayer's report and later sells the fuel within the bulk transfer/terminal system must give the copy and a “Statement of Subsequent Seller” to the buyer. 2012 1040 ez If the later sale is outside the bulk transfer/terminal system and that person expects that another tax will be imposed, that person should (but is not required to) give the copy and the statement to the buyer. 2012 1040 ez A model statement of subsequent seller is shown in the Appendix as Model Certificate A. 2012 1040 ez The statement must contain all information necessary to complete the model. 2012 1040 ez   If the first taxpayer's report relates to fuel sold to more than one buyer, copies of that report must be made when the fuel is divided. 2012 1040 ez Each buyer must be given a copy of the report. 2012 1040 ez Refund claim. 2012 1040 ez   You must have filed Form 720 and paid the second tax before you file for a refund of that tax. 2012 1040 ez You must make your claim for refund on Form 8849. 2012 1040 ez Complete Schedule 5 (Form 8849) and attach it to your Form 8849. 2012 1040 ez Do not include this claim with a claim under another tax provision. 2012 1040 ez You must not have included the second tax in the price of the fuel and must not have collected it from the purchaser. 2012 1040 ez You must submit the following information with your claim. 2012 1040 ez A copy of the first taxpayer's report (discussed earlier). 2012 1040 ez A copy of the statement of subsequent seller if the fuel was bought from someone other than the first taxpayer. 2012 1040 ez Definitions of Nontaxable Uses This section provides definitions of the terms used in Table 2-1 for nontaxable uses. 2012 1040 ez If applicable, the type of use number from Table 2-1 is indicated in each heading. 2012 1040 ez Type of use table. 2012 1040 ez   The first column of the table is the number you enter on Form 4136, Form 8849, or Schedule C (Form 720) for that type of use. 2012 1040 ez For type of use 2, the mobile machinery parenthetical applies only to Form 8849 and Form 720. 2012 1040 ez Table 2-1. 2012 1040 ez Type of Use Table No. 2012 1040 ez Type of Use 1 On a farm for farming purposes 2 Off-highway business use (for business use other than in a highway vehicle registered or required to be registered for highway use) (other than use in mobile machinery) 3 Export 4 In a boat engaged in commercial fishing 5 In certain intercity and local buses 6 In a qualified local bus 7 In a bus transporting students and employees of schools (school buses) 8 For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel in the propulsion engine of a train or diesel-powered highway vehicle (but not off-highway business use) 9 In foreign trade 10 Certain helicopter and fixed-wing aircraft uses 11 Exclusive use by a qualified blood collector organization 12 In a highway vehicle owned by the United States that is not used on a highway 13 Exclusive use by a nonprofit educational organization 14 Exclusive use by a state, political subdivision of a state, or the District of Columbia 15 In an aircraft or vehicle owned by an aircraft museum 16 In military aircraft On a farm for farming purposes (No. 2012 1040 ez 1). 2012 1040 ez   On a farm for farming purposes means fuel used in carrying on a trade or business of farming, on a farm in the United States, and for farming purposes. 2012 1040 ez Farm. 2012 1040 ez   A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms; orchards; plantations; ranches; nurseries; ranges; and feed yards for fattening cattle. 2012 1040 ez It also includes structures such as greenhouses used primarily for the raising of agricultural or horticultural commodities. 2012 1040 ez A fish farm is an area where fish are grown or raised — not merely caught or harvested. 2012 1040 ez Farming purposes. 2012 1040 ez   As an owner, tenant, or operator, you use fuel on a farm for farming purposes if you use it in any of the following ways. 2012 1040 ez To cultivate the soil or to raise or harvest any agricultural or horticultural commodity. 2012 1040 ez To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife. 2012 1040 ez To operate, manage, conserve, improve, or maintain your farm and its tools and equipment. 2012 1040 ez To handle, dry, pack, grade, or store any raw agricultural or horticultural commodity. 2012 1040 ez For this use to qualify, you must have produced more than half the commodity so treated during the tax year. 2012 1040 ez Commodity means a single raw product. 2012 1040 ez For example, apples and peaches are two separate commodities. 2012 1040 ez To plant, cultivate, care for, or cut trees or to prepare (other than sawing logs into lumber, chipping, or other milling) trees for market, but only if the planting, etc. 2012 1040 ez , is incidental to your farming operations. 2012 1040 ez Your tree operations will be incidental only if they are minor in nature when compared to the total farming operations. 2012 1040 ez   If any other person, such as a neighbor or custom operator, performs a service for you on your farm for any of the purposes listed in (1) or (2), you are considered to be the ultimate purchaser that used the fuel on a farm for farming purposes. 2012 1040 ez However, see Custom application of fertilizer and pesticide, next. 2012 1040 ez   If doubt exists whether the owner, the tenant, or the operator of the farm bought the fuel, determine who bore the cost of the fuel. 2012 1040 ez For example, if the owner of a farm and the tenant equally share the cost of gasoline that is used on a farm for farming purposes, each can claim a credit for the tax on one-half the fuel used. 2012 1040 ez Custom application of fertilizer and pesticide. 2012 1040 ez   Fuel used on a farm for farming purposes includes fuel used in the application of fertilizer, pesticides, or other substances, including aerial applications. 2012 1040 ez Generally, the applicator is treated as having used the fuel on a farm for farming purposes. 2012 1040 ez For aviation gasoline, the aerial applicator makes the claim as the ultimate purchaser. 2012 1040 ez For kerosene used in aviation, the ultimate purchaser may make the claim or waive their right to make the claim to the registered ultimate vendor. 2012 1040 ez Fuel used between airfield and farm. 2012 1040 ez   Fuel used by an aerial applicator for the direct flight between the airfield and one or more farms is treated as a farming purpose. 2012 1040 ez Fuel not used for farming. 2012 1040 ez   Fuel is not used on a farm for farming purposes if it is used in any of the following ways. 2012 1040 ez Off the farm, such as on the highway or in noncommercial aviation, other than fuel used between the airfield and farm described above, even if the fuel is used in transporting livestock, feed, crops, or equipment. 2012 1040 ez For personal use, such as mowing the lawn. 2012 1040 ez In processing, packaging, freezing, or canning operations. 2012 1040 ez In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar. 2012 1040 ez Off-highway business use (No. 2012 1040 ez 2). 2012 1040 ez   Off-highway business use means fuel used in a trade or business or in an income-producing activity other than as a fuel in a highway vehicle registered or required to be registered for use on public highways. 2012 1040 ez The terms “highway vehicle,” “public highway,” and “registered” are defined below. 2012 1040 ez Do not consider any use in a boat as an off-highway business use. 2012 1040 ez   Off-highway business use includes fuels used in any of the following ways. 2012 1040 ez In stationary machines such as generators, compressors, power saws, and similar equipment. 2012 1040 ez For cleaning purposes. 2012 1040 ez In forklift trucks, bulldozers, and earthmovers. 2012 1040 ez   Generally, this use does not include nonbusiness use of fuel, such as use by minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment. 2012 1040 ez Example. 2012 1040 ez Caroline owns a landscaping business. 2012 1040 ez She uses power lawn mowers and chain saws in her business. 2012 1040 ez The gasoline used in the power lawn mowers and chain saws qualifies as fuel used in an off-highway business use. 2012 1040 ez The gasoline used in her personal lawn mower at home does not qualify. 2012 1040 ez Highway vehicle. 2012 1040 ez   A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it is also designed to perform other functions. 2012 1040 ez Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. 2012 1040 ez A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation function for only one of the following. 2012 1040 ez A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). 2012 1040 ez A special kind of cargo, goods, supplies, or materials. 2012 1040 ez Some off-highway task unrelated to highway transportation, except as discussed next. 2012 1040 ez Vehicles not considered highway vehicles. 2012 1040 ez   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the credit or refund of fuel taxes. 2012 1040 ez Specially designed mobile machinery for nontransportation functions. 2012 1040 ez A self-propelled vehicle is not a highway vehicle if all the following apply. 2012 1040 ez The chassis has permanently mounted to it machinery or equipment used to perform certain operations (construction, manufacturing, drilling, mining, timbering, processing, farming, or similar operations) if the operation of the machinery or equipment is unrelated to transportation on or off the public highways. 2012 1040 ez The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if applicable) for the machinery or equipment, whether or not the machinery or equipment is in operation. 2012 1040 ez The chassis could not, because of its special design and without substantial structural modification, be used as part of a vehicle designed to carry any other load. 2012 1040 ez The vehicle must have traveled less than 7,500 miles on public highways during the taxable year. 2012 1040 ez Vehicles specially designed for off-highway transportation. 2012 1040 ez A vehicle is not treated as a highway vehicle if the vehicle is specially designed for the primary function of transporting a particular type of load other than over the public highway and because of this special design, the vehicle's capability to transport a load over a public highway is substantially limited or impaired. 2012 1040 ez To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety, or other requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. 2012 1040 ez It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. 2012 1040 ez Nontransportation trailers and semitrailers. 2012 1040 ez A trailer or semi-trailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway site. 2012 1040 ez For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle. 2012 1040 ez Public highway. 2012 1040 ez   A public highway includes any road in the United States that is not a private roadway. 2012 1040 ez This includes federal, state, county, and city roads and streets. 2012 1040 ez Registered. 2012 1040 ez   A vehicle is considered registered when it is registered or required to be registered for highway use under the law of any state, the District of Columbia, or any foreign country in which it is operated or situated. 2012 1040 ez Any highway vehicle operated under a dealer's tag, license, or permit is considered registered. 2012 1040 ez A highway vehicle is not considered registered solely because a special permit allows the vehicle to be operated at particular times and under specified conditions. 2012 1040 ez Dual use of propulsion motor. 2012 1040 ez   Off-highway business use does not include any fuel used in the propulsion motor of a registered highway vehicle even though that motor also operates special equipment by means of a power take-off or power transfer. 2012 1040 ez It does not matter if the special equipment is mounted on the vehicle. 2012 1040 ez Example. 2012 1040 ez The motor of a registered concrete-mixer truck operates both the engine and the mixing unit by means of a power take-off. 2012 1040 ez The fuel used in the motor to run the mixer is not off-highway business use. 2012 1040 ez Use in separate motor. 2012 1040 ez   Off-highway business use includes fuel used in a separate motor to operate special equipment, such as a refrigeration unit, pump, generator, or mixing unit. 2012 1040 ez If you draw fuel from the same tank that supplies fuel to the propulsion motor, you must figure the quantity used in the separate motor operating the special equipment. 2012 1040 ez You may make a reasonable estimate based on your operating experience and supported by your records. 2012 1040 ez   You can use devices that measure the miles the vehicle has traveled (such as hubometers) to figure the gallons of fuel used to propel the vehicle. 2012 1040 ez Add to this amount the fuel consumed while idling or warming up the motor before propelling the vehicle. 2012 1040 ez The difference between your total fuel used and the fuel used to propel the vehicle is the fuel used in the separate motor. 2012 1040 ez Example. 2012 1040 ez Hazel owns a refrigerated truck. 2012 1040 ez It has a separate motor for the refrigeration unit. 2012 1040 ez The same tank supplies both motors. 2012 1040 ez Using the truck's hubometer, Hazel figures that 90% of the fuel was used to propel the truck. 2012 1040 ez Therefore, 10% of the fuel is used in an off-highway business use. 2012 1040 ez Fuel lost or destroyed. 2012 1040 ez   You cannot treat fuel lost or destroyed through spillage, fire, or other casualty as fuel used in an off-highway business use. 2012 1040 ez Export (No. 2012 1040 ez 3). 2012 1040 ez   Export means fuel transported from the United States with the intention that the fuel remain in a foreign country or possession of the United States. 2012 1040 ez Fuel is not exported if it is in the fuel supply tank of a vehicle or aircraft. 2012 1040 ez In a boat engaged in commercial fishing (No. 2012 1040 ez 4). 2012 1040 ez   In a boat engaged in commercial fishing means fuel used in taking, catching, processing, or transporting fish, shellfish, or other aquatic life for commercial purposes, such as selling or processing the catch, on a specific trip basis. 2012 1040 ez They include boats used in both fresh and salt water fishing. 2012 1040 ez They do not include boats used for both sport fishing and commercial fishing on the same trip. 2012 1040 ez In certain intercity and local buses (No. 2012 1040 ez 5). 2012 1040 ez   In certain intercity and local buses means fuel used in a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. 2012 1040 ez The bus must be engaged in one of the following activities. 2012 1040 ez Scheduled transportation along regular routes. 2012 1040 ez Nonscheduled operations if the seating capacity of the bus is at least 20 adults, not including the driver. 2012 1040 ez Vans and similar vehicles used for van-pooling or taxi service do not qualify. 2012 1040 ez Available to the general public. 2012 1040 ez   This means you offer service to more than a limited number of persons or organizations. 2012 1040 ez If a bus operator normally provides charter operations through travel agencies but has buses available for chartering by the general public, this service is available to the general public. 2012 1040 ez A bus does not qualify when its operator uses it to provide exclusive services to only one person, group, or organization. 2012 1040 ez Also, intercity bus transportation does not include transporting students and employees of schools or intercity transportation in a qualified local bus. 2012 1040 ez In a qualified local bus (No. 2012 1040 ez 6). 2012 1040 ez   In a qualified local bus means fuel used in a bus meeting all the following requirements. 2012 1040 ez It is engaged in furnishing (for compensation) intracity passenger land transportation available to the general public. 2012 1040 ez It operates along scheduled, regular routes. 2012 1040 ez It has a seating capacity of at least 20 adults (excluding the driver). 2012 1040 ez It is under contract with (or is receiving more than a nominal subsidy from) any state or local government to furnish the transportation. 2012 1040 ez Intracity passenger land transportation. 2012 1040 ez   This is the land transportation of passengers between points located within the same metropolitan area. 2012 1040 ez It includes transportation along routes that cross state, city, or county boundaries if the routes remain within the metropolitan area. 2012 1040 ez Under contract. 2012 1040 ez   A bus is under contract with a state or local government only if the contract imposes a bona fide obligation on the bus operator to furnish the transportation. 2012 1040 ez More than a nominal subsidy. 2012 1040 ez   A subsidy is more than nominal if it is reasonably expected to exceed an amount equal to 3 cents multiplied by the number of gallons of fuel used in buses on subsidized routes. 2012 1040 ez A company that operates its buses along subsidized and unsubsidized intracity routes may consider its buses qualified local buses only when the buses are used on the subsidized intracity routes. 2012 1040 ez In a school bus (No. 2012 1040 ez 7). 2012 1040 ez   In a school bus means fuel used in a bus engaged in the transportation of students or employees of schools. 2012 1040 ez A school is an educational organization with a regular faculty and curriculum and a regularly enrolled body of students who attend the place where the educational activities occur. 2012 1040 ez For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel (No. 2012 1040 ez 8). 2012 1040 ez   Diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train (not including off-highway business use) means undyed diesel fuel and undyed kerosene used: For home heating, lighting, and cooking; In boats; In stationary machines, such as generators and compressors; For cleaning purposes; or In minibikes and snowmobiles. 2012 1040 ez In foreign trade (No. 2012 1040 ez 9). 2012 1040 ez   In foreign trade means fuel used in civil aircraft employed in foreign trade or trade between the United States and any of its possessions. 2012 1040 ez The term trade includes the transportation of persons or property for hire and the making of the necessary preparations for such transportation. 2012 1040 ez In the case of aircraft registered in a foreign country, the country must allow reciprocal benefits for aircraft registered in the United States. 2012 1040 ez Certain helicopter and fixed-wing aircraft uses (No. 2012 1040 ez 10). 2012 1040 ez   Includes: Certain helicopter uses. 2012 1040 ez   Certain helicopter uses means fuel used by a helicopter for any of the following purposes. 2012 1040 ez Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. 2012 1040 ez Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). 2012 1040 ez Providing emergency medical transportation. 2012 1040 ez   During a use described in items (1) and (2), the helicopter must not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. 2012 1040 ez For item (1), treat each flight segment as a separate flight. 2012 1040 ez Fixed-wing aircraft uses. 2012 1040 ez   Fixed-wing aircraft uses means fuel used by a fixed-wing aircraft for any of the following purposes. 2012 1040 ez Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). 2012 1040 ez Providing emergency medical transportation. 2012 1040 ez The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. 2012 1040 ez During a use described in item (1), the aircraft must not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. 2012 1040 ez Exclusive use by a qualified blood collector organization (No. 2012 1040 ez 11). 2012 1040 ez   Exclusive use by a qualified blood collector organization means fuel used by the qualified blood collector organization for its exclusive use in the collection, storage, or transportation of blood. 2012 1040 ez Qualified blood collector organization. 2012 1040 ez   A qualified blood collector organization is one that is: Described in section 501(c)(3) and exempt from tax under section 501(a), Primarily engaged in the activity of collecting human blood, Registered by the IRS, and Registered by the Food and Drug Administration to collect blood. 2012 1040 ez In a highway vehicle owned by the United States that is not used on a highway (No. 2012 1040 ez 12). 2012 1040 ez   In a highway vehicle owned by the United States that is not used on a highway means fuel used in a vehicle that was not used on public highways during the period covered by the claim. 2012 1040 ez This use applies whether or not the vehicle is registered or required to be registered for highway use. 2012 1040 ez Exclusive use by a nonprofit educational organization (No. 2012 1040 ez 13). 2012 1040 ez   Exclusive use by a nonprofit educational organization means fuel used by an organization exempt from income tax under section 501(a) that meets both of the following requirements. 2012 1040 ez It has a regular faculty and curriculum. 2012 1040 ez It has a regularly enrolled body of students who attend the place where the instruction normally occurs. 2012 1040 ez   A nonprofit educational organization also includes a school operated by a church or other organization described in section 501(c)(3) if the school meets the above requirements. 2012 1040 ez Exclusive use by a state, political subdivision of a state, or the District of Columbia (No. 2012 1040 ez 14). 2012 1040 ez   Exclusive use by a state, political subdivision of a state, or the District of Columbia means fuel purchased by the state or local government for its exclusive use. 2012 1040 ez A state or local government is any state, any political subdivision thereof, or the District of Columbia. 2012 1040 ez An Indian tribal government is treated as a state only if the fuel is used in an activity that involves the exercise of an essential tribal government function. 2012 1040 ez Gasoline, diesel fuel, and kerosene used by the American Red Cross is considered to be the use of these fuels by a state. 2012 1040 ez In an aircraft or vehicle owned by an aircraft museum (No. 2012 1040 ez 15). 2012 1040 ez   In an aircraft or vehicle owned by an aircraft museum means fuel used in an aircraft or vehicle that is owned by an organization that meets all the following requirements. 2012 1040 ez It is exempt from income tax as an organization described in section 501(c)(3). 2012 1040 ez It is operated as a museum under a state (or District of Columbia) charter. 2012 1040 ez It is operated exclusively for acquiring, exhibiting, and caring for aircraft of the type used for combat or transport in  World War II. 2012 1040 ez   The aircraft or vehicle (such as a ground servicing vehicle for aircraft) must be used exclusively for the purposes described in item (3). 2012 1040 ez In military aircraft (No. 2012 1040 ez 16). 2012 1040 ez   In a military aircraft means fuel used in an aircraft owned by the United States or any foreign nation and constituting a part of its armed forces. 2012 1040 ez In commercial aviation (other than foreign trade). 2012 1040 ez   See Commercial aviation, earlier, for the definition. 2012 1040 ez Use in a train. 2012 1040 ez   Use in a train means fuel used in the propulsion engine of equipment or machinery that rides on rails. 2012 1040 ez This includes use in a locomotive, work train, switching engine, and track maintenance machine. 2012 1040 ez Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit For alternative fuel mixtures produced after December 31, 2011, see How to Claim the Credit below. 2012 1040 ez The section 6426 credit for biodiesel and alternative fuel consists of the biodiesel or renewable diesel mixture credit, alternative fuel credit, and alternative fuel mixture credit. 2012 1040 ez Biodiesel or renewable diesel mixture credit claimant. 2012 1040 ez   Claimant produced a biodiesel mixture by mixing biodiesel with diesel fuel. 2012 1040 ez Claimant produced a renewable diesel mixture by mixing renewable diesel with liquid fuel (other than renewable diesel). 2012 1040 ez   The person that produced and sold or used the mixture in their trade or business is the only person eligible to make this claim. 2012 1040 ez The credit is based on the gallons of biodiesel or renewable diesel in the mixture. 2012 1040 ez Renewable diesel does not include any fuel derived from coprocessing biomass (as defined in section 45K(c)(3)) with a feedstock that is not biomass. 2012 1040 ez Claim requirements. 2012 1040 ez   See the Instructions for Form 720 for the biodiesel or renewable diesel mixture claim requirements. 2012 1040 ez Alternative fuel credit claimant. 2012 1040 ez   For the alternative fuel credit, the registered alternative fueler who (1) sold an alternative fuel at retail delivered it into the fuel supply tank of a motor vehicle or motorboat, (2) sold an alternative fuel, delivered it in bulk taxable use in a motor vehicle or motorboat, and received required statement from the buyer, (3) used an alternative fuel (not sold at retail or in bulk as previously described) motor vehicle or motorboat, or (4) sold an alternative fuel used as a fuel in aviation is the only person eligible to make this claim. 2012 1040 ez Carbon capture requirement. 2012 1040 ez   A credit for Fischer-Tropsch process liquid fuel derived from coal (including peat) can be claimed only if the fuel is derived from coal produced at a gasification facility that separates and sequesters at least 75% of the facility's total carbon dioxide emissions. 2012 1040 ez Alternative fuel credit. 2012 1040 ez   The registered alternative fueler is the person eligible to make the claim. 2012 1040 ez An alternative fueler is the person liable for tax on alternative fuel under the rules for taxable events for Other Fuels (discussed in chapter 1) or would be liable but for an exemption for nontaxable uses. 2012 1040 ez An alternative fueler includes a person who sells for use or uses an alternative fuel in aviation. 2012 1040 ez Alternative fuel mixture credit claimant. 2012 1040 ez   For the alternative fuel mixture credit, the registered alternative fueler that produced and sold or used the mixture as a fuel in their trade or business is the only person eligible to make this claim. 2012 1040 ez The credit is based on the gallons of alternative fuel in the mixture. 2012 1040 ez An alternative fuel mixture is a mixture of alternative fuel and section 4081 taxable fuel (gasoline, diesel fuel, or kerosene). 2012 1040 ez Registration. 2012 1040 ez   You must be registered by the IRS to be eligible to claim the section 6426 fuel credit. 2012 1040 ez See Registration Requirements in chapter 1. 2012 1040 ez Credits for fuel provide incentive for United States production. 2012 1040 ez   The section 6426 fuel credit may not be claimed for alternative fuel that is produced outside the United States for use as a fuel outside the United States. 2012 1040 ez The United States includes any possession of the United States. 2012 1040 ez Credit for fuels derived from paper or pulp production. 2012 1040 ez   Credit for alternative fuels and alternative fuel mixtures for any fuel derived from the production of paper or pulp are not available for fuel sold or used on or after December 31, 2009. 2012 1040 ez How to Claim the Credit Any biodiesel or renewable diesel mixture credit must first be claimed on Schedule C to reduce your taxable fuel liability reported on Form 720. 2012 1040 ez Any excess credit may be claimed on Schedule C (Form 720), Schedule 3 (Form 8849), Form 4136, or Form 8864, Biodiesel and Renewable Diesel Fuels Credit. 2012 1040 ez See Notice 2005-4 and the Instructions for Form 720 for more information. 2012 1040 ez Also see Notice 2013-26 on page 984 of I. 2012 1040 ez R. 2012 1040 ez B. 2012 1040 ez 2013-18 at www. 2012 1040 ez irs. 2012 1040 ez gov/pub/irs-irbs/irb13-18. 2012 1040 ez pdf; and see chapter 2, later. 2012 1040 ez Coordination with income tax credit. 2012 1040 ez   Only one credit may be taken for any amount of biodiesel or renewable diesel. 2012 1040 ez If any amount is claimed (or will be claimed) for any amount of biodiesel or renewable diesel on Form 720, Form 8849, or Form 4136, then a claim cannot be made on Form 8864 for that amount of biodiesel or renewable diesel. 2012 1040 ez   Any alternative fuel credit must first be claimed on Schedule C (Form 720) to reduce your section 4041 taxable fuel liability for alternative fuel and CNG reported on Form 720. 2012 1040 ez Any excess credit may claimed on Schedule C (Form 720), Schedule 3 (Form 8849), or Form 4136. 2012 1040 ez   For alternative fuel mixtures produced after December 31, 2011, the alternative fuel mixture credit can be claimed on Schedule C (Form 720), not on Form 4136 or Schedule 3 (Form 8849), and only to the extent of your section 4081 taxable fuel liability for gasoline, diesel fuel and kerosene reported on Form 720. 2012 1040 ez   Calculate the limitation for alternative fuel mixtures separately and enter on Schedule C (Form 720), line 14, only the gallons of mixtures that do not exceed your section 4081 taxable fuel liability. 2012 1040 ez Filing Claims This section tells you how to make a claim for a credit or refund of excise taxes on fuels. 2012 1040 ez This section also covers recordkeeping requirements and when to include the credit or refund in your income. 2012 1040 ez Generally, you will provide all the information needed to claim a credit or refund when you properly complete Form 8849, Form 4136, Schedule C (Form 720), Form 6478, or Form 8864. 2012 1040 ez In some cases, you will have to attach additional information. 2012 1040 ez You need to keep records that support your claim for a credit or refund. 2012 1040 ez Keep at your principal place of business all records needed to enable the IRS to verify that you are the person entitled to claim a credit or refund and the amount you claimed. 2012 1040 ez Ultimate purchaser. 2012 1040 ez   Ultimate purchasers may make claims for the nontaxable use of fuels on Form 4136, Schedule 1 (Form 8849), and Schedule C (Form 720) if reporting excise tax liability on that return. 2012 1040 ez If you are an ultimate purchaser, you must keep the following records. 2012 1040 ez The number of gallons purchased and used during the period covered by your claim. 2012 1040 ez The dates of the purchases. 2012 1040 ez The names and addresses of suppliers and amounts purchased from each in the period covered by your claim. 2012 1040 ez The nontaxable use for which you used the fuel. 2012 1040 ez The number of gallons used for each nontaxable use. 2012 1040 ez It is important that your records show separately the number of gallons used for each nontaxable use that qualifies as a claim. 2012 1040 ez If the fuel is exported, you must have proof of exportation. 2012 1040 ez   For more information about keeping records, see Publication 583, Starting a Business and Keeping Records, or chapter 1 of Publication 17, Your Federal Income Tax for Individuals. 2012 1040 ez Exceptions. 2012 1040 ez    Generally, the ultimate purchaser may not claim a credit or refund for undyed diesel fuel, undyed kerosene, or kerosene for use in aviation sold for the exclusive use of a state or local government. 2012 1040 ez However, see Claims by credit card issuers, later, for an exception. 2012 1040 ez The ultimate purchaser may not claim a credit or refund as follows. 2012 1040 ez The ultimate purchaser of gasoline or aviation gasoline used by a state or local government for its exclusive use or by a nonprofit educational organization for its exclusive use may waive its right to make a claim by providing a certificate that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Certificate M. 2012 1040 ez A new certificate is required each year or when any information in the current certificate expires. 2012 1040 ez The ultimate purchaser of kerosene for use in commercial aviation or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia) may waive its right to make a claim by providing a waiver that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Waiver L. 2012 1040 ez A new waiver is required each year or when any information in the current waiver expires. 2012 1040 ez The ultimate purchaser of undyed diesel fuel or undyed kerosene used in certain intercity and local buses may waive its right to make a claim by providing a waiver that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Waiver N. 2012 1040 ez A new waiver is required each year or when any information in the current waiver expires. 2012 1040 ez The ultimate purchaser of kerosene for use in nonexempt, noncommercial aviation must provide a certificate that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Certificate Q. 2012 1040 ez A new certificate is required each year or when any information in the current certificate expires. 2012 1040 ez Registered ultimate vendor. 2012 1040 ez   Registered ultimate vendors may make claims for certain sales of fuels on Form 4136, Schedule 2 (Form 8849), and Schedule C (Form 720) if reporting excise tax liability on that return. 2012 1040 ez If you are a registered ultimate vendor, you must keep certain information pertaining to the sale of the fuel. 2012 1040 ez   To make a claim, you must have sold the fuel at a tax-excluded price, repaid the tax to the buyer, or obtained the buyer's written consent to the allowance of the claim. 2012 1040 ez You are required to have a valid certificate or waiver in your possession in order to make the claim. 2012 1040 ez   In addition, you must have a registration number that has not been revoked or suspended. 2012 1040 ez See Form 637. 2012 1040 ez State use. 2012 1040 ez   To make a claim as an ultimate vendor (state), you must have a UV registration number and the fuel cannot be purchased with a credit card as explained below. 2012 1040 ez If you sell undyed diesel fuel, undyed kerosene, or kerosene for use in aviation for use by a state or local government, you must keep the following information. 2012 1040 ez The name and taxpayer identification number of each person (government unit) that bought the fuel. 2012 1040 ez The number of gallons sold to each person. 2012 1040 ez An unexpired certificate from the buyer. 2012 1040 ez See Model Certificate P in the Appendix. 2012 1040 ez The certificate expires on the earlier of 1 year after the date of the certificate or the date a new certificate is given to the registered ultimate vendor. 2012 1040 ez Nonprofit educational organization and state use. 2012 1040 ez   To make a claim as an ultimate vendor (nonprofit educational organization or state), you must have a UV registration number and the fuel cannot be purchased with a credit card as explained later. 2012 1040 ez If you sell gasoline or aviation gasoline to a nonprofit educational organization for its exclusive use or to a state or local government for its exclusive use, you must keep the following information. 2012 1040 ez The name and taxpayer identification number of each person (nonprofit educational organization or government unit) that bought the fuel. 2012 1040 ez The number of gallons sold to each person. 2012 1040 ez An unexpired certificate from the buyer. 2012 1040 ez See Model Certificate M in the Appendix. 2012 1040 ez  The certificate expires on the earlier of 1 year after the date of the certificate or the date a new certificate is given to the registered ultimate vendor. 2012 1040 ez Blocked pump. 2012 1040 ez   To make a claim as an ultimate vendor (blocked pump), you must have a UP registration number. 2012 1040 ez If you sell undyed kerosene (other than kerosene for use in aviation) from a pump that qualifies as a blocked pump because it is locked by you after each sale and is unlocked by you at the request of the buyer, you must keep the following information for each sale of more than 5 gallons. 2012 1040 ez The date of each sale. 2012 1040 ez The name and address of the buyer. 2012 1040 ez The number of gallons sold to that buyer. 2012 1040 ez Certain intercity and local bus use. 2012 1040 ez   To make a claim as an ultimate vendor of undyed diesel fuel or undyed kerosene used in certain intercity and local buses, you must have a UB registration number. 2012 1040 ez You must keep the following information. 2012 1040 ez The date of each sale. 2012 1040 ez The name and address of the buyer. 2012 1040 ez The number of gallons sold to the buyer. 2012 1040 ez A copy of the waiver signed by the buyer at the time the credit or payment is claimed. 2012 1040 ez See Model Waiver N in the Appendix. 2012 1040 ez Kerosene for use in commercial aviation or noncommercial aviation. 2012 1040 ez   To make a claim as an ultimate vendor of kerosene for use in commercial aviation (other than foreign trade) or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia), you must have a UA registration number. 2012 1040 ez See Kerosene for use in aviation, earlier, for a list of nontaxable uses. 2012 1040 ez You must keep the following information. 2012 1040 ez The date of each sale. 2012 1040 ez The name and address of the buyer. 2012 1040 ez The number of gallons sold to the buyer. 2012 1040 ez A copy of the waiver signed by the buyer at the time the credit or payment is claimed. 2012 1040 ez See Model Waiver L in the Appendix. 2012 1040 ez Kerosene for use in nonexempt, noncommercial aviation. 2012 1040 ez   To make a claim as an ultimate vendor of kerosene for use in nonexempt, noncommercial aviation, you must have a UA registration number. 2012 1040 ez You must keep the following information. 2012 1040 ez The date of each sale. 2012 1040 ez The name and address of the buyer. 2012 1040 ez The number of gallons sold to the buyer. 2012 1040 ez A copy of the certificate signed by the buyer at the time the credit or payment is claimed. 2012 1040 ez See Model Certificate Q in the Appendix. 2012 1040 ez Claims by credit card issuers. 2012 1040 ez   For sales of gasoline, aviation gasoline, diesel fuel, kerosene, or kerosene for use in aviation that are purchased by an exempt user with the use of a credit card, the registered credit card issuer is the only person who can make the claim. 2012 1040 ez An exempt user for this purpose is: For gasoline or aviation gasoline, a state or local government (including essential government use by an Indian tribal government) or a nonprofit educational organization; or For diesel fuel, kerosene, or kerosene for use in aviation, a state or local government (including essential government use by an Indian tribal government). 2012 1040 ez   If gasoline is purchased without the use of a credit card, then the registered ultimate vendor of the gasoline may make the claim for refund or credit. 2012 1040 ez However, if the gasoline is purchased with a credit card issued to a state, but the credit card issuer is not registered by the IRS or does not meet the conditions described, the credit card issuer must collect the tax and the state may make the claim. 2012 1040 ez   If diesel fuel, kerosene, or kerosene for use in aviation is purchased without the use of a credit card, the registered ultimate vendor may make the claim for refund or credit. 2012 1040 ez A state is not allowed to make a claim for these fuels. 2012 1040 ez However, if the diesel fuel or kerosene is purchased with a credit card issued to a state, but the credit card issuer is not registered by the IRS or does not meet the conditions described, the credit card issuer must collect the tax and the state may make the claim. 2012 1040 ez   The claim from the credit card issuer must contain the following information as it applies to the fuel covered in the claim. 2012 1040 ez The total number of gallons. 2012 1040 ez Its registration number. 2012 1040 ez A statement that it has not collected the amount of tax from the ultimate purchaser or has obtained the written consent of the ultimate purchaser to make the claim. 2012 1040 ez A statement that it has repaid or agreed to repay the amount of tax to the ultimate vendor, has obtained the written consent of the ultimate vendor to make the claim, or has otherwise made arrangements which directly or indirectly provide the ultimate vendor with reimbursement of the tax. 2012 1040 ez Has in its possession an unexpired certificate similar to Model Certificate R in the Appendix and has no reason to believe any of the information in the certificate is false. 2012 1040 ez Taxpayer identification number. 2012 1040 ez   To file a claim, you must have a taxpayer identification number. 2012 1040 ez Your taxpayer identification number can be an: Employer identification number (EIN), Social security number (SSN), or Individual taxpayer identification number (ITIN), if you are an alien individual and do not have and are not eligible to get an SSN. 2012 1040 ez   If you normally file only a U. 2012 1040 ez S. 2012 1040 ez individual income tax return (such as Form 1040 or 1040NR), use your SSN or ITIN. 2012 1040 ez You get an SSN by filing Form SS-5, Application for a Social Security Card, with the Social Security Administration. 2012 1040 ez To get an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. 2012 1040 ez   If you operate a business, use your EIN. 2012 1040 ez If you do not have an EIN, you may apply for one online. 2012 1040 ez Go to the IRS website at irs. 2012 1040 ez gov/businesses/small and click on the “Employer ID Numbers (EINs)” link. 2012 1040 ez You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 2012 1040 ez Claiming A Refund Generally, you may claim a refund of excise taxes on Form 8849. 2012 1040 ez Complete and attach to Form 8849 the appropriate Form 8849 schedules. 2012 1040 ez The instructions for Form 8849 and the separate instructions for each schedule explain the requirements for making a claim for refund. 2012 1040 ez If you file Form 720, you can use the Schedule C (Form 720) for your refund claims for the quarter. 2012 1040 ez See the Instructions for Form 720. 2012 1040 ez Do not claim a refund on Form 8849 for any amount for which you have filed or will file a claim on Schedule C (Form 720) or Form 4136. 2012 1040 ez The alternative fuel mixture credit must be claimed on Schedule C (Form 720) against your section 4081 taxable fuel liability for gasoline, diesel, and kerosene and any excess is not allowed. 2012 1040 ez The alternative fuel credit must first be claimed on Schedule C (Form 720) against your section 4041 taxable fuel liability for alternative fuel and CNG. 2012 1040 ez To the extent the alternative fuel credit exceeds this taxable fuel liability, a payment is allowed and may be claimed as a credit on Schedule C (Form 720), or as an income tax credit on Forms 4136, 6478, or 8864, as applicable. 2012 1040 ez Only one claim may be made for any particular amount of alternative fuel. 2012 1040 ez Claiming a Credit on Form 4136 For alternative fuel mixtures produced after December 31, 2011, the alternative fuel mixture credit cannot be claimed on Form 4136. 2012 1040 ez See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2, earlier. 2012 1040 ez A credit may be claimed for certain uses and sales of fuels on Form 4136 when you file your income tax return at the end of the year. 2012 1040 ez If you meet certain requirements (discussed earlier), you may be able to make a claim during the year. 2012 1040 ez Credit only. 2012 1040 ez   You can claim the following taxes only as a credit on Form 4136. 2012 1040 ez Tax on fuels used for nontaxable uses if the total for your tax year is less than $750. 2012 1040 ez Tax on fuel you did not include in any claim for refund previously filed for any quarter of your tax year. 2012 1040 ez Tax on fuel you used in mobile machinery (off-highway business use) that traveled less than 7,500 miles on public highways. 2012 1040 ez Do not claim a credit for any amount for which you have filed a refund claim on Form 8849 or credit on Schedule C (Form 720). 2012 1040 ez When to file. 2012 1040 ez   You can claim a fuel tax credit on your income tax return for the year you used the fuel (or sold the fuel in the case of a registered ultimate vendor claim). 2012 1040 ez You may be able to make a fuel tax claim on an amended income tax return for the year you used the fuel. 2012 1040 ez Generally, you must file an amended return by the later of 3 years from the date you filed your original return or within 2 years from the date you paid the income tax. 2012 1040 ez How to claim a credit. 2012 1040 ez   How you claim a credit depends on whether you are an individual, partnership, corporation, S corporation, or farmers' cooperative association. 2012 1040 ez Individuals. 2012 1040 ez   You claim the credit on the “Credits from” line of Form 1040. 2012 1040 ez Also check box b on that line. 2012 1040 ez If you would not otherwise have to file an income tax return, you must do so to get a fuel tax credit. 2012 1040 ez Partnerships. 2012 1040 ez   Partnerships (other than electing large partnerships) claim the credit by including a statement on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 2012 1040 ez , showing each partner's share of the number of gallons of each fuel sold or used for a non