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Free income tax service 37. Free income tax service   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. Free income tax service  The maximum adoption credit is $12,970 for 2013. Free income tax service See Adoption Credit . Free income tax service Plug-in electric vehicle credit. Free income tax service  This credit has expired. Free income tax service Credit for prior year minimum tax. Free income tax service  The refundable portion of the credit for prior year minimum tax has expired. Free income tax service Excess withholding of social security and railroad retirement tax. Free income tax service  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. Free income tax service 2% of wages up to $113,700. Free income tax service If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. Free income tax service See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . Free income tax service Introduction This chapter discusses the following nonrefundable credits. Free income tax service Adoption credit. Free income tax service Alternative motor vehicle credit. Free income tax service Alternative fuel vehicle refueling property credit. Free income tax service Credit to holders of tax credit bonds. Free income tax service Foreign tax credit. Free income tax service Mortgage interest credit. Free income tax service Nonrefundable credit for prior year minimum tax. Free income tax service Plug-in electric drive motor vehicle credit. Free income tax service Residential energy credits. Free income tax service Retirement savings contributions credit. Free income tax service This chapter also discusses the following refundable credits. Free income tax service Credit for tax on undistributed capital gain. Free income tax service Health coverage tax credit. Free income tax service Credit for excess social security tax or railroad retirement tax withheld. Free income tax service Several other credits are discussed in other chapters in this publication. Free income tax service Child and dependent care credit (chapter 32). Free income tax service Credit for the elderly or the disabled (chapter 33). Free income tax service Child tax credit (chapter 34). Free income tax service Education credits (chapter 35). Free income tax service Earned income credit (chapter 36). Free income tax service Nonrefundable credits. Free income tax service   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. Free income tax service These credits may reduce your tax to zero. Free income tax service If these credits are more than your tax, the excess is not refunded to you. Free income tax service Refundable credits. Free income tax service   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. Free income tax service These credits are added to the federal income tax withheld and any estimated tax payments you made. Free income tax service If this total is more than your total tax, the excess will be refunded to you. Free income tax service Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. Free income tax service However, if the total of these credits is more than your tax, the excess is not refunded to you. Free income tax service Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. Free income tax service The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. Free income tax service If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. Free income tax service If your modified AGI is $234,580 or more, you cannot take the credit. Free income tax service Qualified adoption expenses. Free income tax service   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. Free income tax service These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. Free income tax service Nonqualified expenses. Free income tax service   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. Free income tax service Eligible child. Free income tax service   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. Free income tax service Child with special needs. Free income tax service   An eligible child is a child with special needs if all three of the following apply. Free income tax service The child was a citizen or resident of the United States (including U. Free income tax service S. Free income tax service possessions) at the time the adoption process began. Free income tax service A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. Free income tax service The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Free income tax service Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. Free income tax service When to take the credit. Free income tax service   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. Free income tax service If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. Free income tax service See the Instructions for Form 8839 for more specific information on when to take the credit. Free income tax service Foreign child. Free income tax service   If the child is not a U. Free income tax service S. Free income tax service citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. Free income tax service You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. Free income tax service How to take the credit. Free income tax service   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. Free income tax service Include the credit in your total for Form 1040, line 53. Free income tax service Check box c and enter “8839” on the line next to that box. Free income tax service More information. Free income tax service   For more information, see the Instructions for Form 8839. Free income tax service Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. Free income tax service Amount of credit. Free income tax service   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. Free income tax service In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. Free income tax service   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. Free income tax service How to take the credit. Free income tax service   To take the credit, you must complete Form 8910 and attach it to your Form 1040. Free income tax service Include the credit in your total for Form 1040, line 53. Free income tax service Check box c and enter “8910” on the line next to that box. Free income tax service More information. Free income tax service   For more information on the credit, see the Instructions for Form 8910. Free income tax service Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. Free income tax service Qualified alternative fuel vehicle refueling property. Free income tax service   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. Free income tax service To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. Free income tax service To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. Free income tax service   The following are alternative fuels. Free income tax service Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. Free income tax service Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. Free income tax service Electricity. Free income tax service Amount of the credit. Free income tax service   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. Free income tax service For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Free income tax service How to take the credit. Free income tax service   To take the credit, you must complete Form 8911 and attach it to your Form 1040. Free income tax service Include the credit in your total for Form 1040, line 53. Free income tax service Check box c and enter “8911” on the line next to that box. Free income tax service More information. Free income tax service   For more information on the credit, see the Form 8911 instructions. Free income tax service Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. Free income tax service You may be able to take a credit if you are a holder of one of the following bonds. Free income tax service Clean renewable energy bonds (issued before 2010). Free income tax service New clean renewable energy bonds. Free income tax service Qualified energy conservation bonds. Free income tax service Qualified school construction bonds. Free income tax service Qualified zone academy bonds. Free income tax service Build America bonds. Free income tax service In some instances, an issuer may elect to receive a credit for interest paid on the bond. Free income tax service If the issuer makes this election, you cannot also claim a credit. Free income tax service Interest income. Free income tax service   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. Free income tax service How to take the credit. Free income tax service   Complete Form 8912 and attach it to your Form 1040. Free income tax service Include the credit in your total for Form 1040, line 53. Free income tax service Check box c and enter “8912” on the line next to that box. Free income tax service More information. Free income tax service   For more information, see the Instructions for Form 8912. Free income tax service Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. Free income tax service S. Free income tax service possession as a credit against your U. Free income tax service S. Free income tax service income tax. Free income tax service Or, you can deduct them as an itemized deduction (see chapter 22). Free income tax service You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. Free income tax service S. Free income tax service tax under any of the following. Free income tax service Foreign earned income exclusion. Free income tax service Foreign housing exclusion. Free income tax service Income from Puerto Rico exempt from U. Free income tax service S. Free income tax service tax. Free income tax service Possession exclusion. Free income tax service Limit on the credit. Free income tax service   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. Free income tax service S. Free income tax service tax liability (Form 1040, line 44), multiplied by a fraction. Free income tax service The numerator of the fraction is your taxable income from sources outside the United States. Free income tax service The denominator is your total taxable income from U. Free income tax service S. Free income tax service and foreign sources. Free income tax service See Publication 514 for more information. Free income tax service How to take the credit. Free income tax service   Complete Form 1116 and attach it to your Form 1040. Free income tax service Enter the credit on Form 1040, line 47. Free income tax service Exception. Free income tax service   You do not have to complete Form 1116 to take the credit if all of the following apply. Free income tax service All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). Free income tax service If you had dividend income from shares of stock, you held those shares for at least 16 days. Free income tax service You are not filing Form 4563 or excluding income from sources within Puerto Rico. Free income tax service The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). Free income tax service All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. Free income tax service More information. Free income tax service   For more information on the credit and these requirements, see the Instructions for Form 1116. Free income tax service Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. Free income tax service If you qualify, you can take the credit each year for part of the home mortgage interest you pay. Free income tax service Who qualifies. Free income tax service   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Free income tax service Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Free income tax service Amount of credit. Free income tax service   Figure your credit on Form 8396. Free income tax service If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Free income tax service   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Free income tax service To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Free income tax service      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. Free income tax service   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. Free income tax service If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. Free income tax service See Publication 530 for more information. Free income tax service Carryforward. Free income tax service   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. Free income tax service If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Free income tax service   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Free income tax service How to take the credit. Free income tax service    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. Free income tax service Be sure to include any credit carryforward from 2010, 2011, and 2012. Free income tax service   Include the credit in your total for Form 1040, line 53. Free income tax service Check box c and enter “8396” on the line next to that box. Free income tax service Reduced home mortgage interest deduction. Free income tax service   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Free income tax service You must do this even if part of that amount is to be carried forward to 2014. Free income tax service For more information about the home mortgage interest deduction, see chapter 23. Free income tax service Recapture of federal mortgage subsidy. Free income tax service   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. Free income tax service The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. Free income tax service See the Instructions for Form 8828 and chapter 15 for more information. Free income tax service More information. Free income tax service   For more information on the credit, see the Form 8396 instructions. Free income tax service Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. Free income tax service If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. Free income tax service This is called the alternative minimum tax. Free income tax service The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. Free income tax service If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. Free income tax service You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. Free income tax service How to take the credit. Free income tax service    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. Free income tax service Include the credit in your total for Form 1040, line 53, and check box b. Free income tax service You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. Free income tax service More information. Free income tax service   For more information on the credit, see the Instructions for Form 8801. Free income tax service Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. Free income tax service Qualified plug-in electric drive motor vehicle. Free income tax service   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Free income tax service Qualified two- or three-wheeled plug-in electric vehicle. Free income tax service   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. Free income tax service 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Free income tax service Certification and other requirements. Free income tax service   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. Free income tax service However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. Free income tax service   The following requirements must also be met to qualify for the credit. Free income tax service You are the owner of the vehicle. Free income tax service If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. Free income tax service You placed the vehicle in service during 2013. Free income tax service The vehicle is manufactured primarily for use on public streets, roads, and highways. Free income tax service The original use of the vehicle began with you. Free income tax service You acquired the vehicle for your use or to lease to others, and not for resale. Free income tax service In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. Free income tax service You use the vehicle primarily in the United States. Free income tax service How to take the credit. Free income tax service   To take the credit, you must complete Form 8936 and attach it to your Form 1040. Free income tax service Include the credit in your total for Form 1040, line 53. Free income tax service Check box c and enter “8936” on the line next to that box. Free income tax service More information. Free income tax service   For more information on the credit, see the Form 8936 instructions. Free income tax service Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. Free income tax service Nonbusiness energy property credit. Free income tax service Residential energy efficient property credit. Free income tax service If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. Free income tax service Nonbusiness energy property credit. Free income tax service   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. Free income tax service   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. Free income tax service    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. Free income tax service   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. Free income tax service Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. Free income tax service Exterior window (including skylights). Free income tax service Exterior doors. Free income tax service Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. Free income tax service   Residential energy property is any of the following. Free income tax service Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. Free income tax service Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. Free income tax service Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. Free income tax service Residential energy efficient property credit. Free income tax service   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. Free income tax service The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. Free income tax service Basis reduction. Free income tax service   You must reduce the basis of your home by the amount of any credit allowed. Free income tax service How to take the credit. Free income tax service   Complete Form 5695 and attach it to your Form 1040. Free income tax service Enter the credit on Form 1040, line 52. Free income tax service More information. Free income tax service   For more information on these credits, see the Form 5695 instructions. Free income tax service Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. Free income tax service However, you cannot take the credit if either of the following applies. Free income tax service The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). Free income tax service The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). Free income tax service Student. Free income tax service   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. Free income tax service School. Free income tax service   A school includes a technical, trade, or mechanical school. Free income tax service It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Free income tax service How to take the credit. Free income tax service   Figure the credit on Form 8880. Free income tax service Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. Free income tax service More information. Free income tax service   For more information on the credit, see the Form 8880 instructions. Free income tax service Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. Free income tax service If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. Free income tax service Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. Free income tax service If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. Free income tax service The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. Free income tax service How to take the credit. Free income tax service   To take the credit, attach Copy B of Form 2439 to your Form 1040. Free income tax service Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. Free income tax service More information. Free income tax service   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. Free income tax service Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. Free income tax service You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. Free income tax service You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. Free income tax service S. Free income tax service Treasury–HCTC. Free income tax service ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. Free income tax service You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). Free income tax service You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. Free income tax service S. Free income tax service military health system (TRICARE). Free income tax service You were not imprisoned under federal, state, or local authority. Free income tax service Your employer did not pay 50% or more of the cost of coverage. Free income tax service You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. Free income tax service But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. Free income tax service If you meet all of these conditions, you may be able to take a credit of up to 72. Free income tax service 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. Free income tax service You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. Free income tax service The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. Free income tax service You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Free income tax service If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. Free income tax service TAA recipient. Free income tax service   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). Free income tax service Example. Free income tax service You received a trade adjustment allowance for January 2013. Free income tax service You were an eligible TAA recipient on the first day of January and February. Free income tax service Alternative TAA recipient. Free income tax service   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. Free income tax service Example. Free income tax service You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. Free income tax service The program was established by the Department of Labor. Free income tax service You were an eligible alternative TAA recipient on the first day of October and November. Free income tax service RTAA recipient. Free income tax service   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. Free income tax service PBGC pension recipient. Free income tax service   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. Free income tax service You were age 55 or older on the first day of the month. Free income tax service You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Free income tax service If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. Free income tax service How to take the credit. Free income tax service   To take the credit, complete Form 8885 and attach it to your Form 1040. Free income tax service Include your credit in the total for Form 1040, line 71, and check box c. Free income tax service   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. Free income tax service For details, see Publication 502 or Form 8885. Free income tax service More information. Free income tax service   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. Free income tax service Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. Free income tax service If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Free income tax service If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. Free income tax service If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. Free income tax service 2% rate. Free income tax service You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. Free income tax service For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. Free income tax service 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. Free income tax service 45%) or the Additional Medicare Tax rate (. Free income tax service 9%). Free income tax service The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. Free income tax service Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. Free income tax service 40 RRTA tier 2 $84,300 $3,709. Free income tax service 20 All wages are subject to Medicare tax withholding. Free income tax service   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Free income tax service Be sure to attach a copy of all of your W-2 forms. Free income tax service Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. Free income tax service Employer's error. Free income tax service   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. Free income tax service The employer should adjust the tax for you. Free income tax service If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. Free income tax service Joint return. Free income tax service   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. Free income tax service Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. Free income tax service How to figure the credit if you did not work for a railroad. Free income tax service   If you did not work for a railroad during 2013, figure the credit as follows: 1. Free income tax service Add all social security tax withheld (but not more than $7,049. Free income tax service 40 for each employer). Free income tax service Enter the total here   2. Free income tax service Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Free income tax service Add lines 1 and 2. Free income tax service If $7,049. Free income tax service 40 or less, stop here. Free income tax service You cannot take  the credit   4. Free income tax service Social security tax limit 7,049. Free income tax service 40 5. Free income tax service Credit. Free income tax service Subtract line 4 from line 3. Free income tax service Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. Free income tax service You are married and file a joint return with your spouse who had no gross income in 2013. Free income tax service During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. Free income tax service Social security tax of $3,720 was withheld. Free income tax service You also worked for another employer in 2013 and earned $55,000 in wages. Free income tax service $3,410 of social security tax was withheld from these wages. Free income tax service Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. Free income tax service 60 for the excess social security tax withheld. Free income tax service 1. Free income tax service Add all social security tax withheld (but not more than $7,049. Free income tax service 40 for each employer). Free income tax service Enter the total here $7,130. Free income tax service 00 2. Free income tax service Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. Free income tax service Add lines 1 and 2. Free income tax service If $7,049. Free income tax service 40 or less, stop here. Free income tax service You cannot take the credit 7,130. Free income tax service 00 4. Free income tax service Social security tax limit 7,049. Free income tax service 40 5. Free income tax service Credit. Free income tax service Subtract line 4 from line 3. Free income tax service Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. Free income tax service 60 How to figure the credit if you worked for a railroad. Free income tax service   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. Free income tax service Add all social security and tier 1 RRTA tax withheld at the 6. Free income tax service 2% rate (but not more than $7,049. Free income tax service 40 for each employer). Free income tax service Enter the total here   2. Free income tax service Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Free income tax service Add lines 1 and 2. Free income tax service If $7,049. Free income tax service 40 or less, stop here. Free income tax service You cannot take  the credit   4. Free income tax service Social security and tier 1 RRTA  tax limit 7,049. Free income tax service 40 5. Free income tax service Credit. Free income tax service Subtract line 4 from line 3. Free income tax service Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. Free income tax service   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. Free income tax service More information. Free income tax service   For more information on the credit, see Publication 505. Free income tax service Prev  Up  Next   Home   More Online Publications
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Free income tax service 6. Free income tax service   Retail Tax on Heavy Trucks, Trailers, and Tractors Table of Contents Highway vehicle. Free income tax service Vehicles not considered highway vehicles. Free income tax service Idling reduction device. Free income tax service Separate purchase. Free income tax service Leases. Free income tax service Exported vehicle. Free income tax service Tax on resale of tax-paid trailers and semitrailers. Free income tax service Use treated as sale. Free income tax service Sale. Free income tax service Long-term lease. Free income tax service Short-term lease. Free income tax service Related person. Free income tax service Exclusions from tax base. Free income tax service Sales not at arm's length. Free income tax service Installment sales. Free income tax service Repairs and modifications. Free income tax service Further manufacture. Free income tax service Rail trailers and rail vans. Free income tax service Parts and accessories. Free income tax service Trash containers. Free income tax service House trailers. Free income tax service Camper coaches or bodies for self-propelled mobile homes. Free income tax service Farm feed, seed, and fertilizer equipment. Free income tax service Ambulances and hearses. Free income tax service Truck-tractors. Free income tax service Concrete mixers. Free income tax service Registration requirement. Free income tax service Further manufacture. Free income tax service A tax of 12% of the sales price is imposed on the first retail sale of the following articles, including related parts and accessories sold on or in connection with, or with the sale of, the articles. Free income tax service Truck chassis and bodies. Free income tax service Truck trailer and semitrailer chassis and bodies. Free income tax service Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Free income tax service A truck is a highway vehicle primarily designed to transport its load on the same chassis as the engine, even if it is equipped to tow a vehicle, such as a trailer or semitrailer. Free income tax service A tractor is a highway vehicle designed to tow a vehicle, such as a trailer or semitrailer. Free income tax service A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing. Free income tax service A sale of a truck, truck trailer, or semitrailer is considered a sale of a chassis and a body. Free income tax service The seller is liable for the tax. Free income tax service Chassis or body. Free income tax service   A chassis or body is taxable only if you sell it for use as a component part of a highway vehicle that is a truck, truck trailer or semitrailer, or a tractor of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Free income tax service Highway vehicle. Free income tax service   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. Free income tax service Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. Free income tax service 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. Free income tax service A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). Free income tax service A special kind of cargo, goods, supplies, or materials. Free income tax service Some off-highway task unrelated to highway transportation, except as discussed next. Free income tax service Vehicles not considered highway vehicles. Free income tax service   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the retail tax. Free income tax service Specially designed mobile machinery for nontransportation functions. Free income tax service A self-propelled vehicle is not a highway vehicle if all the following apply. Free income tax service 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. Free income tax service 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. Free income tax service 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. Free income tax service Vehicles specially designed for off-highway transportation. Free income tax service 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 vehicles's capability to transport a load over a public highway is substantially limited or impaired. Free income tax service 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. Free income tax service It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. Free income tax service Nontransportation trailers and semitrailers. Free income tax service A trailer or semitrailer 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. Free income tax service For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle. Free income tax service Gross vehicle weight. Free income tax service   The tax does not apply to truck chassis and bodies suitable for use with a vehicle that has a gross vehicle weight (defined below) of 33,000 pounds or less. Free income tax service It also does not apply to truck trailer and semitrailer chassis and bodies suitable for use with a trailer or semitrailer that has a gross vehicle weight of 26,000 pounds or less. Free income tax service Tractors that have a gross vehicle weight of 19,500 pounds or less and a gross combined weight of 33,000 pounds or less are excluded from the 12% retail tax. Free income tax service   The following four classifications of truck body types meet the suitable for use standard and will be excluded from the retail excise tax. Free income tax service Platform truck bodies 21 feet or less in length. Free income tax service Dry freight and refrigerated truck van bodies 24 feet or less in length. Free income tax service Dump truck bodies with load capacities of 8 cubic yards or less. Free income tax service Refuse packer truck bodies with load capacities of 20 cubic yards or less. Free income tax service For more information on these classifications, see Revenue Procedure 2005-19, which is on page 832 of I. Free income tax service R. Free income tax service B. Free income tax service 2005-14 at www. Free income tax service irs. Free income tax service gov/pub/irs-irbs/irb05-14. Free income tax service pdf. Free income tax service   The gross vehicle weight means the maximum total weight of a loaded vehicle. Free income tax service Generally, this maximum total weight is the gross vehicle weight rating provided by the manufacturer or determined by the seller of the completed article. Free income tax service The seller's gross vehicle weight rating is determined solely on the basis of the strength of the chassis frame and the axle capacity and placement. Free income tax service The seller may not take into account any readily attachable components (such as tires or rim assemblies) in determining the gross vehicle weight. Free income tax service See Regulations section 145. Free income tax service 4051-1(e)(3) for more information. Free income tax service Parts or accessories. Free income tax service   The tax applies to parts or accessories sold on or in connection with, or with the sale of, a taxable article. Free income tax service For example, if at the time of the sale by the retailer, the part or accessory has been ordered from the retailer, the part or accessory will be considered as sold in connection with the sale of the vehicle. Free income tax service The tax applies in this case whether or not the retailer bills the parts or accessories separately. Free income tax service   If the retailer sells a taxable chassis, body, or tractor without parts or accessories considered essential for the operation or appearance of the taxable article, the sale of the parts or accessories by the retailer to the purchaser is considered made in connection with the sale of the taxable article even though they are shipped separately, at the same time, or on a different date. Free income tax service The tax applies unless there is evidence to the contrary. Free income tax service For example, if a retailer sells to any person a chassis and the bumpers for the chassis, or sells a taxable tractor and the fifth wheel and attachments, the tax applies to the parts or accessories regardless of the method of billing or the time at which the shipments were made. Free income tax service The tax does not apply to parts and accessories that are spares or replacements. Free income tax service   The tax imposed on parts and accessories sold on or in connection with the taxable articles listed earlier and the tax imposed on the separate purchase of parts and accessories (discussed next) for the taxable articles listed earlier do not apply to an idling reduction device or insulation that has an R value of at least R35 per inch. Free income tax service Idling reduction device. Free income tax service   An idling reduction device is any device or system of devices that provide the tractor with services, such as heat, air conditioning, and electricity, without the use of the main drive engine while the tractor is temporarily parked or stationary. Free income tax service The device must be affixed to the tractor and determined by the Administrator of the EPA, in consultation with the Secretary of Energy and Secretary of Transportation, to reduce idling while parked or stationary. Free income tax service The EPA discusses idling reduction technologies on its website at www. Free income tax service epa. Free income tax service gov/smartway/technology/idling. Free income tax service htm. Free income tax service Separate purchase. Free income tax service   The tax generally applies to the price of a part or accessory and its installation if the following conditions are met. Free income tax service The owner, lessee, or operator of any vehicle that contains a taxable article installs any part or accessory on the vehicle. Free income tax service The installation occurs within 6 months after the vehicle is first placed in service. Free income tax service   The owners of the trade or business installing the parts or accessories are secondarily liable for the tax. Free income tax service   A vehicle is placed in service on the date the owner takes actual possession of the vehicle. Free income tax service This date is established by a signed delivery ticket or other comparable document indicating delivery to and acceptance by the owner. Free income tax service   The tax does not apply if the installed part or accessory is a replacement part or accessory. Free income tax service The tax also does not apply if the total price of the parts and accessories, including installation charges, during the 6-month period is $1,000 or less. Free income tax service However, if the total price is more than $1,000, the tax applies to the cost of all parts and accessories (and installation charges) during that period. Free income tax service Example. Free income tax service You bought a taxable vehicle and placed it in service on April 8. Free income tax service On May 3, you bought and installed parts and accessories at a cost of $850. Free income tax service On July 15, you bought and installed parts and accessories for $300. Free income tax service Tax of $138 (12% of $1,150) applies on July 15. Free income tax service Also, tax will apply to any costs of additional parts and accessories installed on the vehicle before October 8. Free income tax service First retail sale defined. Free income tax service   The sale of an article is treated as the first retail sale, and the seller will be liable for the tax imposed on the sale unless one of the following exceptions applies. Free income tax service There has been a prior taxable sale, lease, or use of the article (however, see Tax on resale of tax-paid trailers and semitrailers, later). Free income tax service The sale qualifies as a tax-free sale under section 4221 (see Sales exempt from tax, later). Free income tax service The seller in good faith accepts from the purchaser a statement signed under penalties of perjury and executed in good faith that the purchaser intends to resell the article or lease it on a long-term basis. Free income tax service There is no registration requirement. Free income tax service Leases. Free income tax service   A long-term lease (a lease with a term of 1 year or more, taking into account options to renew) before a first retail sale is treated as a taxable sale. Free income tax service The tax is imposed on the lessor at the time of the lease. Free income tax service   A short-term lease (a lease with a term of less than 1 year, taking into account options to renew) before a first retail sale is treated as a taxable use. Free income tax service The tax is imposed on the lessor at the time of the lease. Free income tax service Exported vehicle. Free income tax service   A vehicle exported before its first retail sale, used in a foreign country, and then returned to the United States is subject to the retail tax on its first domestic use or retail sale after importation. Free income tax service Tax on resale of tax-paid trailers and semitrailers. Free income tax service   The tax applies to a trailer or semitrailer resold within 6 months after having been sold in a taxable sale. Free income tax service The seller liable for the tax on the resale can claim a credit equal to the tax paid on the prior taxable sale. Free income tax service The credit cannot exceed the tax on the resale. Free income tax service See Regulations section 145. Free income tax service 4052-1(a)(4) for information on the conditions to allowance for the credit. Free income tax service Use treated as sale. Free income tax service   If any person uses a taxable article before the first retail sale of the article, that person is liable for the tax as if the article had been sold at retail by that person. Free income tax service Figure the tax on the price at which similar articles are sold in the ordinary course of trade by retailers. Free income tax service The tax attaches when the use begins. Free income tax service   If the seller of an article regularly sells the articles at retail in arm's-length transactions, figure the tax on its use on the lowest established retail price for the articles in effect at the time of the taxable use. Free income tax service   If the seller of an article does not regularly sell the articles at retail in arm's-length transactions, a constructive price on which the tax is figured will be determined by the IRS after considering the selling practices and price structures of sellers of similar articles. Free income tax service   If a seller of an article incurs liability for tax on the use of the article and later sells or leases the article in a transaction that otherwise would be taxable, liability for tax is not incurred on the later sale or lease. Free income tax service Presumptive retail sales price. Free income tax service   There are rules to ensure that the tax base of transactions considered to be taxable sales includes either an actual or presumed markup percentage. Free income tax service If the person liable for tax is the vehicle's manufacturer, producer, or importer, the following discussions show how you figure the presumptive retail sales price depending on the type of transaction and the persons involved in the transaction. Free income tax service Table 6-1 outlines the appropriate tax base calculation for various transactions. Free income tax service   The presumed markup percentage to be used for trucks and truck-tractors is 4%. Free income tax service But for truck trailers and semitrailers and remanufactured trucks and tractors, the presumed markup percentage is zero. Free income tax service Sale. Free income tax service   For a taxable sale by a manufacturer, producer, importer, or related person, you generally figure the tax on a tax base of the sales price plus an amount equal to the presumed markup percentage times that sales price. Free income tax service Long-term lease. Free income tax service   In the case of a long-term lease by a manufacturer, producer, importer, or related person, figure the tax on a tax base of the constructive sales price plus an amount equal to the presumed markup percentage times the constructive sales price. Free income tax service Short-term lease. Free income tax service   When a manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a constructive sales price at which those or similar articles generally are sold in the ordinary course of trade by retailers. Free income tax service   But if the lessor in this situation regularly sells articles at retail in arm's-length transactions, figure the tax on the lowest established retail price in effect at the time of the taxable use. Free income tax service   If a person other than the manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a tax base of the price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor and a presumed markup percentage. Free income tax service Related person. Free income tax service   A related person is any member of the same controlled group as the manufacturer, producer, or importer. Free income tax service Do not treat as a related person a person that sells the articles through a permanent retail establishment in the normal course of being a retailer if that person has records to prove the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. Free income tax service Table 6-1. Free income tax service Tax Base IF the transaction is a. Free income tax service . Free income tax service . Free income tax service THEN figuring the base by using the. Free income tax service . Free income tax service . Free income tax service Sale by the manufacturer, producer, importer, or related person Sales price plus (presumed markup percentage × sales price) Sale by the dealer Total consideration paid for the item including any charges incident to placing it in a condition ready for use Long-term lease by the manufacturer, producer, importer, or related person Constructive sales price plus (presumed markup percentage × constructive sales price) Short-term lease by the manufacturer, producer, importer, or related person Constructive sales price at which such or similar articles are sold Short-term lease by a lessor other than the manufacturer, producer, importer, or related person Price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor plus a presumed markup percentage Short-term lease where the articles are regularly sold at arm's length Lowest established retail price in effect at the time of the taxable use General rule for sales by dealers to the consumer. Free income tax service   For a taxable sale, other than a long-term lease, by a person other than a manufacturer, producer, importer, or related person, your tax base is the retail sales price as discussed next under Determination of tax base. Free income tax service   When you sell an article to the consumer, generally you do not add a presumed markup to the tax base. Free income tax service However, you do add a markup if all the following apply. Free income tax service You do not perform any significant activities relating to the processing of the sale of a taxable article. Free income tax service The main reason for processing the sale through you is to avoid or evade the presumed markup. Free income tax service You do not have records proving that the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. Free income tax service In these situations, your tax base is the sales price plus an amount equal to the presumed markup percentage times that selling price. Free income tax service Determination of tax base. Free income tax service   These rules apply to both normal retail sales price and presumptive retail sales price computations. Free income tax service To arrive at the tax base, the price is the total consideration paid (including trade-in allowance) for the item and includes any charge incident to placing the article in a condition ready for use. Free income tax service However, see Presumptive retail sales price, earlier. Free income tax service Exclusions from tax base. Free income tax service   Exclude from the tax base the retail excise tax imposed on the sale. Free income tax service Exclude any state or local retail sales tax if stated as a separate charge from the price whether the sales tax is imposed on the seller or purchaser. Free income tax service Also exclude the value of any used component of the article furnished by the first user of the article. Free income tax service   Exclude charges for transportation, delivery, insurance, and installation (other than installation charges for parts and accessories, discussed earlier) and other expenses incurred in connection with the delivery of an article to a purchaser. Free income tax service These expenses are those incurred in delivery from the retail dealer to the customer. Free income tax service In the case of delivery directly from the manufacturer to the dealer's customer, include the transportation and delivery charges to the extent the charges do not exceed what it would have cost to ship the article to the dealer. Free income tax service   Exclude amounts charged for machinery or equipment that does not contribute to the highway transportation function of the vehicle, provided those charges are supported by adequate records. Free income tax service For example, for an industrial vacuum loader vehicle, exclude amounts charged for the vacuum pump and hose, filter system, material separator, silencer or muffler, control cabinet, and ladder. Free income tax service Similarly, for a sewer cleaning vehicle, exclude amounts charged for the high pressure water pump, hose components, and the vacuum pipe. Free income tax service Sales not at arm's length. Free income tax service   For any taxable article sold (not at arm's length) at less than the fair market price, figure the excise tax on the price for which similar articles are sold at retail in the ordinary course of trade. Free income tax service   A sale is not at arm's length if either of the following apply. Free income tax service One of the parties is controlled (in law or in fact) by the other or there is common control, whether or not the control is actually exercised to influence the sales price. Free income tax service The sale is made under special arrangements between a seller and a purchaser. Free income tax service Installment sales. Free income tax service   If the first retail sale is an installment sale, or other form of sale in which the sales price is paid in installments, tax liability arises at the time of the sale. Free income tax service The tax is figured on the entire sales price. Free income tax service No part of the tax is deferred because the sales price is paid in installments. Free income tax service Repairs and modifications. Free income tax service   The tax does not apply to the sale or use of an article that has been repaired or modified unless the cost of the repairs and modifications is more than 75% of the retail price of a comparable new article. Free income tax service This includes modifications that change the transportation function of an article or restore a wrecked article to a functional condition. Free income tax service However, this exception generally does not apply to an article that was not subject to the tax when it was new. Free income tax service Further manufacture. Free income tax service   The tax does not apply to the use by a person of a taxable article as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by that person. Free income tax service Do not treat a person as engaged in the manufacture of any article merely because that person combines the article with a: Coupling device (including any fifth wheel); Wrecker crane; Loading and unloading equipment (including any crane, hoist, winch, or power liftgate); Aerial ladder or tower; Ice and snow control equipment; Earth moving, excavation, and construction equipment; Spreader; Sleeper cab; Cab shield; or Wood or metal floor. Free income tax service Combining an article with an item in this list does not give rise to taxability. Free income tax service However, see Parts or accessories discussed earlier. Free income tax service Articles exempt from tax. Free income tax service   The tax on heavy trucks, trailers, and tractors does not apply to sales of the articles described in the following discussions. Free income tax service Rail trailers and rail vans. Free income tax service   This is any chassis or body of a trailer or semitrailer designed for use both as a highway vehicle and a railroad car (including any parts and accessories designed primarily for use on and in connection with it). Free income tax service Do not treat a piggyback trailer or semitrailer as designed for use as a railroad car. Free income tax service Parts and accessories. Free income tax service   This is any part or accessory sold separately from the truck or trailer, except as described earlier under Parts or accessories and Separate purchase. Free income tax service Trash containers. Free income tax service   This is any box, container, receptacle, bin, or similar article that meets all the following conditions. Free income tax service It is designed to be used as a trash container. Free income tax service It is not designed to carry freight other than trash. Free income tax service It is not designed to be permanently mounted on or affixed to a truck chassis or body. Free income tax service House trailers. Free income tax service   This is any house trailer (regardless of size) suitable for use in connection with either passenger automobiles or trucks. Free income tax service Camper coaches or bodies for self-propelled mobile homes. Free income tax service   This is any article designed to be mounted or placed on trucks, truck chassis, or automobile chassis and to be used primarily as living quarters or camping accommodations. Free income tax service Further, the tax does not apply to chassis specifically designed and constructed to accommodate and transport self-propelled mobile home bodies. Free income tax service Farm feed, seed, and fertilizer equipment. Free income tax service   This is any body primarily designed to process or prepare, haul, spread, load, or unload feed, seed, or fertilizer to or on farms. Free income tax service This exemption applies only to the farm equipment body (and parts and accessories) and not to the chassis upon which the farm equipment is mounted. Free income tax service Ambulances and hearses. Free income tax service   This is any ambulance, hearse, or combination ambulance-hearse. Free income tax service Truck-tractors. Free income tax service   This is any truck-tractor specifically designed for use in shifting semitrailers in and around freight yards and freight terminals. Free income tax service Concrete mixers. Free income tax service   This is any article designed to be placed or mounted on a truck, truck trailer, or semitrailer chassis to be used to process or prepare concrete. Free income tax service This exemption does not apply to the chassis on which the article is mounted. Free income tax service Sales exempt from tax. Free income tax service   The following sales are ordinarily exempt from tax. Free income tax service Sales to a state or local government for its exclusive use. Free income tax service Sales to Indian tribal governments, but only if the transaction involves the exercise of an essential tribal government function. Free income tax service Sales to a nonprofit educational organization for its exclusive use. Free income tax service Sales to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. Free income tax service Sales for use by the purchaser for further manufacture of other taxable articles (see below). Free income tax service Sales for export or for resale by the purchaser to a second purchaser for export. Free income tax service Sales to the United Nations for official use. Free income tax service Registration requirement. Free income tax service   In general, the seller and buyer must be registered for a sale to be tax free. Free income tax service See the Form 637 instructions for more information. Free income tax service Certain registration exceptions apply in the case of sales to state and local governments, sales to foreign purchasers for export, and sales for resale or long term leasing. Free income tax service Further manufacture. Free income tax service   If you buy articles tax free and resell or use them other than in the manufacture of another article, you are liable for the tax on their resale or use just as if you had manufactured and made the first retail sale of them. Free income tax service Credits or refunds. Free income tax service   A credit or refund (without interest) of the retail tax on the taxable articles described earlier may be allowable if the tax has been paid with respect to an article and, before any other use, such article is used by any person as a component part of another taxable article manufactured or produced. Free income tax service The person using the article as a component part is eligible for the credit or refund. Free income tax service   A credit or refund is allowable if, before any other use, an article is, by any person: Exported, Used or sold for use as supplies for vessels, Sold to a state or local government for its exclusive use, Sold to a nonprofit educational organization for its exclusive use, or Sold to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. Free income tax service A credit or refund is also allowable if there is a price readjustment by reason of the return or repossession of an article or by reason of a bona fide discount, rebate, or allowance. Free income tax service   See also Conditions to allowance in chapter 5. Free income tax service Tire credit. Free income tax service   A credit is allowed against the retail tax on the taxable articles described earlier if taxable tires are sold on or in connection with the sale of the article. Free income tax service The credit is equal to the manufacturers excise tax imposed on the taxable tires (discussed earlier). Free income tax service This is the section 4051(d) taxable tire credit and is claimed on Schedule C (Form 720) for the same quarter for which the tax on the heavy vehicle is reported. Free income tax service Prev  Up  Next   Home   More Online Publications