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Irs Tax Form 1040 Ez

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Irs Tax Form 1040 Ez

Irs tax form 1040 ez Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. Irs tax form 1040 ez S. Irs tax form 1040 ez Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). Irs tax form 1040 ez If you itemize, you cannot take the standard deduction. Irs tax form 1040 ez This section explains what expenses you can deduct as a homeowner. Irs tax form 1040 ez It also points out expenses that you cannot deduct. Irs tax form 1040 ez There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. Irs tax form 1040 ez Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. Irs tax form 1040 ez Your house payment. Irs tax form 1040 ez   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. Irs tax form 1040 ez Your house payment may include several costs of owning a home. Irs tax form 1040 ez The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. Irs tax form 1040 ez These are discussed in more detail later. Irs tax form 1040 ez   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. Irs tax form 1040 ez Minister's or military housing allowance. Irs tax form 1040 ez   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. Irs tax form 1040 ez You do not have to reduce your deductions by your nontaxable allowance. Irs tax form 1040 ez For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. Irs tax form 1040 ez Nondeductible payments. Irs tax form 1040 ez   You cannot deduct any of the following items. Irs tax form 1040 ez Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. Irs tax form 1040 ez Wages you pay for domestic help. Irs tax form 1040 ez Depreciation. Irs tax form 1040 ez The cost of utilities, such as gas, electricity, or water. Irs tax form 1040 ez Most settlement costs. Irs tax form 1040 ez See Settlement or closing costs under Cost as Basis, later, for more information. Irs tax form 1040 ez Forfeited deposits, down payments, or earnest money. Irs tax form 1040 ez Hardest Hit Fund and Emergency Homeowners' Loan Programs You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Irs tax form 1040 ez You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Irs tax form 1040 ez You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Irs tax form 1040 ez If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Irs tax form 1040 ez However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Irs tax form 1040 ez Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. Irs tax form 1040 ez This is called a real estate tax. Irs tax form 1040 ez You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. Irs tax form 1040 ez The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. Irs tax form 1040 ez Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. Irs tax form 1040 ez You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. Irs tax form 1040 ez If you own a cooperative apartment, see Special Rules for Cooperatives , later. Irs tax form 1040 ez Where to deduct real estate taxes. Irs tax form 1040 ez   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. Irs tax form 1040 ez Real estate taxes paid at settlement or closing. Irs tax form 1040 ez   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. Irs tax form 1040 ez Your share of these taxes is fully deductible if you itemize your deductions. Irs tax form 1040 ez Division of real estate taxes. Irs tax form 1040 ez   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. Irs tax form 1040 ez You (the buyer) are treated as paying the taxes beginning with the date of sale. Irs tax form 1040 ez This applies regardless of the lien dates under local law. Irs tax form 1040 ez Generally, this information is included on the settlement statement you get at closing. Irs tax form 1040 ez   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. Irs tax form 1040 ez You each can deduct your own share, if you itemize deductions, for the year the property is sold. Irs tax form 1040 ez Example. Irs tax form 1040 ez You bought your home on September 1. Irs tax form 1040 ez The property tax year (the period to which the tax relates) in your area is the calendar year. Irs tax form 1040 ez The tax for the year was $730 and was due and paid by the seller on August 15. Irs tax form 1040 ez You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). Irs tax form 1040 ez You figure your deduction for real estate taxes on your home as follows. Irs tax form 1040 ez 1. Irs tax form 1040 ez Enter the total real estate taxes for the real property tax year $730 2. Irs tax form 1040 ez Enter the number of days in the property tax year that you owned the property 122 3. Irs tax form 1040 ez Divide line 2 by 365 . Irs tax form 1040 ez 3342 4. Irs tax form 1040 ez Multiply line 1 by line 3. Irs tax form 1040 ez This is your deduction. Irs tax form 1040 ez Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. Irs tax form 1040 ez You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. Irs tax form 1040 ez Delinquent taxes. Irs tax form 1040 ez   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. Irs tax form 1040 ez If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. Irs tax form 1040 ez You treat them as part of the cost of your home. Irs tax form 1040 ez See Real estate taxes , later, under Basis. Irs tax form 1040 ez Escrow accounts. Irs tax form 1040 ez   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. Irs tax form 1040 ez You may not be able to deduct the total you pay into the escrow account. Irs tax form 1040 ez You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Irs tax form 1040 ez Your real estate tax bill will show this amount. Irs tax form 1040 ez Refund or rebate of real estate taxes. Irs tax form 1040 ez   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. Irs tax form 1040 ez If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. Irs tax form 1040 ez For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. Irs tax form 1040 ez Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. Irs tax form 1040 ez Charges for services. Irs tax form 1040 ez   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. Irs tax form 1040 ez You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). Irs tax form 1040 ez    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. Irs tax form 1040 ez If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. Irs tax form 1040 ez Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Irs tax form 1040 ez Assessments for local benefits. Irs tax form 1040 ez   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Irs tax form 1040 ez Local benefits include the construction of streets, sidewalks, or water and sewer systems. Irs tax form 1040 ez You must add these amounts to the basis of your property. Irs tax form 1040 ez   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. Irs tax form 1040 ez An example is a charge to repair an existing sidewalk and any interest included in that charge. Irs tax form 1040 ez   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. Irs tax form 1040 ez If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. Irs tax form 1040 ez   An assessment for a local benefit may be listed as an item in your real estate tax bill. Irs tax form 1040 ez If so, use the rules in this section to find how much of it, if any, you can deduct. Irs tax form 1040 ez Transfer taxes (or stamp taxes). Irs tax form 1040 ez   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. Irs tax form 1040 ez If you are the buyer and you pay them, include them in the cost basis of the property. Irs tax form 1040 ez If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. Irs tax form 1040 ez Homeowners association assessments. Irs tax form 1040 ez   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. Irs tax form 1040 ez Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. Irs tax form 1040 ez As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. Irs tax form 1040 ez You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. Irs tax form 1040 ez For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. Irs tax form 1040 ez At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. Irs tax form 1040 ez At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. Irs tax form 1040 ez Tenant-stockholders. Irs tax form 1040 ez   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. Irs tax form 1040 ez The tenant-stockholder does not have to live in any of the cooperative's dwelling units. Irs tax form 1040 ez The units that the tenant-stockholder has the right to occupy can be rented to others. Irs tax form 1040 ez Deductible taxes. Irs tax form 1040 ez   You figure your share of real estate taxes in the following way. Irs tax form 1040 ez Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Irs tax form 1040 ez Multiply the corporation's deductible real estate taxes by the number you figured in (1). Irs tax form 1040 ez This is your share of the real estate taxes. Irs tax form 1040 ez   Generally, the corporation will tell you your share of its real estate tax. Irs tax form 1040 ez This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. Irs tax form 1040 ez Refund of real estate taxes. Irs tax form 1040 ez   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. Irs tax form 1040 ez Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. Irs tax form 1040 ez Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Irs tax form 1040 ez Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. Irs tax form 1040 ez For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). Irs tax form 1040 ez If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. Irs tax form 1040 ez Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. Irs tax form 1040 ez Most home buyers take out a mortgage (loan) to buy their home. Irs tax form 1040 ez They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. Irs tax form 1040 ez Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). Irs tax form 1040 ez However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. Irs tax form 1040 ez If either of these situations applies to you, see Publication 936 for more information. Irs tax form 1040 ez Also see Publication 936 if you later refinance your mortgage or buy a second home. Irs tax form 1040 ez Refund of home mortgage interest. Irs tax form 1040 ez   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. Irs tax form 1040 ez For more information, see Recoveries in Publication 525. Irs tax form 1040 ez The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. Irs tax form 1040 ez See Mortgage Interest Statement , later. Irs tax form 1040 ez Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. Irs tax form 1040 ez The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. Irs tax form 1040 ez Prepaid interest. Irs tax form 1040 ez   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Irs tax form 1040 ez Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. Irs tax form 1040 ez An exception (discussed later) applies to points. Irs tax form 1040 ez Late payment charge on mortgage payment. Irs tax form 1040 ez   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. Irs tax form 1040 ez Mortgage prepayment penalty. Irs tax form 1040 ez   If you pay off your home mortgage early, you may have to pay a penalty. Irs tax form 1040 ez You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Irs tax form 1040 ez Ground rent. Irs tax form 1040 ez   In some states (such as Maryland), you may buy your home subject to a ground rent. Irs tax form 1040 ez A ground rent is an obligation you assume to pay a fixed amount per year on the property. Irs tax form 1040 ez Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Irs tax form 1040 ez Redeemable ground rents. Irs tax form 1040 ez   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. Irs tax form 1040 ez The ground rent is a redeemable ground rent only if all of the following are true. Irs tax form 1040 ez Your lease, including renewal periods, is for more than 15 years. Irs tax form 1040 ez You can freely assign the lease. Irs tax form 1040 ez You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. Irs tax form 1040 ez The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Irs tax form 1040 ez   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. Irs tax form 1040 ez You cannot deduct them. Irs tax form 1040 ez Nonredeemable ground rents. Irs tax form 1040 ez   Payments on a nonredeemable ground rent are not mortgage interest. Irs tax form 1040 ez You can deduct them as rent only if they are a business expense or if they are for rental property. Irs tax form 1040 ez Cooperative apartment. Irs tax form 1040 ez   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . Irs tax form 1040 ez In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. Irs tax form 1040 ez Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. Irs tax form 1040 ez For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. Irs tax form 1040 ez Refund of cooperative's mortgage interest. Irs tax form 1040 ez   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Irs tax form 1040 ez The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Irs tax form 1040 ez   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Irs tax form 1040 ez Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. Irs tax form 1040 ez You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). Irs tax form 1040 ez This amount should be included in the mortgage interest statement provided by your lender. Irs tax form 1040 ez See the discussion under Mortgage Interest Statement , later. Irs tax form 1040 ez Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. Irs tax form 1040 ez Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Irs tax form 1040 ez Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. Irs tax form 1040 ez A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Irs tax form 1040 ez See Points paid by the seller , later. Irs tax form 1040 ez General rule. Irs tax form 1040 ez   You cannot deduct the full amount of points in the year paid. Irs tax form 1040 ez They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. Irs tax form 1040 ez Exception. Irs tax form 1040 ez   You can deduct the full amount of points in the year paid if you meet all the following tests. Irs tax form 1040 ez Your loan is secured by your main home. Irs tax form 1040 ez (Generally, your main home is the one you live in most of the time. Irs tax form 1040 ez ) Paying points is an established business practice in the area where the loan was made. Irs tax form 1040 ez The points paid were not more than the points generally charged in that area. Irs tax form 1040 ez You use the cash method of accounting. Irs tax form 1040 ez This means you report income in the year you receive it and deduct expenses in the year you pay them. Irs tax form 1040 ez Most individuals use this method. Irs tax form 1040 ez The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Irs tax form 1040 ez The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Irs tax form 1040 ez The funds you provided are not required to have been applied to the points. Irs tax form 1040 ez They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Irs tax form 1040 ez You cannot have borrowed these funds. Irs tax form 1040 ez You use your loan to buy or build your main home. Irs tax form 1040 ez The points were computed as a percentage of the principal amount of the mortgage. Irs tax form 1040 ez The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. Irs tax form 1040 ez The points may be shown as paid from either your funds or the seller's. Irs tax form 1040 ez Note. Irs tax form 1040 ez If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. Irs tax form 1040 ez If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. Irs tax form 1040 ez Home improvement loan. Irs tax form 1040 ez   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. Irs tax form 1040 ez Refinanced loan. Irs tax form 1040 ez   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Irs tax form 1040 ez You can deduct the rest of the points over the life of the loan. Irs tax form 1040 ez Points not fully deductible in year paid. Irs tax form 1040 ez    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. Irs tax form 1040 ez Figure A. Irs tax form 1040 ez   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. Irs tax form 1040 ez    Please click here for the text description of the image. Irs tax form 1040 ez Figure A. Irs tax form 1040 ez Are my points fully deductible this year? Amounts charged for services. Irs tax form 1040 ez   Amounts charged by the lender for specific services connected to the loan are not interest. Irs tax form 1040 ez Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Irs tax form 1040 ez You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Irs tax form 1040 ez For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. Irs tax form 1040 ez Points paid by the seller. Irs tax form 1040 ez   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Irs tax form 1040 ez Treatment by seller. Irs tax form 1040 ez   The seller cannot deduct these fees as interest. Irs tax form 1040 ez However, they are a selling expense that reduces the seller's amount realized. Irs tax form 1040 ez See Publication 523 for more information. Irs tax form 1040 ez Treatment by buyer. Irs tax form 1040 ez   The buyer treats seller-paid points as if he or she had paid them. Irs tax form 1040 ez If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. Irs tax form 1040 ez If any of those tests are not met, the buyer must deduct the points over the life of the loan. Irs tax form 1040 ez   The buyer must also reduce the basis of the home by the amount of the seller-paid points. Irs tax form 1040 ez For more information about the basis of your home, see Basis , later. Irs tax form 1040 ez Funds provided are less than points. Irs tax form 1040 ez   If you meet all the tests listed earlier under Exception except that the funds you provided were less than the points charged to you (test 6), you can deduct the points in the year paid up to the amount of funds you provided. Irs tax form 1040 ez In addition, you can deduct any points paid by the seller. Irs tax form 1040 ez Example 1. Irs tax form 1040 ez When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Irs tax form 1040 ez You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. Irs tax form 1040 ez Of the $1,000 you were charged for points, you can deduct $750 in the year paid. Irs tax form 1040 ez You spread the remaining $250 over the life of the mortgage. Irs tax form 1040 ez Example 2. Irs tax form 1040 ez The facts are the same as in Example 1 , except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Irs tax form 1040 ez In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Irs tax form 1040 ez You spread the remaining $250 over the life of the mortgage. Irs tax form 1040 ez You must reduce the basis of your home by the $1,000 paid by the seller. Irs tax form 1040 ez Excess points. Irs tax form 1040 ez   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. Irs tax form 1040 ez You must spread any additional points over the life of the mortgage. Irs tax form 1040 ez Mortgage ending early. Irs tax form 1040 ez   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Irs tax form 1040 ez A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Irs tax form 1040 ez Example. Irs tax form 1040 ez Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. Irs tax form 1040 ez He had deducted $1,400 of these points through 2012. Irs tax form 1040 ez Dan prepaid his mortgage in full in 2013. Irs tax form 1040 ez He can deduct the remaining $1,600 of points in 2013. Irs tax form 1040 ez Exception. Irs tax form 1040 ez   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. Irs tax form 1040 ez Instead, deduct them over the term of the new loan. Irs tax form 1040 ez Form 1098. Irs tax form 1040 ez   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Irs tax form 1040 ez See Mortgage Interest Statement , later. Irs tax form 1040 ez Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). Irs tax form 1040 ez If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. Irs tax form 1040 ez See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. Irs tax form 1040 ez If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. Irs tax form 1040 ez The seller must give you this number and you must give the seller your SSN. Irs tax form 1040 ez Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Irs tax form 1040 ez Failure to meet either of these requirements may result in a $50 penalty for each failure. Irs tax form 1040 ez Table 1. Irs tax form 1040 ez Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. Irs tax form 1040 ez IF you are eligible to deduct . Irs tax form 1040 ez . Irs tax form 1040 ez . Irs tax form 1040 ez THEN report the amount  on Schedule A (Form 1040) . Irs tax form 1040 ez . Irs tax form 1040 ez . Irs tax form 1040 ez real estate taxes line 6. Irs tax form 1040 ez home mortgage interest and points reported on Form 1098 line 10. Irs tax form 1040 ez home mortgage interest not reported on  Form 1098 line 11. Irs tax form 1040 ez points not reported on Form 1098 line 12. Irs tax form 1040 ez qualified mortgage insurance premiums line 13. Irs tax form 1040 ez Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. Irs tax form 1040 ez The statement will show the total interest paid on your mortgage during the year. Irs tax form 1040 ez If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. Irs tax form 1040 ez See Points , earlier. Irs tax form 1040 ez The interest you paid at settlement should be included on the statement. Irs tax form 1040 ez If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. Irs tax form 1040 ez Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. Irs tax form 1040 ez Write “See attached” to the right of line 10. Irs tax form 1040 ez A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. Irs tax form 1040 ez If a statement comes from a cooperative housing corporation, it generally will show your share of interest. Irs tax form 1040 ez Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. Irs tax form 1040 ez If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. Irs tax form 1040 ez A copy of this form will be sent to the IRS also. Irs tax form 1040 ez Example. Irs tax form 1040 ez You bought a new home on May 3. Irs tax form 1040 ez You paid no points on the purchase. Irs tax form 1040 ez During the year, you made mortgage payments which included $4,480 deductible interest on your new home. Irs tax form 1040 ez The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. Irs tax form 1040 ez The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). Irs tax form 1040 ez You can deduct the $5,100 if you itemize your deductions. Irs tax form 1040 ez Refund of overpaid interest. Irs tax form 1040 ez   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. Irs tax form 1040 ez Generally, you must include the refund in income in the year you receive it. Irs tax form 1040 ez See Refund of home mortgage interest , earlier, under Home Mortgage Interest. Irs tax form 1040 ez More than one borrower. Irs tax form 1040 ez   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Irs tax form 1040 ez Show how much of the interest each of you paid, and give the name and address of the person who received the form. Irs tax form 1040 ez Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. Irs tax form 1040 ez Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. Irs tax form 1040 ez Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Irs tax form 1040 ez Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Irs tax form 1040 ez Prepaid mortgage insurance premiums. Irs tax form 1040 ez   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. Irs tax form 1040 ez The premiums are treated as paid in the year to which they were allocated. Irs tax form 1040 ez If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. Irs tax form 1040 ez See Publication 936 for details. Irs tax form 1040 ez Exception for certain mortgage insurance. Irs tax form 1040 ez   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. Irs tax form 1040 ez Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. Irs tax form 1040 ez It also must be secured by that home. Irs tax form 1040 ez If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Irs tax form 1040 ez Home acquisition debt limit. Irs tax form 1040 ez   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). Irs tax form 1040 ez Discharges of qualified principal residence indebtedness. Irs tax form 1040 ez   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. Irs tax form 1040 ez You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. Irs tax form 1040 ez Principal residence. Irs tax form 1040 ez   Your principal residence is the home where you ordinarily live most of the time. Irs tax form 1040 ez You can have only one principal residence at any one time. Irs tax form 1040 ez Qualified principal residence indebtedness. Irs tax form 1040 ez   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. Irs tax form 1040 ez If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. Irs tax form 1040 ez   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. Irs tax form 1040 ez Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. Irs tax form 1040 ez Amount you can exclude. Irs tax form 1040 ez   You can only exclude debt discharged after 2006 and before 2014. Irs tax form 1040 ez The most you can exclude is $2 million ($1 million if married filing separately). Irs tax form 1040 ez You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. Irs tax form 1040 ez Ordering rule. Irs tax form 1040 ez   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. Irs tax form 1040 ez Qualified Home This means your main home or your second home. Irs tax form 1040 ez A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Irs tax form 1040 ez Main home. Irs tax form 1040 ez   You can have only one main home at any one time. Irs tax form 1040 ez This is the home where you ordinarily live most of the time. Irs tax form 1040 ez Second home and other special situations. Irs tax form 1040 ez   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. Irs tax form 1040 ez Limit on Deduction If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. Irs tax form 1040 ez See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Irs tax form 1040 ez If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Irs tax form 1040 ez Form 1098. Irs tax form 1040 ez   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. Irs tax form 1040 ez See Form 1098, Mortgage Interest Statement in Publication 936. Irs tax form 1040 ez Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. Irs tax form 1040 ez If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. Irs tax form 1040 ez Who qualifies. Irs tax form 1040 ez   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Irs tax form 1040 ez Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Irs tax form 1040 ez The MCC will show the certificate credit rate you will use to figure your credit. Irs tax form 1040 ez It also will show the certified indebtedness amount. Irs tax form 1040 ez Only the interest on that amount qualifies for the credit. Irs tax form 1040 ez See Figuring the Credit , later. Irs tax form 1040 ez You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Irs tax form 1040 ez Contact your state or local housing finance agency for information about the availability of MCCs in your area. Irs tax form 1040 ez How to claim the credit. Irs tax form 1040 ez   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. Irs tax form 1040 ez S. Irs tax form 1040 ez Nonresident Alien Income Tax Return. Irs tax form 1040 ez Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. Irs tax form 1040 ez Reducing your home mortgage interest deduction. Irs tax form 1040 ez   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. Irs tax form 1040 ez You must do this even if part of that amount is to be carried forward to 2014. Irs tax form 1040 ez Selling your home. Irs tax form 1040 ez   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. Irs tax form 1040 ez For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. Irs tax form 1040 ez Figuring the Credit Figure your credit on Form 8396. Irs tax form 1040 ez Mortgage not more than certified indebtedness. Irs tax form 1040 ez   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Irs tax form 1040 ez Mortgage more than certified indebtedness. Irs tax form 1040 ez   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. Irs tax form 1040 ez 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. Irs tax form 1040 ez Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. Irs tax form 1040 ez Example. Irs tax form 1040 ez Emily bought a home this year. Irs tax form 1040 ez Her mortgage loan is $125,000. Irs tax form 1040 ez The certified indebtedness amount on her MCC is $100,000. Irs tax form 1040 ez She paid $7,500 interest this year. Irs tax form 1040 ez Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. Irs tax form 1040 ez 80)       $125,000       $7,500 x . Irs tax form 1040 ez 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. Irs tax form 1040 ez In each later year, she will figure her credit using only 80% of the interest she pays for that year. Irs tax form 1040 ez Limits Two limits may apply to your credit. Irs tax form 1040 ez A limit based on the credit rate, and A limit based on your tax. Irs tax form 1040 ez Limit based on credit rate. Irs tax form 1040 ez   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. Irs tax form 1040 ez Limit based on tax. Irs tax form 1040 ez   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. Irs tax form 1040 ez See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. Irs tax form 1040 ez Dividing the Credit 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, the credit must be divided based on the interest held by each person. Irs tax form 1040 ez Example. Irs tax form 1040 ez John and his brother, George, were issued an MCC. Irs tax form 1040 ez They used it to get a mortgage on their main home. Irs tax form 1040 ez John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. Irs tax form 1040 ez John paid $5,400 mortgage interest this year and George paid $3,600. Irs tax form 1040 ez The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. Irs tax form 1040 ez The loan amount (mortgage) on their home is $120,000. Irs tax form 1040 ez The credit is limited to $2,000 because the credit rate is more than 20%. Irs tax form 1040 ez John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. Irs tax form 1040 ez His credit is limited to $1,200 ($2,000 × 60%). Irs tax form 1040 ez George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. Irs tax form 1040 ez His credit is limited to $800 ($2,000 × 40%). Irs tax form 1040 ez Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Irs tax form 1040 ez Example. Irs tax form 1040 ez You receive a mortgage credit certificate from State X. Irs tax form 1040 ez This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. Irs tax form 1040 ez You claim no other credits. Irs tax form 1040 ez Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). Irs tax form 1040 ez You can carry forward this amount to the next 3 years or until used, whichever comes first. Irs tax form 1040 ez Credit rate more than 20%. Irs tax form 1040 ez   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). Irs tax form 1040 ez Example. Irs tax form 1040 ez In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. Irs tax form 1040 ez The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. Irs tax form 1040 ez Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. Irs tax form 1040 ez The amount of credit you can claim on the new loan may change. Irs tax form 1040 ez Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. Irs tax form 1040 ez Table 2. Irs tax form 1040 ez Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . Irs tax form 1040 ez . Irs tax form 1040 ez . Irs tax form 1040 ez THEN the interest you claim on Form 8396, line 1, is* . Irs tax form 1040 ez . Irs tax form 1040 ez . Irs tax form 1040 ez smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. Irs tax form 1040 ez larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. Irs tax form 1040 ez         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. Irs tax form 1040 ez  See New MCC cannot increase your credit above. Irs tax form 1040 ez An issuer may reissue an MCC after you refinance your mortgage. Irs tax form 1040 ez If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. Irs tax form 1040 ez Year of refinancing. Irs tax form 1040 ez   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. Irs tax form 1040 ez   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. Irs tax form 1040 ez The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. Irs tax form 1040 ez It must show a separate calculation for the part of the year when the new MCC was in effect. Irs tax form 1040 ez Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. Irs tax form 1040 ez New MCC cannot increase your credit. Irs tax form 1040 ez   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. Irs tax form 1040 ez   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. Irs tax form 1040 ez However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. Irs tax form 1040 ez In that case, you will need to know the amount of the credit you could have claimed using the old MCC. Irs tax form 1040 ez   There are two methods for figuring the credit you could have claimed. Irs tax form 1040 ez Under one method, you figure the actual credit that would have been allowed. Irs tax form 1040 ez This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. Irs tax form 1040 ez   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. Irs tax form 1040 ez Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. Irs tax form 1040 ez The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. Irs tax form 1040 ez The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. Irs tax form 1040 ez    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. Irs tax form 1040 ez    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. Irs tax form 1040 ez Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. Irs tax form 1040 ez While you own your home, you may add certain items to your basis. Irs tax form 1040 ez You may subtract certain other items from your basis. Irs tax form 1040 ez These items are called adjustments to basis and are explained later under Adjusted Basis . Irs tax form 1040 ez It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. Irs tax form 1040 ez You also must keep records of the events that affect basis or adjusted basis. Irs tax form 1040 ez See Keeping Records , below. Irs tax form 1040 ez Figuring Your Basis How you figure your basis depends on how you acquire your home. Irs tax form 1040 ez If you buy or build your home, your cost is your basis. Irs tax form 1040 ez If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. Irs tax form 1040 ez If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. Irs tax form 1040 ez Each of these topics is discussed later. Irs tax form 1040 ez Property transferred from a spouse. Irs tax form 1040 ez   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. Irs tax form 1040 ez Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. Irs tax form 1040 ez Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. Irs tax form 1040 ez The cost of your home includes most settlement or closing costs you paid when you bought the home. Irs tax form 1040 ez If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. Irs tax form 1040 ez See Settlement or closing costs , later. Irs tax form 1040 ez If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. Irs tax form 1040 ez Purchase. Irs tax form 1040 ez   The basis of a home you bought is the amount you paid for it. Irs tax form 1040 ez This usually includes your down payment and any debt you assumed. Irs tax form 1040 ez The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. Irs tax form 1040 ez This amount includes any purchase commissions or other costs of acquiring the shares. Irs tax form 1040 ez Construction. Irs tax form 1040 ez   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. Irs tax form 1040 ez This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. Irs tax form 1040 ez If you built all or part of your home yourself, your basis is the total amount it cost you to build it. Irs tax form 1040 ez You cannot include in basis the value of your own labor or any other labor for which you did not pay. Irs tax form 1040 ez Real estate taxes. Irs tax form 1040 ez   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. Irs tax form 1040 ez See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. Irs tax form 1040 ez   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. Irs tax form 1040 ez You cannot deduct them as taxes paid. Irs tax form 1040 ez   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. Irs tax form 1040 ez Do not include those taxes in your basis. Irs tax form 1040 ez If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Irs tax form 1040 ez Example 1. Irs tax form 1040 ez You bought your home on September 1. Irs tax form 1040 ez The property tax year in your area is the calendar year, and the tax is due on August 15. Irs tax form 1040 ez The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. Irs tax form 1040 ez You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. Irs tax form 1040 ez You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. Irs tax form 1040 ez You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. Irs tax form 1040 ez Example 2. Irs tax form 1040 ez You bought your home on May 3, 2013. Irs tax form 1040 ez The property tax year in your area is the calendar year. Irs tax form 1040 ez The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. Irs tax form 1040 ez Under state law, the taxes become a lien on May 31. Irs tax form 1040 ez You agreed to pay all taxes due after the date of sale. Irs tax form 1040 ez The taxes due in 2013 for 2012 were $1,375. Irs tax form 1040 ez The taxes due in 2014 for 2013 will be $1,425. Irs tax form 1040 ez You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. Irs tax form 1040 ez Instead, you add the $1,375 to the cost (basis) of your home. Irs tax form 1040 ez You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. Irs tax form 1040 ez You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. Irs tax form 1040 ez Settlement or closing costs. Irs tax form 1040 ez   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. Irs tax form 1040 ez These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. Irs tax form 1040 ez If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. Irs tax form 1040 ez   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. Irs tax form 1040 ez You deduct them in the year you buy your home if you itemize your deductions. Irs tax form 1040 ez You can add certain other settlement or closing costs to the basis of your home. Irs tax form 1040 ez Items added to basis. Irs tax form 1040 ez   You can include in your basis the settlement fees and closing costs you paid for buying your home. Irs tax form 1040 ez A fee is for buying the home if you would have had to pay it even if you paid cash for the home. Irs tax form 1040 ez   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. Irs tax form 1040 ez Abstract fees (abstract of title fees). Irs tax form 1040 ez Charges for installing utility services. Irs tax form 1040 ez Legal fees (including fees for the title search and preparation of the sales contract and deed). Irs tax form 1040 ez Recording fees. Irs tax form 1040 ez Surveys. Irs tax form 1040 ez Transfer or stamp taxes. Irs tax form 1040 ez Owner's title insurance. Irs tax form 1040 ez Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. Irs tax form 1040 ez   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. Irs tax form 1040 ez Items not added to basis and not deductible. Irs tax form 1040 ez   Here are some settlement and closing costs that you cannot deduct or add to your basis. Irs tax form 1040 ez Fire insurance premiums. Irs tax form 1040 ez Charges for using utilities or other services related to occupancy of the home before closing. Irs tax form 1040 ez Rent for occupying the home before closing. Irs tax form 1040 ez Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. Irs tax form 1040 ez Points paid by seller. Irs tax form 1040 ez   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. Irs tax form 1040 ez   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. Irs tax form 1040 ez See Points , earlier, for the rules on deducting points. Irs tax form 1040 ez Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. Irs tax form 1040 ez Fair market value. Irs tax form 1040 ez   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. Irs tax form 1040 ez Donor's adjusted basis is more than FMV. Irs tax form 1040 ez   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. Irs tax form 1040 ez Disposition basis. Irs tax form 1040 ez   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. Irs tax form 1040 ez Your basis for figuring a gain is the same as the donor's adjusted basis. Irs tax form 1040 ez Your basis for figuring a loss is the FMV when you received the gift. Irs tax form 1040 ez If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. Irs tax form 1040 ez However, if using the FMV results in a gain, then you neither have a gain nor a loss. Irs tax form 1040 ez Example 1. Irs tax form 1040 ez Andrew received a house as a gift from Ishmael (the donor). Irs tax form 1040 ez At the time of the gift, the home had an FMV of $80,000. Irs tax form 1040 ez Ishmael's adjusted basis was $100,000. Irs tax form 1040 ez After he received the house, no events occurred to increase or decrease the basis. Irs tax form 1040 ez If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. Irs tax form 1040 ez Example 2. Irs tax form 1040 ez Same facts as Example 1 , except this time Andrew sells the house for $70,000. Irs tax form 1040 ez He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. Irs tax form 1040 ez Example 3. Irs tax form 1040 ez Same facts as Example 1 , except this time Andrew sells the house for $90,000. Irs tax form 1040 ez Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. Irs tax form 1040 ez Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. Irs tax form 1040 ez So in this situation, Andrew will neither have a gain nor a loss. Irs tax form 1040 ez Donor's adjusted basis equal to or less than the FMV. Irs tax form 1040 ez   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. Irs tax form 1040 ez Part of federal gift tax due to net increase in value. Irs tax form 1040 ez   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Irs tax form 1040 ez The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. Irs tax form 1040 ez The net increase in the value of the home is its FMV minus the adjusted basis of the donor. Irs tax form 1040 ez Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. Irs tax form 1040 ez Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. Irs tax form 1040 ez If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. Irs tax form 1040 ez If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. Irs tax form 1040 ez Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. Irs tax form 1040 ez If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Irs tax form 1040 ez Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. Irs tax form 1040 ez These events can increase or decrease your original basis. Irs tax form 1040 ez The result is called adjusted basis. Irs tax form 1040 ez See Table 3, on this page, for a list of some of the items that can adjust your basis. Irs tax form 1040 ez Table 3. Irs tax form 1040 ez Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. Irs tax form 1040 ez It is not intended to be all-inclusive. Irs tax form 1040 ez Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. Irs tax form 1040 ez   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. Irs tax form 1040 ez You must add the cost of any improvements to the basis of your home. Irs tax form 1040 ez You cannot deduct these costs. Irs tax form 1040 ez   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. Irs tax form 1040 ez Amount added to basis. Irs tax form 1040 ez   The amount you add to your basis for improvements is your actual cost. Irs tax form 1040 ez This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. Irs tax form 1040 ez For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Irs tax form 1040 ez   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. Irs tax form 1040 ez These assessments are discussed earlier under Real Estate Taxes . Irs tax form 1040 ez Improvements no longer part of home. Irs tax form 1040 ez    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Irs tax form 1040 ez Example. Irs tax form 1040 ez You put wall-to-wall carpeting in your home 15 years ago. Irs tax form 1040 ez Later, you replaced that carpeting with new wall-to-wall carpeting. Irs tax form 1040 ez The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Irs tax form 1040 ez Repairs versus improvements. Irs tax form 1040 ez   A repair keeps your home in an ordinary, efficient operating condition. Irs tax form 1040 ez It does not add to the value of your home or prolong its life. Irs tax form 1040 ez Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. Irs tax form 1040 ez You cannot deduct repair costs and generally cannot add them to the basis of your home. Irs tax form 1040 ez   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. Irs tax form 1040 ez You add them to the basis of your home. Irs tax form 1040 ez Records to keep. Irs tax form 1040 ez   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. Irs tax form 1040 ez Also see Keeping Records , below. Irs tax form 1040 ez Energy conservation subsidy. Irs tax form 1040 ez   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. Irs tax form 1040 ez You must reduce the basis of your home by that value. Irs tax form 1040 ez   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. Irs tax form 1040 ez Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. Irs tax form 1040 ez These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. Irs tax form 1040 ez You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Irs tax form 1040 ez In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. Irs tax form 1040 ez How to keep records. Irs tax form 1040 ez   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. Irs tax form 1040 ez How long to keep records. Irs tax form 1040 ez   You must keep your records for as long as they are important for meeting any provision of the federal tax law. Irs tax form 1040 ez   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. Irs tax form 1040 ez (A period of limitations is the period of time after which no legal action can be brought. Irs tax form 1040 ez ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. Irs tax form 1040 ez For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Irs tax form 1040 ez Returns filed before the due date are treated as filed on the due date. Irs tax form 1040 ez   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. Irs tax form 1040 ez Keep those records as long as they are important in figuring the basis of the original or replacement property. Irs tax form 1040 ez Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Irs tax form 1040 ez Table 4. Irs tax form 1040 ez Record of Home Improvements Keep this for your records. Irs tax form 1040 ez Also, keep receipts or other proof of improvements. Irs tax form 1040 ez Remove from this record any improvements that are no longer part of your main home. Irs tax form 1040 ez For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. Irs tax form 1040 ez (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To
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Collection Procedures for Taxpayers Filing and/or Paying Late

The Collection Process and Taxpayer Rights

What do I do if I Cannot File or Pay by the Due Date?

What if the IRS Asks for Financial Information to Determine How Much I Can Pay?

What Options Do I Have if I Cannot Full Pay?

What Can the IRS do if I Will Not File or Pay?

How Can I Prevent Future Tax Liabilities?

Page Last Reviewed or Updated: 27-Jan-2014

The Irs Tax Form 1040 Ez

Irs tax form 1040 ez 1. Irs tax form 1040 ez   Fuel Taxes Table of Contents Definitions Information Returns Registration RequirementsAdditional information. Irs tax form 1040 ez Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. Irs tax form 1040 ez Reseller statement. Irs tax form 1040 ez Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. Irs tax form 1040 ez Deep-draft ocean-going vessels. Irs tax form 1040 ez Passenger vessels. Irs tax form 1040 ez Ocean-going barges. Irs tax form 1040 ez State or local governments. Irs tax form 1040 ez Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel Definitions Excise taxes are imposed on all the following fuels. Irs tax form 1040 ez Gasoline, including aviation gasoline and gasoline blendstocks. Irs tax form 1040 ez Diesel fuel, including dyed diesel fuel. Irs tax form 1040 ez Diesel-water fuel emulsion. Irs tax form 1040 ez Kerosene, including dyed kerosene and kerosene used in aviation. Irs tax form 1040 ez Other Fuels (including alternative fuels). Irs tax form 1040 ez Compressed natural gas (CNG). Irs tax form 1040 ez Fuels used in commercial transportation on inland waterways. Irs tax form 1040 ez Any liquid used in a fractional ownership program aircraft as fuel. Irs tax form 1040 ez The following terms are used throughout the discussion of fuel taxes. Irs tax form 1040 ez Other terms are defined in the discussion of the specific fuels to which they pertain. Irs tax form 1040 ez Agri-biodiesel. Irs tax form 1040 ez   Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats. Irs tax form 1040 ez Approved terminal or refinery. Irs tax form 1040 ez   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner. Irs tax form 1040 ez Biodiesel. Irs tax form 1040 ez   Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials (ASTM) D6751. Irs tax form 1040 ez Blended taxable fuel. Irs tax form 1040 ez   This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. Irs tax form 1040 ez This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. Irs tax form 1040 ez Blender. Irs tax form 1040 ez   This is the person that produces blended taxable fuel. Irs tax form 1040 ez Bulk transfer. Irs tax form 1040 ez   This is the transfer of taxable fuel by pipeline or vessel. Irs tax form 1040 ez Bulk transfer/terminal system. Irs tax form 1040 ez   This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Irs tax form 1040 ez Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system. Irs tax form 1040 ez Cellulosic biofuel. Irs tax form 1040 ez   Cellulosic biofuel means any liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis that meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act. Irs tax form 1040 ez Cellulosic biofuel does not include any alcohol with a proof of less than 150 (without regard to denaturants). Irs tax form 1040 ez For fuels sold or used after December 31, 2009, cellulosic biofuel does not include fuel of which more than 4% (determined by weight) is any combination of water and sediment, fuel of which the ash content is more than 1%, or fuel that has an acid number greater than 25. Irs tax form 1040 ez Also see Second generation biofuel below. Irs tax form 1040 ez Diesel-water fuel emulsion. Irs tax form 1040 ez   A diesel-water fuel emulsion means an emulsion at least 14% of which is water. Irs tax form 1040 ez The emulsion additive used to produce the fuel must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. Irs tax form 1040 ez Dry lease aircraft exchange. Irs tax form 1040 ez   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. Irs tax form 1040 ez Enterer. Irs tax form 1040 ez   This is the importer of record (under customs law) for the taxable fuel. Irs tax form 1040 ez However, if the importer of record is acting as an agent, such as a customs broker, the person for whom the agent is acting is the enterer. Irs tax form 1040 ez If there is no importer of record, the owner at the time of entry into the United States is the enterer. Irs tax form 1040 ez Entry. Irs tax form 1040 ez   Taxable fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. Irs tax form 1040 ez This does not apply to fuel brought into Puerto Rico (which is part of the U. Irs tax form 1040 ez S. Irs tax form 1040 ez customs territory), but does apply to fuel brought into the United States from Puerto Rico. Irs tax form 1040 ez Fractional ownership aircraft program and fractional program aircraft. Irs tax form 1040 ez   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. Irs tax form 1040 ez Measurement of taxable fuel. Irs tax form 1040 ez   Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit. Irs tax form 1040 ez Other fuels. Irs tax form 1040 ez   See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2. Irs tax form 1040 ez Pipeline operator. Irs tax form 1040 ez   This is the person that operates a pipeline within the bulk transfer/terminal system. Irs tax form 1040 ez Position holder. Irs tax form 1040 ez   This is the person that holds the inventory position in the taxable fuel in the terminal, as reflected in the records of the terminal operator. Irs tax form 1040 ez You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the taxable fuel. Irs tax form 1040 ez A terminal operator that owns taxable fuel in its terminal is a position holder. Irs tax form 1040 ez Rack. Irs tax form 1040 ez   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel. Irs tax form 1040 ez Refiner. Irs tax form 1040 ez   This is any person that owns, operates, or otherwise controls a refinery. Irs tax form 1040 ez Refinery. Irs tax form 1040 ez   This is a facility used to produce taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. Irs tax form 1040 ez However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. Irs tax form 1040 ez For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system. Irs tax form 1040 ez Registrant. Irs tax form 1040 ez   This is a taxable fuel registrant (see Registration Requirements, later). Irs tax form 1040 ez Removal. Irs tax form 1040 ez   This is any physical transfer of taxable fuel. Irs tax form 1040 ez It also means any use of taxable fuel other than as a material in the production of taxable fuel or Other Fuels. Irs tax form 1040 ez However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed. Irs tax form 1040 ez Renewable diesel. Irs tax form 1040 ez   See Renewable Diesel Credits in chapter 2. Irs tax form 1040 ez Sale. Irs tax form 1040 ez   For taxable fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, taxable fuel to the buyer for money, services, or other property. Irs tax form 1040 ez For taxable fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that taxable fuel. Irs tax form 1040 ez Second generation biofuel. Irs tax form 1040 ez   This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U. Irs tax form 1040 ez S. Irs tax form 1040 ez C. Irs tax form 1040 ez 7545). Irs tax form 1040 ez It also includes certain liquid fuel which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. Irs tax form 1040 ez It is not alcohol of less than 150 proof (disregard any added denaturants). Irs tax form 1040 ez See Form 6478 for more information. Irs tax form 1040 ez State. Irs tax form 1040 ez   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. Irs tax form 1040 ez An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function. Irs tax form 1040 ez Taxable fuel. Irs tax form 1040 ez   This means gasoline, diesel fuel, and kerosene. Irs tax form 1040 ez Terminal. Irs tax form 1040 ez   This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. Irs tax form 1040 ez It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. Irs tax form 1040 ez A terminal does not include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable fuel stored at the facility has been previously taxed upon removal from a refinery or terminal. Irs tax form 1040 ez Terminal operator. Irs tax form 1040 ez   This is any person that owns, operates, or otherwise controls a terminal. Irs tax form 1040 ez Throughputter. Irs tax form 1040 ez   This is any person that is a position holder or that owns taxable fuel within the bulk transfer/terminal system (other than in a terminal). Irs tax form 1040 ez Vessel operator. Irs tax form 1040 ez   This is the person that operates a vessel within the bulk transfer/terminal system. Irs tax form 1040 ez However, vessel does not include a deep draft ocean-going vessel. Irs tax form 1040 ez Information Returns Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. Irs tax form 1040 ez A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. Irs tax form 1040 ez For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS. Irs tax form 1040 ez The returns are due the last day of the month following the month in which the transaction occurs. Irs tax form 1040 ez Generally, these returns can be filed on paper or electronically. Irs tax form 1040 ez For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. Irs tax form 1040 ez Publication 3536 is only available on the IRS website. Irs tax form 1040 ez Form 720-TO. Irs tax form 1040 ez   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. Irs tax form 1040 ez Each terminal operator must file a separate form for each approved terminal. Irs tax form 1040 ez Form 720-CS. Irs tax form 1040 ez   This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal. Irs tax form 1040 ez Registration Requirements The following discussion applies to excise tax registration requirements for activities relating to fuels only. Irs tax form 1040 ez See Form 637 for other persons who must register and for more information about registration. Irs tax form 1040 ez Persons that are required to be registered. Irs tax form 1040 ez   You are required to be registered if you are a: Blender; Enterer; Pipeline operator; Position holder; Refiner; Terminal operator; Vessel operator; Producer or importer of alcohol, biodiesel, agri-biodiesel, and renewable diesel; or Producer of cellulosic or second generation biofuel. Irs tax form 1040 ez Persons that may register. Irs tax form 1040 ez   You may, but are not required to, register if you are a: Feedstock user, Industrial user, Throughputter that is not a position holder, Ultimate vendor, Diesel-water fuel emulsion producer, Credit card issuer, or Alternative fuel claimant. Irs tax form 1040 ez Ultimate vendors, credit card issuers, and alternative fuel claimants do not need to be registered to buy or sell fuel. Irs tax form 1040 ez However, they must be registered to file claims for certain sales and uses of fuel. Irs tax form 1040 ez See Form 637 for more information. Irs tax form 1040 ez Taxable fuel registrant. Irs tax form 1040 ez   This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. Irs tax form 1040 ez The term registrant as used in the discussions of these fuels means a taxable fuel registrant. Irs tax form 1040 ez Additional information. Irs tax form 1040 ez   See the Form 637 instructions for the information you must submit when you apply for registration. Irs tax form 1040 ez Failure to register. Irs tax form 1040 ez   The penalty for failure to register if you must register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register. Irs tax form 1040 ez Gasoline and Aviation Gasoline Gasoline. Irs tax form 1040 ez   Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. Irs tax form 1040 ez Gasoline includes any gasoline blend other than: Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat), Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or Denatured alcohol. Irs tax form 1040 ez Gasoline also includes gasoline blendstocks, discussed later. Irs tax form 1040 ez Aviation gasoline. Irs tax form 1040 ez   This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D910 or military specification MIL-G-5572. Irs tax form 1040 ez Taxable Events The tax on gasoline is $. Irs tax form 1040 ez 184 per gallon. Irs tax form 1040 ez The tax on aviation gasoline is $. Irs tax form 1040 ez 194 per gallon. Irs tax form 1040 ez When used in a fractional ownership program aircraft, gasoline also is subject to a surtax of $. Irs tax form 1040 ez 141 per gallon. Irs tax form 1040 ez See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later. Irs tax form 1040 ez Tax is imposed on the removal, entry, or sale of gasoline. Irs tax form 1040 ez Each of these events is discussed later. Irs tax form 1040 ez Also, see the special rules that apply to gasoline blendstocks, later. Irs tax form 1040 ez If the tax is paid on the gasoline in more than one event, a refund may be allowed for the “second” tax paid. Irs tax form 1040 ez See Refunds of Second Tax in chapter 2. Irs tax form 1040 ez Removal from terminal. Irs tax form 1040 ez   All removals of gasoline at a terminal rack are taxable. Irs tax form 1040 ez The position holder for that gasoline is liable for the tax. Irs tax form 1040 ez Two-party exchanges. Irs tax form 1040 ez   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. Irs tax form 1040 ez A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. Irs tax form 1040 ez The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. Irs tax form 1040 ez The exchange transaction occurs before or at the same time as removal across the rack by the receiving person. Irs tax form 1040 ez The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. Irs tax form 1040 ez The transaction is subject to a written contract. Irs tax form 1040 ez Terminal operator's liability. Irs tax form 1040 ez   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. Irs tax form 1040 ez   However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax. Irs tax form 1040 ez The terminal operator is a registrant. Irs tax form 1040 ez The terminal operator has an unexpired notification certificate (discussed later) from the position holder. Irs tax form 1040 ez The terminal operator has no reason to believe any information on the certificate is false. Irs tax form 1040 ez Removal from refinery. Irs tax form 1040 ez   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions. Irs tax form 1040 ez It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant. Irs tax form 1040 ez It is made at the refinery rack. Irs tax form 1040 ez The refiner is liable for the tax. Irs tax form 1040 ez Exception. Irs tax form 1040 ez   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met. Irs tax form 1040 ez The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. Irs tax form 1040 ez The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system. Irs tax form 1040 ez The removal from the refinery is by railcar. Irs tax form 1040 ez The same person operates the refinery and the facility at which the gasoline is received. Irs tax form 1040 ez Entry into the United States. Irs tax form 1040 ez   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions. Irs tax form 1040 ez It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. Irs tax form 1040 ez It is not made by bulk transfer. Irs tax form 1040 ez The enterer is liable for the tax. Irs tax form 1040 ez Importer of record's liability. Irs tax form 1040 ez   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. Irs tax form 1040 ez   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. Irs tax form 1040 ez The importer of record has an unexpired notification certificate (discussed later) from the enterer. Irs tax form 1040 ez The importer of record has no reason to believe any information in the certificate is false. Irs tax form 1040 ez Customs bond. Irs tax form 1040 ez   The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. Irs tax form 1040 ez Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. Irs tax form 1040 ez   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. Irs tax form 1040 ez The position holder is liable for the tax. Irs tax form 1040 ez The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. Irs tax form 1040 ez However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. Irs tax form 1040 ez Bulk transfers not received at approved terminal or refinery. Irs tax form 1040 ez   The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply. Irs tax form 1040 ez No tax was previously imposed (as discussed earlier) on any of the following events. Irs tax form 1040 ez The removal from the refinery. Irs tax form 1040 ez The entry into the United States. Irs tax form 1040 ez The removal from a terminal by an unregistered position holder. Irs tax form 1040 ez Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel). Irs tax form 1040 ez   The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. Irs tax form 1040 ez However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. Irs tax form 1040 ez The owner is a registrant. Irs tax form 1040 ez The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received. Irs tax form 1040 ez The owner has no reason to believe any information on the certificate is false. Irs tax form 1040 ez The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. Irs tax form 1040 ez The operator is jointly and severally liable if the owner does not meet these conditions. Irs tax form 1040 ez Sales to unregistered person. Irs tax form 1040 ez   The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. Irs tax form 1040 ez   The seller is liable for the tax. Irs tax form 1040 ez However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. Irs tax form 1040 ez   The seller is a registrant. Irs tax form 1040 ez The seller has an unexpired notification certificate (discussed later) from the buyer. Irs tax form 1040 ez The seller has no reason to believe any information on the certificate is false. Irs tax form 1040 ez The buyer of the gasoline is liable for the tax if the seller meets these conditions. Irs tax form 1040 ez The buyer is jointly and severally liable if the seller does not meet these conditions. Irs tax form 1040 ez Exception. Irs tax form 1040 ez   The tax does not apply to a sale if all of the following apply. Irs tax form 1040 ez The buyer's principal place of business is not in the United States. Irs tax form 1040 ez The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. Irs tax form 1040 ez The seller is a registrant and the exporter of record. Irs tax form 1040 ez The fuel was exported. Irs tax form 1040 ez Removal or sale of blended gasoline. Irs tax form 1040 ez   The removal or sale of blended gasoline by the blender is taxable. Irs tax form 1040 ez See Blended taxable fuel under Definitions, earlier. Irs tax form 1040 ez   The blender is liable for the tax. Irs tax form 1040 ez The tax is figured on the number of gallons not previously subject to the tax on gasoline. Irs tax form 1040 ez   Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. Irs tax form 1040 ez See Form 720 to report this tax. Irs tax form 1040 ez You also must be registered with the IRS as a blender. Irs tax form 1040 ez See Form 637. Irs tax form 1040 ez   However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. Irs tax form 1040 ez Notification certificate. Irs tax form 1040 ez   The notification certificate is used to notify a person of the registration status of the registrant. Irs tax form 1040 ez A copy of the registrant's letter of registration cannot be used as a notification certificate. Irs tax form 1040 ez A model notification certificate is shown in the Appendix as Model Certificate C. Irs tax form 1040 ez A notification certificate must contain all information necessary to complete the model. Irs tax form 1040 ez   The certificate may be included as part of any business records normally used for a sale. Irs tax form 1040 ez A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. Irs tax form 1040 ez The registrant must provide a new certificate if any information on a certificate has changed. Irs tax form 1040 ez Additional persons liable. Irs tax form 1040 ez   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or Anyone who willfully causes the person to fail to pay the tax. Irs tax form 1040 ez Gasoline Blendstocks Gasoline blendstocks may be subject to $. Irs tax form 1040 ez 001 per gallon LUST tax as discussed below. Irs tax form 1040 ez Gasoline includes gasoline blendstocks. Irs tax form 1040 ez The previous discussions apply to these blendstocks. Irs tax form 1040 ez However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $. Irs tax form 1040 ez 001 per gallon or are not subject to the excise tax. Irs tax form 1040 ez Blendstocks. Irs tax form 1040 ez   Gasoline blendstocks are: Alkylate, Butane, Butene, Catalytically cracked gasoline, Coker gasoline, Ethyl tertiary butyl ether (ETBE), Hexane, Hydrocrackate, Isomerate, Methyl tertiary butyl ether (MTBE), Mixed xylene (not including any separated isomer of xylene), Natural gasoline, Pentane, Pentane mixture, Polymer gasoline, Raffinate, Reformate, Straight-run gasoline, Straight-run naphtha, Tertiary amyl methyl ether (TAME), Tertiary butyl alcohol (gasoline grade) (TBA), Thermally cracked gasoline, and Toluene. Irs tax form 1040 ez   However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline. Irs tax form 1040 ez Not used to produce finished gasoline. Irs tax form 1040 ez   Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met. Irs tax form 1040 ez Removals and entries not connected to sale. Irs tax form 1040 ez   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant. Irs tax form 1040 ez Removals and entries connected to sale. Irs tax form 1040 ez   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements. Irs tax form 1040 ez The person has an unexpired certificate (discussed later) from the buyer. Irs tax form 1040 ez The person has no reason to believe any information in the certificate is false. Irs tax form 1040 ez Sales after removal or entry. Irs tax form 1040 ez   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. Irs tax form 1040 ez The seller is liable for the tax. Irs tax form 1040 ez However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements. Irs tax form 1040 ez The seller has an unexpired certificate (discussed next) from the buyer. Irs tax form 1040 ez The seller has no reason to believe any information in the certificate is false. Irs tax form 1040 ez Certificate of buyer. Irs tax form 1040 ez   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. Irs tax form 1040 ez The certificate may be included as part of any business records normally used for a sale. Irs tax form 1040 ez A model certificate is shown in the Appendix as Model Certificate D. Irs tax form 1040 ez The certificate must contain all information necessary to complete the model. Irs tax form 1040 ez   A certificate expires on the earliest of the following dates. Irs tax form 1040 ez The date 1 year after the effective date (not earlier than the date signed) of the certificate. Irs tax form 1040 ez The date a new certificate is provided to the seller. Irs tax form 1040 ez The date the seller is notified that the buyer's right to provide a certificate has been withdrawn. Irs tax form 1040 ez The buyer must provide a new certificate if any information on a certificate has changed. Irs tax form 1040 ez   The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer. Irs tax form 1040 ez Received at approved terminal or refinery. Irs tax form 1040 ez   The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements. Irs tax form 1040 ez The person is a registrant. Irs tax form 1040 ez The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received. Irs tax form 1040 ez The person has no reason to believe any information on the certificate is false. Irs tax form 1040 ez Bulk transfers to registered industrial user. Irs tax form 1040 ez   The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. Irs tax form 1040 ez An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline. Irs tax form 1040 ez Credits or Refunds. Irs tax form 1040 ez   A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. Irs tax form 1040 ez For more information, see chapter 2. Irs tax form 1040 ez Diesel Fuel and Kerosene Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier). Irs tax form 1040 ez However, special rules (discussed later) apply to dyed diesel fuel and dyed kerosene, and to undyed diesel fuel and undyed kerosene sold or used in Alaska for certain nontaxable uses and undyed kerosene used for a feedstock purpose. Irs tax form 1040 ez Diesel fuel means: Any liquid that without further processing or blending is suitable for use as a fuel in a diesel-powered highway vehicle or train, and Transmix. Irs tax form 1040 ez A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Irs tax form 1040 ez A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. Irs tax form 1040 ez However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Irs tax form 1040 ez Diesel fuel does not include gasoline, kerosene, excluded liquid, No. Irs tax form 1040 ez 5 and No. Irs tax form 1040 ez 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884. Irs tax form 1040 ez An excluded liquid is either of the following. Irs tax form 1040 ez A liquid that contains less than 4% normal paraffins. Irs tax form 1040 ez A liquid with all the following properties. Irs tax form 1040 ez Distillation range of 125 degrees Fahrenheit or less. Irs tax form 1040 ez Sulfur content of 10 ppm or less. Irs tax form 1040 ez Minimum color of +27 Saybolt. Irs tax form 1040 ez Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation. Irs tax form 1040 ez Kerosene. Irs tax form 1040 ez   This means any of the following liquids. Irs tax form 1040 ez One of the two grades of kerosene (No. Irs tax form 1040 ez 1-K and No. Irs tax form 1040 ez 2-K) covered by ASTM specification D3699. Irs tax form 1040 ez Kerosene-type jet fuel covered by ASTM specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). Irs tax form 1040 ez See Kerosene for Use in Aviation, later. Irs tax form 1040 ez   However, kerosene does not include excluded liquid, discussed earlier. Irs tax form 1040 ez   Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use. Irs tax form 1040 ez Diesel-powered highway vehicle. Irs tax form 1040 ez   This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. Irs tax form 1040 ez Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation are generally not considered diesel-powered highway vehicles. Irs tax form 1040 ez For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-Highway Business Use (No. Irs tax form 1040 ez 2) in chapter 2. Irs tax form 1040 ez Diesel-powered train. Irs tax form 1040 ez   This is any diesel-powered equipment or machinery that rides on rails. Irs tax form 1040 ez The term includes a locomotive, work train, switching engine, and track maintenance machine. Irs tax form 1040 ez Taxable Events The tax on diesel fuel and kerosene is $. Irs tax form 1040 ez 244 per gallon. Irs tax form 1040 ez It is imposed on the removal, entry, or sale of diesel fuel and kerosene. Irs tax form 1040 ez Each of these events is discussed later. Irs tax form 1040 ez Only the $. Irs tax form 1040 ez 001 LUST tax applies to dyed diesel fuel and dyed kerosene, discussed later. Irs tax form 1040 ez If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the “second” tax paid. Irs tax form 1040 ez See Refunds of Second Tax in chapter 2. Irs tax form 1040 ez Use in certain intercity and local buses. Irs tax form 1040 ez   Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. Irs tax form 1040 ez A claim for $. Irs tax form 1040 ez 17 per gallon may be made by the registered ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. Irs tax form 1040 ez An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. Irs tax form 1040 ez The bus must be engaged in one of the following activities. Irs tax form 1040 ez Scheduled transportation along regular routes regardless of the size of the bus. Irs tax form 1040 ez Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver). Irs tax form 1040 ez A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations. Irs tax form 1040 ez Removal from terminal. Irs tax form 1040 ez   All removals of diesel fuel and kerosene at a terminal rack are taxable. Irs tax form 1040 ez The position holder for that fuel is liable for the tax. Irs tax form 1040 ez Two-party exchanges. Irs tax form 1040 ez   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. Irs tax form 1040 ez A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. Irs tax form 1040 ez The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. Irs tax form 1040 ez The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person. Irs tax form 1040 ez The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. Irs tax form 1040 ez The transaction is subject to a written contract. Irs tax form 1040 ez Terminal operator's liability. Irs tax form 1040 ez   The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that diesel fuel or kerosene is dyed (discussed later). Irs tax form 1040 ez   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. Irs tax form 1040 ez However, a terminal operator will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met. Irs tax form 1040 ez The terminal operator is a registrant. Irs tax form 1040 ez The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder. Irs tax form 1040 ez The terminal operator has no reason to believe any information on the certificate is false. Irs tax form 1040 ez Removal from refinery. Irs tax form 1040 ez   The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions. Irs tax form 1040 ez It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant. Irs tax form 1040 ez It is made at the refinery rack. Irs tax form 1040 ez The refiner is liable for the tax. Irs tax form 1040 ez Exception. Irs tax form 1040 ez   The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met. Irs tax form 1040 ez The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. Irs tax form 1040 ez The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system. Irs tax form 1040 ez The removal from the refinery is by: Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery. Irs tax form 1040 ez Entry into the United States. Irs tax form 1040 ez   The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions. Irs tax form 1040 ez It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. Irs tax form 1040 ez It is not made by bulk transfer. Irs tax form 1040 ez The enterer is liable for the tax. Irs tax form 1040 ez Importer of record's liability. Irs tax form 1040 ez   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. Irs tax form 1040 ez   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. Irs tax form 1040 ez The importer of record has an unexpired notification certificate (discussed under Gasoline) from the enterer. Irs tax form 1040 ez The importer of record has no reason to believe any information in the certificate is false. Irs tax form 1040 ez Customs bond. Irs tax form 1040 ez   The customs bond will not be charged for the tax imposed on the entry of the diesel fuel or kerosene if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. Irs tax form 1040 ez Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. Irs tax form 1040 ez   The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. Irs tax form 1040 ez The position holder is liable for the tax. Irs tax form 1040 ez The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. Irs tax form 1040 ez However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. Irs tax form 1040 ez Bulk transfers not received at approved terminal or refinery. Irs tax form 1040 ez   The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply. Irs tax form 1040 ez No tax was previously imposed (as discussed earlier) on any of the following events. Irs tax form 1040 ez The removal from the refinery. Irs tax form 1040 ez The entry into the United States. Irs tax form 1040 ez The removal from a terminal by an unregistered position holder. Irs tax form 1040 ez Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel). Irs tax form 1040 ez   The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. Irs tax form 1040 ez However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. Irs tax form 1040 ez The owner is a registrant. Irs tax form 1040 ez The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received. Irs tax form 1040 ez The owner has no reason to believe any information on the certificate is false. Irs tax form 1040 ez The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. Irs tax form 1040 ez The operator is jointly and severally liable if the owner does not meet these conditions. Irs tax form 1040 ez Sales to unregistered person. Irs tax form 1040 ez   The sale of diesel fuel or kerosene located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. Irs tax form 1040 ez   The seller is liable for the tax. Irs tax form 1040 ez However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. Irs tax form 1040 ez The seller is a registrant. Irs tax form 1040 ez The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer. Irs tax form 1040 ez The seller has no reason to believe any information on the certificate is false. Irs tax form 1040 ez The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. Irs tax form 1040 ez The buyer is jointly and severally liable if the seller does not meet these conditions. Irs tax form 1040 ez Exception. Irs tax form 1040 ez   The tax does not apply to a sale if all of the following apply. Irs tax form 1040 ez The buyer's principal place of business is not in the United States. Irs tax form 1040 ez The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. Irs tax form 1040 ez The seller is a registrant and the exporter of record. Irs tax form 1040 ez The fuel was exported. Irs tax form 1040 ez Removal or sale of blended diesel fuel or kerosene. Irs tax form 1040 ez   The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. Irs tax form 1040 ez Blended taxable fuel produced using biodiesel is subject to the tax. Irs tax form 1040 ez See Blended taxable fuel under Definitions, earlier. Irs tax form 1040 ez   The blender is liable for the tax. Irs tax form 1040 ez The tax is figured on the number of gallons not previously subject to the tax. Irs tax form 1040 ez   Persons who blend biodiesel with undyed diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. Irs tax form 1040 ez Generally, the biodiesel mixture must be diesel fuel (defined earlier). Irs tax form 1040 ez See Form 720 to report this tax. Irs tax form 1040 ez You also must be registered by the IRS as a blender. Irs tax form 1040 ez See Form 637 for more information. Irs tax form 1040 ez   However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. Irs tax form 1040 ez Additional persons liable. Irs tax form 1040 ez   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax applies to: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty; or Anyone who willfully causes the person to fail to pay the tax. Irs tax form 1040 ez Credits or Refunds. Irs tax form 1040 ez   A credit or refund is allowable for the tax on undyed diesel fuel or undyed kerosene used for a nontaxable use. Irs tax form 1040 ez For more information, see chapter 2. Irs tax form 1040 ez Dyed Diesel Fuel and Dyed Kerosene Dyed diesel fuel and dyed kerosene are subject to $. Irs tax form 1040 ez 001 per gallon LUST tax as discussed below, unless the fuel is for export. Irs tax form 1040 ez The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene (other than the LUST tax) if all the following tests are met. Irs tax form 1040 ez The person otherwise liable for tax (for example, the position holder) is a registrant. Irs tax form 1040 ez In the case of a removal from a terminal, the terminal is an approved terminal. Irs tax form 1040 ez The diesel fuel or kerosene satisfies the dyeing requirements (described next). Irs tax form 1040 ez Dyeing requirements. Irs tax form 1040 ez   Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies the following requirements. Irs tax form 1040 ez It contains the dye Solvent Red 164 (and no other dye) at a concentration spectrally equivalent to at least 3. Irs tax form 1040 ez 9 pounds of the solid dye standard Solvent Red 26 per thousand barrels of fuel or any dye of a type and in a concentration that has been approved by the Commissioner. Irs tax form 1040 ez Is indelibly dyed by mechanical injection. Irs tax form 1040 ez See section 6 of Notice 2005-80 for transition rules that apply until final regulations are issued by the IRS. Irs tax form 1040 ez Notice required. Irs tax form 1040 ez   A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be: Provided by the terminal operator to any person that receives dyed diesel fuel or dyed kerosene at a terminal rack of that operator, and Posted by a seller on any retail pump or other delivery facility where it sells dyed diesel fuel or dyed kerosene for use by its buyer. Irs tax form 1040 ez   The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel. Irs tax form 1040 ez   Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). Irs tax form 1040 ez That seller is subject to the penalty described next. Irs tax form 1040 ez Penalty. Irs tax form 1040 ez   A penalty is imposed on a person if any of the following situations apply. Irs tax form 1040 ez Any dyed fuel is sold or held for sale by the person for a use the person knows or has reason to know is not a nontaxable use of the fuel. Irs tax form 1040 ez Any dyed fuel is held for use or used by the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed. Irs tax form 1040 ez The person willfully alters, chemically or otherwise, or attempts to so alter, the strength or composition of any dye in dyed fuel. Irs tax form 1040 ez The person has knowledge that a dyed fuel that has been altered, as described in (3) above, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel. Irs tax form 1040 ez   The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. Irs tax form 1040 ez After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. Irs tax form 1040 ez   This penalty is in addition to any tax imposed on the fuel. Irs tax form 1040 ez   If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. Irs tax form 1040 ez   There is no administrative appeal or review allowed for the third and subsequent penalty imposed by section 6715 on any person except for: Fraud or a mistake in the chemical analysis, or Mathematical calculation of the penalty. Irs tax form 1040 ez   If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. Irs tax form 1040 ez However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. Irs tax form 1040 ez The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank. Irs tax form 1040 ez Exception to penalty. Irs tax form 1040 ez   The penalty under item (3) will not apply in any of the following situations. Irs tax form 1040 ez Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any undyed liquid and the resulting product meets the dyeing requirements. Irs tax form 1040 ez Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any other liquid (other than diesel fuel or kerosene) that contains the type and amount of dye required to meet the dyeing requirements. Irs tax form 1040 ez The alteration or attempted alteration occurs in an exempt area of Alaska. Irs tax form 1040 ez See Removal for sale or use in Alaska, later. Irs tax form 1040 ez Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with diesel fuel or kerosene not meeting the dyeing requirements and the blending occurs as part of a nontaxable use (other than export), discussed later. Irs tax form 1040 ez Alaska and Feedstocks Tax of $. Irs tax form 1040 ez 001 per gallon is imposed on: Undyed diesel fuel or undyed kerosene sold or used in Alaska for certain nontaxable uses (see Later sales on page 10). Irs tax form 1040 ez Undyed kerosene used for feedstock purposes. Irs tax form 1040 ez Removal for sale or use in Alaska. Irs tax form 1040 ez   No tax is imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in certain areas of Alaska for certain nontaxable uses. Irs tax form 1040 ez The removal or entry of any diesel fuel or kerosene is not taxed if all the following requirements are satisfied. Irs tax form 1040 ez The person otherwise liable for the tax (position holder, refiner, or enterer): Is a registrant, Can show satisfactory evidence of the nontaxable nature of the transaction, and Has no reason to believe the evidence is false. Irs tax form 1040 ez In the case of a removal from a terminal, the terminal is an approved terminal. Irs tax form 1040 ez The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer. Irs tax form 1040 ez   If all three of the requirements above are not met, then tax is imposed at $. Irs tax form 1040 ez 244 per gallon. Irs tax form 1040 ez   A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. Irs tax form 1040 ez Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes. Irs tax form 1040 ez Later sales. Irs tax form 1040 ez   The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. Irs tax form 1040 ez The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. Irs tax form 1040 ez However, the sale is not taxable (other than the LUST tax at $. Irs tax form 1040 ez 001 per gallon) if all the following requirements are met. Irs tax form 1040 ez The fuel is sold in Alaska for certain nontaxable uses. Irs tax form 1040 ez The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer. Irs tax form 1040 ez The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false. Irs tax form 1040 ez Feedstock purposes. Irs tax form 1040 ez   The $. Irs tax form 1040 ez 001 per gallon LUST tax is imposed on the removal or entry of undyed kerosene if all the following conditions are met. Irs tax form 1040 ez The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant. Irs tax form 1040 ez In the case of a removal from a terminal, the terminal is an approved terminal. Irs tax form 1040 ez Either: The person otherwise liable for tax uses the kerosene for a feedstock purpose, or The kerosene is sold for use by the buyer for a feedstock purpose and, at the time of the sale, the person otherwise liable for tax has an unexpired certificate (described later) from the buyer and has no reason to believe any information on the certificate is false. Irs tax form 1040 ez   If all of the requirements above are not met, then tax is imposed at $. Irs tax form 1040 ez 244 per gallon. Irs tax form 1040 ez   Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or Other Fuels. Irs tax form 1040 ez For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. Irs tax form 1040 ez A feedstock user is a person that uses kerosene for a feedstock purpose. Irs tax form 1040 ez A registered feedstock user is a person that has been registered by the IRS as a feedstock user. Irs tax form 1040 ez See Registration Requirements, earlier. Irs tax form 1040 ez Later sales. Irs tax form 1040 ez   The excise tax ($. Irs tax form 1040 ez 244 per gallon) applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b) above) if the buyer in that sale later sells the kerosene. Irs tax form 1040 ez The tax is imposed at the time of the later sale and that seller is liable for the tax. Irs tax form 1040 ez Certificate. Irs tax form 1040 ez   The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. Irs tax form 1040 ez The certificate may be included as part of any business records normally used for a sale. Irs tax form 1040 ez A model certificate is shown in the Appendix as Model Certificate G. Irs tax form 1040 ez Your certificate must contain all information necessary to complete the model. Irs tax form 1040 ez   A certificate expires on the earliest of the following dates. Irs tax form 1040 ez The date 1 year after the effective date (not earlier than the date signed) of the certificate. Irs tax form 1040 ez The date the seller is provided a new certificate or notice that the current certificate is invalid. Irs tax form 1040 ez The date the seller is notified the buyer's registration has been revoked or suspended. Irs tax form 1040 ez   The buyer must provide a new certificate if any information on a certificate has changed. Irs tax form 1040 ez Back-up Tax Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle. Irs tax form 1040 ez Any dyed diesel fuel or dyed kerosene for other than a nontaxable use. Irs tax form 1040 ez Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel used for a nontaxable purpose) has been allowed. Irs tax form 1040 ez Any liquid other than gasoline, diesel fuel, or kerosene. Irs tax form 1040 ez Generally, this back-up tax is imposed at a rate of $. Irs tax form 1040 ez 244 per gallon. Irs tax form 1040 ez Liability for tax. Irs tax form 1040 ez   Generally, the operator of the vehicle into which the fuel is delivered is liable for the tax. Irs tax form 1040 ez In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. Irs tax form 1040 ez Exemptions from the back-up tax. Irs tax form 1040 ez   The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14, and 15 listed under Definitions of Nontaxable Uses in chapter 2. Irs tax form 1040 ez   In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines. Irs tax form 1040 ez Diesel-Water Fuel Emulsion Diesel-water fuel emulsion means diesel fuel at least 14% of which is water and for which 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. Irs tax form 1040 ez A reduced tax rate of $. Irs tax form 1040 ez 198 per gallon is imposed on a diesel-water fuel emulsion. Irs tax form 1040 ez To be eligible for the reduced rate, the person who sells, removes, or uses the diesel-water fuel emulsion must be registered by the IRS. Irs tax form 1040 ez If the diesel-water fuel emulsion does not meet the requirements above, or if the person who sells, removes, or uses the fuel is not registered, the diesel-water fuel emulsion is taxed at $. Irs tax form 1040 ez 244 per gallon. Irs tax form 1040 ez Credits or refunds. Irs tax form 1040 ez   The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2. Irs tax form 1040 ez Kerosene for Use in Aviation Taxable Events Generally, kerosene is taxed at $. Irs tax form 1040 ez 244 per gallon unless a reduced rate applies (see Diesel Fuel and Kerosene, earlier). Irs tax form 1040 ez For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $. Irs tax form 1040 ez 219. Irs tax form 1040 ez The rate of $. Irs tax form 1040 ez 219 also applies if kerosene is removed into any aircraft from a qualified refueler truck, tanker, or tank wagon that is loaded with the kerosene from a terminal that is located within an airport. Irs tax form 1040 ez The airport terminal does not need to be a secured airport terminal for this rate to apply. Irs tax form 1040 ez However, the refueler truck, tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks, tankers, and tank wagons, treated as terminals, later. Irs tax form 1040 ez For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax is $. Irs tax form 1040 ez 044 per gallon. Irs tax form 1040 ez For kerosene removed into an aircraft from a qualified refueler truck, tanker, or tank wagon, the $. Irs tax form 1040 ez 044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal that is located in a secured area of the airport. Irs tax form 1040 ez See Terminal located within a secured area of an airport, later. Irs tax form 1040 ez In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. Irs tax form 1040 ez For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft for the exclusive use of a state or local government), the rate of tax is $. Irs tax form 1040 ez 001. Irs tax form 1040 ez There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. Irs tax form 1040 ez The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport. Irs tax form 1040 ez See Terminal located within a secured area of an airport, later. Irs tax form 1040 ez In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. Irs tax form 1040 ez The position holder is liable for the $. Irs tax form 1040 ez 001 per gallon tax. Irs tax form 1040 ez For kerosene removed directly from a terminal into the fuel tank of an fractional ownership program aircraft after March 31, 2012, a surtax of $. Irs tax form 1040 ez 141 per gallon applies. Irs tax form 1040 ez Certain refueler trucks, tankers, and tank wagons treated as terminals. Irs tax form 1040 ez   For purposes of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are treated as part of a terminal if the following conditions are met. Irs tax form 1040 ez Such terminal is located within an area of an airport. Irs tax form 1040 ez Any kerosene for use in aviation that is loaded in a refueler truck, tanker, or tank wagon at a terminal is for delivery into aircraft at the airport in which the terminal is located. Irs tax form 1040 ez Except in exigent circumstances, such as those identified in Notice 2005-80, no vehicle registered for highway use is loaded with kerosene for use in aviation at the terminal. Irs tax form 1040 ez The refueler truck, tanker, or tank wagon meets the following requirements: Has storage tanks, hose, and coupling equipment designed and used for fueling aircraft, Is not registered for highway use, and Is operated by the terminal operator or a person that makes a daily accounting to the terminal operator of each delivery of fuel from the refueler truck, tanker, or tank wagon. Irs tax form 1040 ez Information reporting will be required by terminal operators regarding this provision. Irs tax form 1040 ez Until the format of this information reporting is issued, taxpayers are required to retain records regarding the daily accounting, but are not required to report such information. Irs tax form 1040 ez Terminal located within a secured area of an airport. Irs tax form 1040 ez   See Notice 2005-4 and Notice 2005-80 for the list of terminals located within a secured area of an airport. Irs tax form 1040 ez This list refers to fueling operations at airport terminals as it applies to the federal excise tax on kerosene for use in aviation, and has nothing to do with the general security of airports either included or not included in the list. Irs tax form 1040 ez Liability For Tax If the kerosene is removed directly into the fuel tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial aviation is liable for the tax on the removal at the rate of $. Irs tax form 1040 ez 044 per gallon. Irs tax form 1040 ez However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into the fuel tank of an aircraft for use exempt from tax under section 4041(c) (except foreign trade). Irs tax form 1040 ez For example, for kerosene removed directly into the aircraft for use in military aircraft, the position holder is liable for the tax. Irs tax form 1040 ez For the aircraft operator to be liable for the tax $. Irs tax form 1040 ez 044 rate, the position holder must meet the following requirements: Is a taxable fuel registrant, Has an unexpired certificate (a model certificate is shown in the Appendix as Model Certificate K) from the operator of the aircraft, and Has no reason to believe any of the information in the certificate is false. Irs tax form 1040 ez Commercial aviation. Irs tax form 1040 ez   Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. Irs tax form 1040 ez However, commercial aviation does not include any of the following uses. Irs tax form 1040 ez Any use exclusively for the purpose of skydiving. Irs tax form 1040 ez Certain air transportation by seaplane. Irs tax form 1040 ez See Seaplanes under Transportation of Persons by Air in chapter 4. Irs tax form 1040 ez Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers. Irs tax form 1040 ez For more information, see Aircraft used by affiliated corporations under Special Rules on Transportation Taxes in chapter 4. Irs tax form 1040 ez Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less, unless the aircraft is operated on an established line. Irs tax form 1040 ez For more information, see Small aircraft under Special Rules on Transportation Taxes in chapter 4. Irs tax form 1040 ez Any use where the surtax on fuel used in a fractional ownership program aircraft is imposed. Irs tax form 1040 ez See Surtax on any liquid used in a fractional ownership program aircraft as fuel below. Irs tax form 1040 ez Surtax on any liquid used in a fractional ownership program aircraft as fuel Fuel used in a fractional ownership program aircraft (as defined below) after March 31, 2012, is subject to a surtax of $. Irs tax form 1040 ez 141 per gallon. Irs tax form 1040 ez The fractional ownership program manager is liable for the tax. Irs tax form 1040 ez The surtax applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. Irs tax form 1040 ez If the surtax is imposed, the following air transportation taxes do not apply. Irs tax form 1040 ez Transportation of persons by air. Irs tax form 1040 ez Transportation of property by air. Irs tax form 1040 ez Use of international air travel facilities. Irs tax form 1040 ez These taxes are described under Air Transportation Taxes, later. Irs tax form 1040 ez A fractional ownership program aircraft flight is considered noncommercial aviation, for the rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above. Irs tax form 1040 ez Fractional ownership aircraft program    is a program under which:  A single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners; There are one or more fractional owners per fractional program aircraft, with at least one fractional program aircraft having more than one owner; For at least two fractional program aircraft, none of the ownership interests in the aircraft are less than the minimum fractional ownership interest or held by the program manager; There exists a dry-lease aircraft exchange arrangement among all of the fractional owners; and There are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program. Irs tax form 1040 ez Fractional program aircraft. Irs tax form 1040 ez   Any aircraft that, in any fractional ownership aircraft program, is listed as a fractional program aircraft in the management specifications issued to the manager of such program by Federal Aviation Administration under subpart K of part 91 title 14, Code of Federal Regulations, and is registered in the U. Irs tax form 1040 ez S. Irs tax form 1040 ez   Fractional program aircraft are not considered used for transportation of a qualified fractional owner, or on account of such qualified fractional owner when they are used for flight demonstration, maintenance or crew training. Irs tax form 1040 ez In such situations, the flight is not commercial aviation. Irs tax form 1040 ez Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate. Irs tax form 1040 ez Fractional owner. Irs tax form 1040 ez   Any person owning any interest (including the entire interest) in a fractional program aircraft. Irs tax form 1040 ez Dry lease aircraft exchange. Irs tax form 1040 ez   An agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner. Irs tax form 1040 ez Special rule relating to deadhead service. Irs tax form 1040 ez   A fractional program aircraft will not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service. Irs tax form 1040 ez More information. Irs tax form 1040 ez   See section 4043 for more information on the surtax. Irs tax form 1040 ez Certificate for Commercial Aviation and Exempt Uses A certificate is required from the aircraft operator: To support aircraft operator liability for tax on removal of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation, or For exempt uses. Irs tax form 1040 ez Certificate. Irs tax form 1040 ez   The certificate may be included as part of any business records normally used for a sale. Irs tax form 1040 ez See Model Certificate K in the Appendix. Irs tax form 1040 ez   A certificate expires on the earliest of the following dates. Irs tax form 1040 ez The date 1 year after the effective date (not earlier than the date signed) of the certificate. Irs tax form 1040 ez The date the buyer provides the seller a new certificate or notice that the current certificate is invalid. Irs tax form 1040 ez The date the IRS or the buyer notifies the seller that the buyer's right to provide a certificate has been withdrawn. Irs tax form 1040 ez   The buyer must provide a new certificate if any information on a certificate has changed. Irs tax form 1040 ez   The IRS may withdraw the buyer's right to provide a certificate if the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate. Irs tax form 1040 ez Exempt use. Irs tax form 1040 ez   The rate on kerosene for use in aviation is $. Irs tax form 1040 ez 001 (LUST tax) if it is removed from any refinery or terminal directly into the fuel tank of an aircraft for an exempt use. Irs tax form 1040 ez An exempt use includes kerosene for the exclusive use of a state or local government. Irs tax form 1040 ez There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. Irs tax form 1040 ez Flash title transaction. Irs tax form 1040 ez   A position holder is not liable for tax if, among other conditions, it obtains a certificate (described above) from the operator of the aircraft into which the kerosene is delivered. Irs tax form 1040 ez In a “flash title transaction” the position holder sells the kerosene to a wholesale distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is being removed from a terminal into the fuel tank of an aircraft. Irs tax form 1040 ez In this case, the position holder will be treated as having a certificate from the operator of the aircraft if: The aircraft operator puts the reseller's name, address, and EIN on the certificate in place of the position holder's information; and The reseller provides the position holder with a statement of the kerosene reseller. Irs tax form 1040 ez Reseller statement. Irs tax form 1040 ez   This is a statement that is signed under penalties of perjury by a person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains: The reseller's name, address, and EIN; The position holder's name, address, and EIN; and A statement that the reseller has no reason to believe that any information in the accompanying aircraft operator's certificate is false. Irs tax form 1040 ez Credits or Refunds. Irs tax form 1040 ez   A claim may be made by the ultimate purchaser (the operator) for taxed kerosene for use in aviation 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). Irs tax form 1040 ez A claim may be made by a registered ultimate vendor for certain sales. Irs tax form 1040 ez For more information, see chapter 2. Irs tax form 1040 ez Other Fuels (Including Alternative Fuels) Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under section 4081. Irs tax form 1040 ez Other Fuels include alternative fuels. Irs tax form 1040 ez Alternative fuels are: Liquefied petroleum gas (LPG), “P Series” fuels, Compressed natural gas (CNG) (discussed later), Liquefied hydrogen, Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, Liquid fuel derived from biomass, Liquefied natural gas (LNG), and Liquefied gas derived from biomass. Irs tax form 1040 ez Liquefied petroleum gas includes propane, butane, pentane, or mixtures of those products. Irs tax form 1040 ez Qualified methanol and ethanol fuels. Irs tax form 1040 ez   Qualified ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from coal, including peat. Irs tax form 1040 ez The tax rates are listed in the Instructions for Form 720. Irs tax form 1040 ez Partially exempt methanol and ethanol fuels. Irs tax form 1040 ez   A reduced tax rate applies to these fuels. Irs tax form 1040 ez Partially exempt ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from natural gas. Irs tax form 1040 ez The tax rates are listed in the Instructions for Form 720. Irs tax form 1040 ez Motor vehicles. Irs tax form 1040 ez   Motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics. Irs tax form 1040 ez They are propelled by a motor. Irs tax form 1040 ez They are designed for carrying or towing loads from one place to another, regardless of the type of material or load carried or t