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2012 Federal Tax Return

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2012 Federal Tax Return

2012 federal tax return 4. 2012 federal tax return   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. 2012 federal tax return However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. 2012 federal tax return For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. 2012 federal tax return This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. 2012 federal tax return The student loan interest deduction is taken as an adjustment to income. 2012 federal tax return This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). 2012 federal tax return This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. 2012 federal tax return Table 4-1. 2012 federal tax return Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. 2012 federal tax return Do not rely on this table alone. 2012 federal tax return Refer to the text for complete details. 2012 federal tax return Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. 2012 federal tax return Loan qualifications   Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. 2012 federal tax return Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. 2012 federal tax return Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. 2012 federal tax return Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). 2012 federal tax return Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. 2012 federal tax return It includes both required and voluntary interest payments. 2012 federal tax return Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. 2012 federal tax return Loans from the following sources are not qualified student loans. 2012 federal tax return A related person. 2012 federal tax return A qualified employer plan. 2012 federal tax return Your dependent. 2012 federal tax return   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. 2012 federal tax return You can find more information about dependents in Publication 501. 2012 federal tax return Exceptions. 2012 federal tax return   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. 2012 federal tax return An individual can be your dependent even if you are the dependent of another taxpayer. 2012 federal tax return An individual can be your dependent even if the individual files a joint return with a spouse. 2012 federal tax return An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). 2012 federal tax return Reasonable period of time. 2012 federal tax return   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. 2012 federal tax return   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. 2012 federal tax return The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. 2012 federal tax return   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. 2012 federal tax return Academic period. 2012 federal tax return   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. 2012 federal tax return In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. 2012 federal tax return Eligible student. 2012 federal tax return   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. 2012 federal tax return Enrolled at least half-time. 2012 federal tax return   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. 2012 federal tax return   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 2012 federal tax return However, the standard may not be lower than any of those established by the U. 2012 federal tax return S. 2012 federal tax return Department of Education under the Higher Education Act of 1965. 2012 federal tax return Related person. 2012 federal tax return   You cannot deduct interest on a loan you get from a related person. 2012 federal tax return Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. 2012 federal tax return ), Your lineal descendants (children, grandchildren, etc. 2012 federal tax return ), and Certain corporations, partnerships, trusts, and exempt organizations. 2012 federal tax return Qualified employer plan. 2012 federal tax return   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. 2012 federal tax return Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. 2012 federal tax return They include amounts paid for the following items. 2012 federal tax return Tuition and fees. 2012 federal tax return Room and board. 2012 federal tax return Books, supplies, and equipment. 2012 federal tax return Other necessary expenses (such as transportation). 2012 federal tax return The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 2012 federal tax return Eligible educational institution. 2012 federal tax return   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 2012 federal tax return S. 2012 federal tax return Department of Education. 2012 federal tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2012 federal tax return   Certain educational institutions located outside the United States also participate in the U. 2012 federal tax return S. 2012 federal tax return Department of Education's Federal Student Aid (FSA) programs. 2012 federal tax return   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. 2012 federal tax return   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. 2012 federal tax return The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. 2012 federal tax return    The educational institution should be able to tell you if it is an eligible educational institution. 2012 federal tax return Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. 2012 federal tax return Employer-provided educational assistance. 2012 federal tax return See chapter 11, Employer-Provided Educational Assistance . 2012 federal tax return Tax-free distribution of earnings from a Coverdell education savings account (ESA). 2012 federal tax return See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. 2012 federal tax return Tax-free distribution of earnings from a qualified tuition program (QTP). 2012 federal tax return See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. 2012 federal tax return U. 2012 federal tax return S. 2012 federal tax return savings bond interest that you exclude from income because it is used to pay qualified education expenses. 2012 federal tax return See chapter 10, Education Savings Bond Program . 2012 federal tax return The tax-free part of scholarships and fellowships. 2012 federal tax return See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2012 federal tax return Veterans' educational assistance. 2012 federal tax return See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2012 federal tax return Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2012 federal tax return Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. 2012 federal tax return Loan origination fee. 2012 federal tax return   In general, this is a one-time fee charged by the lender when a loan is made. 2012 federal tax return To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. 2012 federal tax return A loan origination fee treated as interest accrues over the term of the loan. 2012 federal tax return   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. 2012 federal tax return If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. 2012 federal tax return The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. 2012 federal tax return A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. 2012 federal tax return Example. 2012 federal tax return In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. 2012 federal tax return The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. 2012 federal tax return Bill began making payments on his student loan in 2013. 2012 federal tax return Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. 2012 federal tax return Bill's loan is payable in 120 equal monthly payments. 2012 federal tax return He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). 2012 federal tax return Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. 2012 federal tax return To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. 2012 federal tax return Capitalized interest. 2012 federal tax return   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. 2012 federal tax return Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. 2012 federal tax return No deduction for capitalized interest is allowed in a year in which no loan payments were made. 2012 federal tax return Interest on revolving lines of credit. 2012 federal tax return   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. 2012 federal tax return See Qualified Education Expenses , earlier. 2012 federal tax return Interest on refinanced student loans. 2012 federal tax return   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. 2012 federal tax return    If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. 2012 federal tax return Voluntary interest payments. 2012 federal tax return   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. 2012 federal tax return Example. 2012 federal tax return The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. 2012 federal tax return He began making payments as required. 2012 federal tax return In September 2013, Roger enrolled in graduate school on a full-time basis. 2012 federal tax return He applied for and was granted deferment of his loan payments while in graduate school. 2012 federal tax return Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. 2012 federal tax return Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. 2012 federal tax return Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. 2012 federal tax return To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. 2012 federal tax return Example. 2012 federal tax return In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. 2012 federal tax return The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. 2012 federal tax return The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. 2012 federal tax return At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. 2012 federal tax return The loan is payable over 60 months, with a payment of $200. 2012 federal tax return 51 due on the first of each month, beginning November 2013. 2012 federal tax return Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. 2012 federal tax return However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). 2012 federal tax return Payment Date   Payment   Stated Interest   Principal November 2013   $200. 2012 federal tax return 51   $44. 2012 federal tax return 27   $156. 2012 federal tax return 24 December 2013   $200. 2012 federal tax return 51   $43. 2012 federal tax return 62   $156. 2012 federal tax return 89 Totals   $401. 2012 federal tax return 02   $87. 2012 federal tax return 89   $313. 2012 federal tax return 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. 2012 federal tax return 89. 2012 federal tax return Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). 2012 federal tax return A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. 2012 federal tax return Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. 2012 federal tax return Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. 2012 federal tax return 02 ($87. 2012 federal tax return 89 + $10 + $303. 2012 federal tax return 13). 2012 federal tax return For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. 2012 federal tax return She also will apply the remaining amount of capitalized interest ($625 − $303. 2012 federal tax return 13 = $321. 2012 federal tax return 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. 2012 federal tax return Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. 2012 federal tax return Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. 2012 federal tax return Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. 2012 federal tax return Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. 2012 federal tax return For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. 2012 federal tax return When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. 2012 federal tax return Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. 2012 federal tax return Your filing status is any filing status except married filing separately. 2012 federal tax return No one else is claiming an exemption for you on his or her tax return. 2012 federal tax return You are legally obligated to pay interest on a qualified student loan. 2012 federal tax return You paid interest on a qualified student loan. 2012 federal tax return Claiming an exemption for you. 2012 federal tax return   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. 2012 federal tax return Example 1. 2012 federal tax return During 2013, Josh paid $600 interest on his qualified student loan. 2012 federal tax return Only he is legally obligated to make the payments. 2012 federal tax return No one claimed an exemption for Josh for 2013. 2012 federal tax return Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. 2012 federal tax return Example 2. 2012 federal tax return During 2013, Jo paid $1,100 interest on her qualified student loan. 2012 federal tax return Only she is legally obligated to make the payments. 2012 federal tax return Jo's parents claimed an exemption for her on their 2013 tax return. 2012 federal tax return In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. 2012 federal tax return Interest paid by others. 2012 federal tax return   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. 2012 federal tax return Example 1. 2012 federal tax return Darla obtained a qualified student loan to attend college. 2012 federal tax return After Darla's graduation from college, she worked as an intern for a nonprofit organization. 2012 federal tax return As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. 2012 federal tax return This payment was treated as additional compensation and reported in box 1 of her Form W-2. 2012 federal tax return Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. 2012 federal tax return Example 2. 2012 federal tax return Ethan obtained a qualified student loan to attend college. 2012 federal tax return After graduating from college, the first monthly payment on his loan was due in December. 2012 federal tax return As a gift, Ethan's mother made this payment for him. 2012 federal tax return No one is claiming a dependency exemption for Ethan on his or her tax return. 2012 federal tax return Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. 2012 federal tax return No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). 2012 federal tax return Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. 2012 federal tax return However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. 2012 federal tax return You can use Worksheet 4-1. 2012 federal tax return Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. 2012 federal tax return Form 1098-E. 2012 federal tax return   To help you figure your student loan interest deduction, you should receive Form 1098-E. 2012 federal tax return Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. 2012 federal tax return   For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. 2012 federal tax return Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. 2012 federal tax return However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. 2012 federal tax return See Allocating Payments Between Interest and Principal , earlier. 2012 federal tax return    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. 2012 federal tax return The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. 2012 federal tax return Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). 2012 federal tax return You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). 2012 federal tax return Modified adjusted gross income (MAGI). 2012 federal tax return   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. 2012 federal tax return However, as discussed below, there may be other modifications. 2012 federal tax return Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. 2012 federal tax return Table 4-2. 2012 federal tax return Effect of MAGI on Student Loan Interest Deduction IF your filing status is. 2012 federal tax return . 2012 federal tax return . 2012 federal tax return AND your MAGI is. 2012 federal tax return . 2012 federal tax return . 2012 federal tax return THEN your student loan interest deduction is. 2012 federal tax return . 2012 federal tax return . 2012 federal tax return single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. 2012 federal tax return more than $60,000  but less than $75,000 reduced because of the phaseout. 2012 federal tax return $75,000 or more eliminated by the phaseout. 2012 federal tax return married filing joint return not more than $125,000 not affected by the phaseout. 2012 federal tax return more than $125,000 but less than $155,000 reduced because of the phaseout. 2012 federal tax return $155,000 or more eliminated by the phaseout. 2012 federal tax return MAGI when using Form 1040A. 2012 federal tax return   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). 2012 federal tax return MAGI when using Form 1040. 2012 federal tax return   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. 2012 federal tax return MAGI when using Form 1040NR. 2012 federal tax return   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). 2012 federal tax return MAGI when using Form 1040NR-EZ. 2012 federal tax return   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). 2012 federal tax return Phaseout. 2012 federal tax return   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. 2012 federal tax return To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. 2012 federal tax return The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). 2012 federal tax return The denominator is $15,000 ($30,000 in the case of a joint return). 2012 federal tax return Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. 2012 federal tax return Example 1. 2012 federal tax return During 2013 you paid $800 interest on a qualified student loan. 2012 federal tax return Your 2013 MAGI is $145,000 and you are filing a joint return. 2012 federal tax return You must reduce your deduction by $533, figured as follows. 2012 federal tax return   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). 2012 federal tax return Example 2. 2012 federal tax return The facts are the same as in Example 1 except that you paid $2,750 interest. 2012 federal tax return Your maximum deduction for 2013 is $2,500. 2012 federal tax return You must reduce your maximum deduction by $1,667, figured as follows. 2012 federal tax return   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). 2012 federal tax return Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. 2012 federal tax return However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. 2012 federal tax return Student Loan Interest Deduction Worksheet at the end of this chapter. 2012 federal tax return Claiming the Deduction The student loan interest deduction is an adjustment to income. 2012 federal tax return To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). 2012 federal tax return Worksheet 4-1. 2012 federal tax return Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. 2012 federal tax return Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. 2012 federal tax return 1. 2012 federal tax return Enter the total interest you paid in 2013 on qualified student loans. 2012 federal tax return Do not enter  more than $2,500 1. 2012 federal tax return   2. 2012 federal tax return Enter the amount from Form 1040, line 22 2. 2012 federal tax return       3. 2012 federal tax return Enter the total of the amounts from Form 1040,  lines 23 through 32 3. 2012 federal tax return           4. 2012 federal tax return Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. 2012 federal tax return           5. 2012 federal tax return Add lines 3 and 4 5. 2012 federal tax return       6. 2012 federal tax return Subtract line 5 from line 2 6. 2012 federal tax return       7. 2012 federal tax return Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. 2012 federal tax return       8. 2012 federal tax return Enter any foreign housing deduction (Form 2555, line 50) 8. 2012 federal tax return       9. 2012 federal tax return Enter the amount of income from Puerto Rico you are excluding 9. 2012 federal tax return       10. 2012 federal tax return Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. 2012 federal tax return       11. 2012 federal tax return Add lines 6 through 10. 2012 federal tax return This is your modified adjusted gross income 11. 2012 federal tax return   12. 2012 federal tax return Enter the amount shown below for your filing status 12. 2012 federal tax return     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. 2012 federal tax return Is the amount on line 11 more than the amount on line 12?       □ No. 2012 federal tax return Skip lines 13 and 14, enter -0- on line 15, and go to line 16. 2012 federal tax return       □ Yes. 2012 federal tax return Subtract line 12 from line 11 13. 2012 federal tax return   14. 2012 federal tax return Divide line 13 by $15,000 ($30,000 if married filing jointly). 2012 federal tax return Enter the result as a decimal  (rounded to at least three places). 2012 federal tax return If the result is 1. 2012 federal tax return 000 or more, enter 1. 2012 federal tax return 000 14. 2012 federal tax return . 2012 federal tax return 15. 2012 federal tax return Multiply line 1 by line 14 15. 2012 federal tax return   16. 2012 federal tax return Student loan interest deduction. 2012 federal tax return Subtract line 15 from line 1. 2012 federal tax return Enter the result here  and on Form 1040, line 33. 2012 federal tax return Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. 2012 federal tax return ) 16. 2012 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IRS Advisory Committees General Information

The Advisory Committee on Tax Exempt and Government Entities (ACT) is an organized public forum for discussion of relevant employee plans, exempt organizations, tax-exempt bonds, and federal, state, local and Indian tribal government issues. The ACT also enables the IRS to receive regular input on the development and implementation of IRS policy concerning these communities. ACT members present interested public's observations about current or proposed IRS policies, programs and procedures as well as suggest improvements through a yearly final report.


The Art Advisory Panel assists IRS by reviewing and evaluating property appraisals submitted by taxpayers in support of the fair market value claimed in works of art involved in federal income, estate and gift tax cases in accordance with the Internal Revenue Code. The panel consists of 25 renowned art experts who serve without compensation.


The Electronic Tax Administration Advisory Committee (ETAAC) provides an organized public forum for discussion of electronic tax administration issues in support of the overriding goal that paperless filing should be the preferred and most convenient method of filing tax and information returns. ETAAC members convey the public’s perception of the IRS electronic tax administration activities, offer constructive observations about current or proposed policies, programs, and procedures, and suggest improvements. Read past reports.


The Information Reporting Program Advisory Committee (IRPAC) advises the IRS on information reporting issues of mutual concern to the private sector and the federal government. The committee works with the Commissioner and other IRS executives to provide recommendations on a wide range of information reporting administration issues. Membership is balanced to include representation from the taxpaying public, the tax professional community, and small and large businesses, state tax administration, and the payroll community. Read past reports and comment letters.


The Internal Revenue Service Advisory Council (IRSAC) provides an organized public forum for IRS officials and representatives of the public to discuss relevant tax administration issues. The Council advises the IRS on issues that have a substantive effect on federal tax administration. As a body designed to focus on broad policy matters, the IRSAC reviews existing tax policy and/or recommends policies with respect to emerging tax administration issues. The IRSAC suggests operational improvements, offers constructive observations about IRS’ current or proposed policies, programs, and procedures and advises the IRS on particular issues having substantive effect on federal tax administration. Find out what IRSAC is doing now and read past reports.


The Taxpayer Advocacy Panel (TAP) is a group of 75 citizen volunteers who listen to taxpayers, identify taxpayers’ issues, and make suggestions for improving IRS service and customer satisfaction. The Panel is demographically and geographically diverse with taxpayers from all walks of life representing each state, the District of Columbia and Puerto Rico. In 2014, the TAP will also have at least one member living abroad to represent international taxpayers.

Page Last Reviewed or Updated: 28-Feb-2014

The 2012 Federal Tax Return

2012 federal tax return 14. 2012 federal tax return   Excise Taxes Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Fuels Used in FarmingBuyer of fuel, including undyed diesel fuel or undyed kerosene. 2012 federal tax return Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel). 2012 federal tax return Custom application of fertilizer and pesticide. 2012 federal tax return Fuel not used for farming. 2012 federal tax return Dyed Diesel Fuel and Dyed Kerosene Fuels Used in Off-Highway Business Use Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines How To Claim a Credit or RefundCredit only. 2012 federal tax return Claiming a Credit Claiming a Refund Including the Credit or Refund in Income Introduction You may be eligible to claim a credit on your income tax return for the federal excise tax on certain fuels. 2012 federal tax return You may also be eligible to claim a quarterly refund of the fuel taxes during the year, instead of waiting to claim a credit on your income tax return. 2012 federal tax return Whether you can claim a credit or refund depends on whether the fuel was taxed and the purpose (nontaxable use) for which you used the fuel. 2012 federal tax return The nontaxable uses of fuel for which a farmer may claim a credit or refund are generally the following. 2012 federal tax return Use on a farm for farming purposes. 2012 federal tax return Off-highway business use. 2012 federal tax return Uses other than as a fuel in a propulsion engine, such as home use. 2012 federal tax return Table 14-1 presents an overview of credits and refunds that may be claimed for fuels used for the nontaxable uses listed above. 2012 federal tax return See Publication 510, Excise Taxes, for more information. 2012 federal tax return Topics - This chapter discusses: Fuels used in farming Dyed diesel fuel and dyed kerosene Fuels used in off-highway business use Fuels used for household purposes How to claim a credit or refund Including the credit or refund in income Useful Items - You may want to see: Publication 510 Excise Taxes Form (and Instructions) 720 Quarterly Federal Excise Tax Return 4136 Credit for Federal Tax Paid on Fuels 8849 Claim for Refund of Excise Taxes See chapter 16 for information about getting publications and forms. 2012 federal tax return Fuels Used in Farming Owners, operators, and tenants of farms and certain other persons may be eligible to claim a credit or refund of excise taxes on fuel used in the trade or business of farming, when used on a farm in the United States for farming purposes. 2012 federal tax return See Table 14-1 for a list of available fuel tax credits and refunds. 2012 federal tax return Fuel is used on a farm for farming purposes only if used in carrying on a trade or business of farming, on a farm in the United States, and for farming purposes. 2012 federal tax return Farm. 2012 federal tax return   A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms, orchards, plantations, ranches, nurseries, ranges, and feed yards for finishing cattle. 2012 federal tax return It also includes structures such as greenhouses used primarily for raising agricultural or horticultural commodities. 2012 federal tax return A fish farm is an area where fish are grown or raised and not merely caught or harvested. 2012 federal tax return Table 14-1. 2012 federal tax return Fuel Tax Credits and Refunds at a Glance Use this table to see if you can take a credit or refund for a nontaxable use of the fuel listed. 2012 federal tax return Fuel Used On a Farm for Farming Purposes Off-Highway Business Use Household Use or Use Other Than as a Fuel1 Gasoline Credit only Credit or refund None Aviation gasoline Credit only None None Undyed diesel fuel and undyed kerosene Credit or refund Credit or refund2 Credit or refund2 Kerosene for use in aviation Credit or refund None None Dyed diesel fuel and dyed kerosene None None None Other Fuels (including alternative fuels)3 Credit or refund Credit or refund None 1For a use other than as fuel in a propulsion engine. 2012 federal tax return 2Applies to undyed kerosene not sold from a blocked pump or, under certain circumstances, for blending with undyed diesel fuel to be used for heating purposes. 2012 federal tax return See Reg. 2012 federal tax return 48. 2012 federal tax return 6427-10 (b)(1) for the definition of a blocked pump. 2012 federal tax return 3Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under Internal Revenue Code section 4081. 2012 federal tax return It includes the alternative fuels: liquefied petroleum gas (LPG),“P” Series fuels, compressed natural gas (CNG), liquefied hydrogen, any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, liquid fuel derived from biomass, liquid natural gas (LNG), liquefied gas derived from biomass, and compressed gas derived from biomass. 2012 federal tax return Farming purposes. 2012 federal tax return   As the owner, tenant, or operator and the ultimate purchaser of fuel that you purchased, you use the fuel on a farm for farming purposes if you use it in any of the following ways. 2012 federal tax return To cultivate the soil or to raise or harvest any agricultural or horticultural commodity. 2012 federal tax return To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife. 2012 federal tax return To operate, manage, conserve, improve, or maintain your farm and its tools and equipment. 2012 federal tax return To handle, dry, pack, grade, or store any raw agricultural or horticultural commodity. 2012 federal tax return For this use to qualify, you must have produced more than half the commodity so treated during the tax year. 2012 federal tax return The more-than-one-half test applies separately to each commodity. 2012 federal tax return Commodity means a single raw product. 2012 federal tax return For example, apples and peaches are two separate commodities. 2012 federal tax return To plant, cultivate, care for, or cut trees or to prepare (other than sawing logs into lumber, chipping, or other milling) trees for market, but only if these activities are incidental to your farming operations. 2012 federal tax return Your tree operations are incidental only if they are minor in nature when compared to the total farming operations. 2012 federal tax return   If any other person, such as a neighbor or custom operator (independent contractor), performs a service for you on your farm for any of the purposes included in list items (1) or (2), above, you are considered to be the ultimate purchaser who used the fuel on a farm for farming purposes. 2012 federal tax return Therefore, you can still claim the credit or refund for the fuel so used. 2012 federal tax return However, see Custom application of fertilizer and pesticide, later. 2012 federal tax return If the other person performs any other services for you on your farm for purposes not included in list items (1) or (2) above, no one can claim the credit or refund for fuel used on your farm for those other services. 2012 federal tax return Buyer of fuel, including undyed diesel fuel or undyed kerosene. 2012 federal tax return   If doubt exists whether the owner, tenant, or operator of the farm bought the fuel, determine who actually bore the cost of the fuel. 2012 federal tax return For example, if the owner of a farm and his or her tenant equally share the cost of gasoline used on the farm, each can claim a credit for the tax on half the fuel used. 2012 federal tax return Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel). 2012 federal tax return   Usually, the farmer is the only person who can make a claim for credit or refund for the tax on undyed diesel fuel, undyed kerosene, or other fuels (including alternative fuel) used for farming purposes. 2012 federal tax return However, see Custom application of fertilizer and pesticide, next. 2012 federal tax return Also see Dyed Diesel Fuel and Dyed Kerosene, later. 2012 federal tax return Example. 2012 federal tax return Farm owner Haleigh Blue hired custom operator Tyler Steele to cultivate the soil on her farm. 2012 federal tax return Tyler used 200 gallons of undyed diesel fuel that he purchased to perform the work on Haleigh's farm. 2012 federal tax return In addition, Haleigh hired contractor Lee Brown to pack and store her apple crop. 2012 federal tax return Lee bought 25 gallons of undyed diesel fuel to use in packing the apples. 2012 federal tax return Haleigh can claim the credit for the 200 gallons of undyed diesel fuel used by Tyler on her farm because it qualifies as fuel used on the farm for farming purposes. 2012 federal tax return No one can claim a credit for the 25 gallons used by Lee because that fuel was not used for a farming purpose included in list items (1) or (2), above. 2012 federal tax return In the above example, both Tyler Steele and Lee Brown could have purchased dyed (untaxed) diesel fuel for their tasks. 2012 federal tax return Custom application of fertilizer and pesticide. 2012 federal tax return   Fuel used on a farm for farming purposes includes fuel used in the application (including aerial application) of fertilizer, pesticides, or other substances. 2012 federal tax return Generally, the applicator is treated as having used the fuel on a farm for farming purposes. 2012 federal tax return For applicators using highway vehicles, only the fuel used on the farm is exempt. 2012 federal tax return Fuel used traveling on the highway to and from the farm is taxable. 2012 federal tax return Fuel used by an aerial applicator for the direct flight between the airfield and one or more farms is treated as used for a farming purpose. 2012 federal tax return For aviation gasoline, the aerial applicator makes the claim as the ultimate purchaser. 2012 federal tax return For kerosene used in aviation, the ultimate purchaser may make the claim or waive the right to make the claim to the registered ultimate vendor. 2012 federal tax return A sample waiver is included as Model Waiver L in the appendix of Publication 510. 2012 federal tax return A registered ultimate vendor is the person who sells undyed diesel fuel, undyed kerosene, or kerosene for use in aviation to the user (ultimate purchaser) of the fuel for use on a farm for farming purposes. 2012 federal tax return To claim a credit or refund of tax, the ultimate vendor must be registered with the Internal Revenue Service at the time the claim is made. 2012 federal tax return However, registered ultimate vendors cannot make claims for undyed diesel fuel and undyed kerosene sold for use on a farm for farming purposes. 2012 federal tax return Fuel not used for farming. 2012 federal tax return   You do not use fuel on a farm for farming purposes when you use it in any of the following ways. 2012 federal tax return Off the farm, such as on the highway or in noncommercial aviation, even if the fuel is used in transporting livestock, feed, crops, or equipment. 2012 federal tax return For personal use, such as lawn mowing. 2012 federal tax return In processing, packaging, freezing, or canning operations. 2012 federal tax return In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar. 2012 federal tax return All-terrain vehicles (ATVs). 2012 federal tax return   Fuel used in ATVs on a farm for farming purposes, discussed earlier, is eligible for a credit or refund of excise taxes on the fuel. 2012 federal tax return Fuel used in ATVs for nonfarming purposes is not eligible for a credit or refund of the taxes. 2012 federal tax return If ATVs are used both for farming and nonfarming purposes, only that portion of the fuel used for farming purposes is eligible for the credit or refund. 2012 federal tax return Dyed Diesel Fuel and Dyed Kerosene If you purchase dyed diesel fuel or dyed kerosene for a nontaxable use, you must use it only on a farm for farming purposes or for other nontaxable purposes. 2012 federal tax return For example, you should not use dyed diesel fuel in a truck that is used both on the farm for farming purposes and on the highway, even though the highway use is in connection with farm business. 2012 federal tax return Excise tax applies to the fuel used by the truck on the highways. 2012 federal tax return In this situation, undyed (taxed) fuel should be purchased for the truck. 2012 federal tax return You should keep fuel records of the use of the truck on the farm for farming purposes, and for other uses. 2012 federal tax return You may be eligible for a credit or refund for the excise tax on fuel used on the farm for farming purposes. 2012 federal tax return Penalty. 2012 federal tax return   A penalty is imposed on any person who knowingly uses, sells, or alters dyed diesel fuel or dyed kerosene for any purpose other than a nontaxable use. 2012 federal tax return The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. 2012 federal tax return After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. 2012 federal tax return For more information on this penalty, see Publication 510. 2012 federal tax return Fuels Used in Off-Highway Business Use You may be eligible to claim a credit or refund for the excise tax on fuel used in an off-highway business use. 2012 federal tax return Off-highway business use. 2012 federal tax return   This is any use of fuel in a trade or business or in an income-producing activity. 2012 federal tax return The use must not be in a highway vehicle registered or required to be registered for use on public highways. 2012 federal tax return Off-highway business use generally does not include any use in a recreational motorboat. 2012 federal tax return Examples. 2012 federal tax return   Off-highway business use includes the use of fuels in a trade or business in any of the following ways. 2012 federal tax return In stationary machines such as generators, compressors, power saws, and similar equipment; For cleaning ; and In forklift trucks, bulldozers, and earthmovers. 2012 federal tax return   Off-highway nonbusiness (taxable) use of fuel includes: use in minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment. 2012 federal tax return For more information, see Publication 510. 2012 federal tax return Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines You may be eligible to claim a credit or refund for the excise tax on undyed diesel fuel or kerosene used for home heating, lighting, and cooking. 2012 federal tax return This also applies to diesel fuel and kerosene used in a home generator to produce electricity for home use. 2012 federal tax return Home use of a fuel does not include use in a propulsion engine and it is not considered an off-highway business use. 2012 federal tax return How To Claim a Credit or Refund You may be able to claim a credit or refund of the excise tax on fuels you use for nontaxable uses. 2012 federal tax return The basic rules for claiming credits and refunds are listed in Table 14-2 . 2012 federal tax return Table 14-2. 2012 federal tax return Claiming a Credit or Refund of Excise Taxes This table gives the basic rules for claiming a credit or refund of excise taxes on fuels used for a nontaxable use. 2012 federal tax return   Credit Refund Which form to use Form 4136, Credit for Federal Tax Paid on Fuels Form 8849, Claim for Refund of Excise Taxes, and Schedule 1 (Form 8849), Nontaxable Use of Fuels Type of form Annual Quarterly When to file With your income tax return By the last day of the quarter following the last quarter included in the claim Amount of tax Any amount $750 or more1 1You may carry over an amount less than $750 to the next quarter. 2012 federal tax return Keep at your principal place of business all records needed to enable the IRS to verify that you are the person entitled to claim a credit or refund and the amount you claimed. 2012 federal tax return You do not have to use any special form, but the records should establish the following information. 2012 federal tax return The total number of gallons bought and used during the period covered by your claim. 2012 federal tax return The dates of the purchases. 2012 federal tax return The names and addresses of suppliers and amounts bought from each during the period covered by your claim. 2012 federal tax return The nontaxable use for which you used the fuel. 2012 federal tax return The number of gallons used for each nontaxable use. 2012 federal tax return It is important that your records separately show the number of gallons used for each nontaxable use that qualifies as a claim. 2012 federal tax return For more information about recordkeeping, see Publication 583, Starting a Business and Keeping Records. 2012 federal tax return Credit or refund. 2012 federal tax return   A credit is an amount that reduces the tax on your income tax return when you file it at the end of the year. 2012 federal tax return If you meet certain requirements, you may claim a refund during the year instead of waiting until you file your income tax return. 2012 federal tax return Credit only. 2012 federal tax return   You can claim the following taxes only as a credit on your income tax return. 2012 federal tax return Tax on gasoline and aviation gasoline you used on a farm for farming purposes. 2012 federal tax return Tax on fuels (including undyed diesel fuel or undyed kerosene) you used for nontaxable uses if the total for the tax year is less than $750. 2012 federal tax return Tax on fuel you did not include in any claim for refund previously filed for any quarter of the tax year. 2012 federal tax return Claiming a Credit You make a claim for a fuel tax credit on Form 4136 and attach it to your income tax return. 2012 federal tax return Do not claim a credit for any excise tax for which you have filed a refund claim. 2012 federal tax return How to claim a credit. 2012 federal tax return   How you claim a credit depends on whether you are an individual, partnership, corporation, S corporation, trust, or farmers' cooperative association. 2012 federal tax return Individuals. 2012 federal tax return   You claim the credit on the “Credit for federal tax on fuels” line of your Form 1040. 2012 federal tax return If you would not otherwise have to file an income tax return, you must do so to get a fuel tax credit. 2012 federal tax return Partnership. 2012 federal tax return   Partnerships (other than electing large partnerships) claim the credit by including a statement on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 2012 federal tax return , showing each partner's share of the number of gallons of each fuel sold or used for a nontaxable use, the type of use, and the applicable credit per gallon. 2012 federal tax return Each partner claims the credit on his or her income tax return for the partner's share of the fuel used by the partnership. 2012 federal tax return An electing large partnership can claim the credit on the “Other payments” line of Form 1065-B, U. 2012 federal tax return S. 2012 federal tax return Return of Income for Electing Large Partnerships. 2012 federal tax return Other entities. 2012 federal tax return   Corporations, S corporations, farmers' cooperative associations, and trusts make the claim on the appropriate line of their income tax return. 2012 federal tax return When to claim a credit. 2012 federal tax return   You can claim a fuel tax credit on your income tax return for the year you used the fuel. 2012 federal tax return You may be able to make a fuel tax claim on an amended income tax return for the year you used the fuel. 2012 federal tax return A claim for credit or refund of an overpayment must generally be filed within the later of: Three years from the date the original return was filed, or Two years from the date the tax was paid. 2012 federal tax return Claiming a Refund Generally, you may claim a refund of excise taxes on Form 8849. 2012 federal tax return Complete and attach to Form 8849 the appropriate Form 8849 schedule(s). 2012 federal tax return The instructions for Form 8849 and the separate instructions for each schedule explain the requirements for making a claim for refund. 2012 federal tax return If you file Form 720, you can use its Schedule C for your refund claims for the quarter. 2012 federal tax return See the Instructions for Form 720. 2012 federal tax return Do not claim a refund on Form 8849 for any amount for which you have filed or will file a claim on Form 720 or Form 4136. 2012 federal tax return You may file a claim for refund for any quarter of your tax year for which you can claim $750 or more. 2012 federal tax return This amount is the excise tax on all fuels used for a nontaxable use during that quarter or any prior quarter (for which no other claim has been filed) during the tax year. 2012 federal tax return If you cannot claim at least $750 at the end of a quarter, you carry the amount over to the next quarter of your tax year to determine if you can claim at least $750 for that quarter. 2012 federal tax return If you cannot claim at least $750 at the end of the fourth quarter of your tax year, you must claim a credit on your income tax return using Form 4136. 2012 federal tax return Only one claim can be filed for a quarter. 2012 federal tax return You cannot claim a refund for excise tax on gasoline and aviation gasoline used on a farm for farming purposes. 2012 federal tax return You must claim a credit on your income tax return for the tax. 2012 federal tax return How to file a quarterly claim. 2012 federal tax return   File the claim for refund by filling out Schedule 1 (Form 8849) and attaching it to Form 8849. 2012 federal tax return Send it to the address shown in the instructions. 2012 federal tax return If you file Form 720, you can use its Schedule C for your refund claims. 2012 federal tax return See the Instructions for Form 720. 2012 federal tax return When to file a quarterly claim. 2012 federal tax return   You must file a quarterly claim by the last day of the first quarter following the last quarter included in the claim. 2012 federal tax return If you do not file a timely refund claim for the fourth quarter of your tax year, you will have to claim a credit for that amount on your income tax return, as discussed earlier. 2012 federal tax return    In most situations, the amount claimed as a credit or refund will be less than the amount deducted as fuel tax expense because the Leaking Underground Storage Tank (LUST) tax of $0. 2012 federal tax return 001 per gallon is generally not subject to credit or refund. 2012 federal tax return Including the Credit or Refund in Income Include any credit or refund of excise taxes on fuels in your gross income if you claimed the total cost of the fuel (including the excise taxes) as an expense deduction that reduced your income tax liability. 2012 federal tax return Which year you include a credit or refund in gross income depends on whether you use the cash or an accrual method of accounting. 2012 federal tax return Cash method. 2012 federal tax return   If you use the cash method and file a claim for refund, include the refund amount in gross income for the tax year in which you receive the refund. 2012 federal tax return If you claim a credit on your income tax return, include the credit amount in gross income for the tax year in which you file Form 4136. 2012 federal tax return If you file an amended return and claim a credit, include the credit amount in gross income for the tax year in which you receive the credit. 2012 federal tax return Example. 2012 federal tax return Sharon Brown, a farmer who uses the cash method, filed her 2012 Form 1040 on March 3, 2013. 2012 federal tax return On her Schedule F, she deducted the total cost of gasoline (including $110 of excise taxes) used on the farm for farming purposes. 2012 federal tax return Then, on Form 4136, she claimed the $110 as a credit. 2012 federal tax return Sharon reports the $110 as other income on line 8b of her 2013 Schedule F. 2012 federal tax return Accrual method. 2012 federal tax return   If you use an accrual method, include the amount of credit or refund in gross income for the tax year in which you used the fuels. 2012 federal tax return It does not matter whether you filed for a quarterly refund or claimed the entire amount as a credit. 2012 federal tax return Example. 2012 federal tax return Patty Green, a farmer who uses the accrual method, files her 2012 Form 1040 on April 15, 2013. 2012 federal tax return On Schedule F, she deducts the total cost of gasoline (including $155 of excise taxes) she used on the farm for farming purposes during 2012. 2012 federal tax return On Form 4136, Patty claims the $155 as a credit. 2012 federal tax return She reports the $155 as other income on line 8b of her 2012 Schedule F. 2012 federal tax return Prev  Up  Next   Home   More Online Publications