The Fuel Tax Credit provides a refundable credit for fuel used in specific, qualifying work-related activities. It is not available to most taxpayers, and eligibility is limited to certain businesses and uses.
Eligibility Requirements
To claim the credit, you must own or operate a business and meet specific conditions, such as running a farm or purchasing aviation gasoline. The IRS cautions taxpayers not to rely on misleading social media claims, as most individuals do not qualify.
Types of Fuels and Nontaxable Uses
The credit applies only to nontaxable uses of gasoline, aviation gasoline, undyed diesel fuel, and undyed kerosene. Nontaxable uses are defined as situations where the fuel is not used for ordinary driving on public roads. Qualifying nontaxable uses include:
- Operating equipment on a farm for farming purposes
- Off-highway business use in equipment, machines, vehicles, or tools that operate on private property, farms, or construction sites
- Fuel used for commercial fishing
- Certain buses, such as intercity, local, or school buses
The complete list of qualifying uses can be found in the IRS instructions for Form 4136, Credit for Federal Tax Paid on Fuels.
Off-Highway Business Use of Gasoline
Off-highway business use refers to fuel consumption by vehicles, machines, or equipment operated off public roads in the course of business. The Fuel Tax Credit is not available for:
- Vehicles used for personal purposes or commuting to work
- Non-business, off-highway uses such as minibikes, snowmobiles, power lawn mowers, chainsaws, or other yard equipment used for personal purposes
- Any vehicle registered or required to be registered for use on public highways
Examples of Eligible and Non-Eligible Uses
The IRS provides examples to help determine eligibility.
- Eligible: A taxpayer who owns a landscaping business and uses gasoline to power lawn mowers and chainsaws while providing landscaping services to clients can claim the credit for that fuel as off-highway business use.
- Not Eligible: A taxpayer who uses gasoline in a lawn mower to mow their own yard does not qualify. Likewise, using gasoline in a vehicle for personal travel, commuting, or rideshare driving (such as Uber or Lyft) does not meet the requirements.
How to Claim the Credit
To claim the Fuel Tax Credit, file Form 4136 with your tax return. The form requires details on the type of fuel purchased, the quantity, and the qualifying nontaxable use. Contact your Stephano Slack tax manager/partner at 610-687-1600 or TaxInfo@StephanoSlack.com fit see if you qualify.
Author John Quigg, CPA, manager, is a trusted expert in tax, planning, and accounting services for individuals and businesses, with a focus on the construction and real estate industries. He also plays a pivotal role in staff training, workflow scheduling, research, compliance, and quality control. He can be contacted at 610-710-4058 or jquigg@stephanoslack.com.
Disclaimer: This content is for informational purposes only and doesn’t constitute professional advice. Source: IRS
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