Farming and Fuel Credits
Sep 23, 2015
It’s that time of the year again when farmers put in long hours harvesting their products from the field. Filling the fuel tanks of all the machinery can become pricey, but fuel tax credits can help reduce the financial burden.
Even though many farmers purchase dyed diesel without having to pay federal taxes, they may still be eligible for the fuel tax credit for other fuels utilized for business. The fuel tax credit is done on Form 4136 and is a refundable credit to the taxpayer. This means even if the credit is more than the amount of tax you owe, you will receive a refund for the balance. Here are a few common examples of how the credit could be used for you:
- Off road use of gasoline-powered pickups or trucks
- Off road use of gasoline-powered tractors/combines
- Off road use of gasoline powered automobiles
- Compressors operated on the farm powered by gasoline
- Backup generators powered by gasoline (or diesel if undyed)
- Lawn mowing/landscaping equipment used in farm areas
- Maintenance shed equipment (any gas operated items used to repair machinery)
- Gas used in ATV’s
- Use of propane powered equipment
Note: If you have propane powered equipment, such as a forklift, you must register the equipment with the IRS in order to claim the fuel used for this purpose.
There may be other ways of receiving this credit which are not listed above. If you think you may be eligible, talk to your tax advisor. Proper supporting documentation will be required. If you are eligible, you are required to pick-up the credit as income for the farm in the following year. Even with this being the case, the fuel tax credit could save you thousands of dollars in taxes per year.
By: Ellie Herr, Staff Accountant