What this line means
A refundable credit for federal excise tax you paid on fuel used for nontaxable purposes. Federal excise tax is built into the price of gasoline and diesel at the pump, but that tax funds highways. If you used the fuel for farming, off-highway business use (construction equipment, generators, boats), or certain other nontaxable purposes, you are entitled to a refund of the excise tax. You calculate it on Form 4136.
Does this apply to you?
- You are a farmer who uses gasoline or diesel in tractors, combines, or other farm equipment that does not travel on public highways
- You operate construction equipment, generators, forklifts, or other off-highway machinery powered by taxable fuel
- You used fuel for a commercial fishing vessel
- You are an aviation operator who paid federal excise tax on fuel used for certain exempt purposes
Easy to overlook
Farmers are the most common claimants and often forget Farmers use large quantities of diesel and gasoline in equipment that never touches a public road. 1 The federal excise tax on diesel is $0.244 per gallon and on gasoline is $0.184 per gallon. A farm using 5,000 gallons of diesel per year is owed $1,220 in fuel tax credits. Many small farmers do not realize this credit exists or assume it is too small to bother with. General filing pattern — farmers and off-highway users miss fuel credit
The credit is fully refundable Unlike most credits on Schedule 3 Part I, the fuel tax credit on this line is refundable. 2 It can generate a refund even if you owe no income tax. This makes it particularly valuable for low-income farmers or small operations with minimal tax liability. IRS Form 4136 Instructions — Credit for Federal Tax Paid on Fuels
Watch out for this
Claiming the credit for fuel used in a vehicle driven on public highways. The federal excise tax on motor fuel specifically funds the Highway Trust Fund. Fuel used in a car, truck, or any vehicle registered for highway use does not qualify for this credit, even if the vehicle is also used for business purposes. The credit is exclusively for off-highway or nontaxable use.
Footnotes
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IRS Form 4136 Instructions, Nontaxable Use of Gasoline and Diesel. https://www.irs.gov/instructions/i4136 ↩
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IRS Form 4136 Instructions, How to Claim the Credit. https://www.irs.gov/instructions/i4136 ↩