If your business pushes dirt around with machines or perhaps runs generators and power equipment at construction sites, sift back through your fuel receipts at tax time. You might dig up a write-off for your return!
Most farmers probably know that the diesel fuel running through their tractor is exempt from federal fuel excise taxes. But, many other small businesses, such as landscapers and building contractors, also can take advantage of the tax break given for off-highway use of gasoline and other fuels, EricJohn Ltd. owner Eric Buechler says. By the way, for 2016, those “other” fuels also include alternative mixtures, such as biodiesel and compressed natural gas.
Now, if you like to go off-roading for pleasure, enjoy yourself but don’t try this tax dodge. It’s only available for doing business, the Internal Revenue Service says. So, you generally can’t claim fuel for snowmobiles, all-terrain vehicles, chain saws, riding lawn mowers, etc. that are for personal use. Vehicles that must be licensed for highway use, such as pick-up trucks, also don’t qualify.
But landscape businesses can take tax credits for fuel used in bulldozers, digging equipment or even lawn mowers at job sites. (The amount varies with the type of fuel.) Likewise, construction contractors can write off part of the cost of gas or other fuel to power forklifts, compressors, power saws and machinery used in building.
To make the claim, you’ll have to declare gallons and types of fuel bought, and you (or your business) must be the “ultimate purchaser.” That’s done on IRS Form 4136, a four-page form showing fuels and deductible rates.
EricJohn Ltd. can guide small business owners through the ruts of the off-highway credit that are bogging them down.
As spring approaches, you might also want to know about one activity that does not work for fuel tax credits. In instructions for the IRS form, the tax collectors specifically say that “processing maple sap into maple syrup or maple sugar” is not considered farming, so it is not eligible for the tax break.