Do You Qualify for the Federal Fuel Tax Credit?

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The Internal Revenue Service has uncovered significant fraud associated with the federal fuel tax credit in recent years and is watching for fraudulent claims this filing season. Before applying this credit to your tax return, the first step is to determine if you qualify for it. The credit is not available to most taxpayers but only to qualified taxpayers, such as those engaged in farming. However, some ineligible taxpayers claim the credit in order to inflate their refunds. Fuel tax credit fraud can result in a penalty of $5,000.

Qualified Taxpayers

The credit is available to qualified taxpayers for the amount of excise taxes included in the price of gasoline used on a farm for farming purposes, for other off-highway business use, by local transit systems, and by the operators of intercity, local or school buses. A special rule applies to diesel and aviation fuel.

Form 4136

Generally, eligible taxpayers may claim fuel taxes as a credit against income tax for the year in which the qualifying use occurred. A claim for credit is made on the taxpayer's income tax return and should be accompanied by Form 4136, "Credit for Federal Tax Paid on Fuels," which is used to compute the credit. The credit may be claimed within three years after the due date for filing the return on which the credit may be claimed or within two years from the time the tax was paid, whichever is later. If the amount of the credit would be $1,000 or more for gasoline or for diesel and special motor fuels used during any of the first three quarters of the tax year ($200 for alcohol mixture), a taxpayer may elect to file a quarterly claim for refund.


A special rule applies to partnerships. Partnerships (other than electing large partnerships) cannot use Form 4136. Instead, they must include a statement on Schedule K-1 (Form 1065) showing the allocation to each partner specifying the number of gallons of each fuel used during the tax year, the applicable credit per gallon, the nontaxable use or sale, and any additional information required to be submitted. For more information about the federal fuel tax credit, contact Doeren Mayhew’s tax advisors today.

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