fuel tax refund ?

Discussion in 'Business Operations' started by The Don'z, Mar 21, 2013.

  1. rlitman

    rlitman LawnSite Bronze Member
    Posts: 1,519

    This is incorrect. You are confusing a "tax deduction" from a "tax credit".

    A credit is money in your pocket. Whatever the credit is, that's what your taxes are reduced by.
    A deduction reduces your taxable income by that amount, but your taxes are then only reduced by that deduction times your tax rate. So you only get back a small fraction of the deduction.

    In this case, getting the credit on off-road fuel use (whether it is for power tools, or vehicles not driven on public highways, or generators, or whatever) will always get you more money back.
     
  2. mkarps

    mkarps LawnSite Member
    Posts: 57

    ok.... I thinkkkkkk I got it now. Reading through the off road refund description it says "If the expense for purchasing the fuel (including the tax) is deducted as a business expense, the credit or refund must be included in gross income by the taxpayer."

    So I can deduct the full portion of fuel, right? In turn lower my tax from that fuel expense deduction...fill out the off road portion for the credit/refund.....but then I do have to claim the refund or credit as additional income which is taxed at my tax rate(25% for example), which is less than 100%. So would be better off claiming rather than not....Yes?

    I hope I've got this figured out...if so thanks again guys. great to have some time to surf lawnsite again but now I just need this snow to melt so I have less time to think about this and can actually get out on the lawns again!! :hammerhead:
     
  3. rlitman

    rlitman LawnSite Bronze Member
    Posts: 1,519

    You deduct the fuel cost as a business expense (at your full tax rate).
    Then get the credit for the off-road tax. That adds to your NEXT year's income (because of when you received the credit), because you deducted the fuel cost already (if you didn't deduct the fuel cost in the first place, then this credit wouldn't be income).

    If your full tax rate is 25%, then you end up with 75% of the credit in your pocket (100% now, but then you pay back the 25% next year, unless you pay quarterly). You still come out ahead.

    Yes, you deduct the full cost of the fuel to the business. The business expense deduction is based on how much the fuel costs.
    The credit for off-road use is to refund you the amount you paid up-front towards road tax. That number is based on gallons, not dollars spent. Because of this disparity, there's no way to get around entering all these numbers.
     
  4. DA Quality Lawn & YS

    DA Quality Lawn & YS LawnSite Fanatic
    Posts: 8,867

    Here in MN you can. You file monthly returns here.
     
  5. The Don'z

    The Don'z LawnSite Member
    Posts: 114

    thanks to everyone for their input, keeping gas records on my tablet as i purchase the fuel, separating truck from equipment.
     
  6. Fvstringpicker

    Fvstringpicker LawnSite Fanatic
    Posts: 7,596

    You're basically right.
     

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