Updates

Maximizing Tax Savings in Construction: Diesel Fuel Tax Credits & Key Filing Insights

September 16, 2024

At Bowers CPAs & Advisors, we have a deep understanding of the unique financial challenges construction companies face. Managing operational costs while complying with complex tax regulations is a daunting task. That’s why we’re here, leveraging our expertise to help you take advantage of every opportunity to reduce your tax burden and streamline your business operations.

In this article, we’ll dive into one of the key tax-saving opportunities available to construction companies: the annual credit claim for undyed diesel fuel used in off-highway activities. We’ll also cover essential filing details to ensure you don’t miss out on valuable tax credits.

Eligibility for Annual Diesel Fuel Credit

You could be eligible for an annual tax credit if your construction business uses undyed diesel fuel for nontaxable purposes. This credit is designed to help you recover federal taxes paid on fuel that’s not used on public highways. Instead, the fuel is utilized for off-road activities—such as operating construction equipment or powering stationary machines.

Eligible uses for the diesel fuel tax credit include:

Stationary Machines: Generators, compressors, power saws, etc.
Construction Equipment: Forklifts, bulldozers, earthmovers, and similar heavy machinery.

If you’re the ultimate purchaser of the fuel and it’s used for these types of off-highway activities, you can likely claim this credit and reduce your overall tax liability.

Conditions for Allowance of Credit

To claim the undyed diesel fuel tax credit, specific conditions must be met:

Nontaxable Use: The diesel fuel must be used for a nontaxable purpose. This means the fuel cannot be used in highway vehicles that are registered or required to be registered for use on public roads.
Minimum Claim Amount: To qualify for the credit, your claim must be for a minimum of $750. If your total claim is less than this amount in any quarter, you can aggregate smaller claims throughout the tax year to reach the minimum required threshold.

By meeting these conditions, you’re eligible to file for the credit and receive a refund for the taxes you’ve paid on the fuel.

How to Complete the Diesel Fuel Tax Credit Claim

When you’re ready to claim the credit, it’s important to ensure your documentation is complete and accurate. Here’s how you can file your claim:

Form 4136: To claim the credit, you’ll need to fill out Form 4136, Credit for Federal Tax Paid on Fuels. This form will require details on the number of gallons used, the type of use (nontaxable), and the amount of the credit being claimed.
Certification Statement: Attach a certification statement to support your claim. This statement should include:

- The number of gallons of diesel fuel used.

- The dates when the fuel was purchased.

- The names and addresses of your suppliers.

- The specific nontaxable use for which the fuel was consumed (e.g., operating bulldozers or generators).

Proper documentation is crucial to ensuring your claim is processed without delays.

Filing Deadlines: (Don’t Miss Out!)

To make sure you receive your credit, it’s essential to stay on top of annual filing deadlines. Here’s what you need to know:

Annual Claims: If you don’t meet the quarterly claim thresholds, you can submit an annual claim using Form 4136 for the income tax year during which the fuel was used. Missing the filing deadline can result in losing the credit, so be sure to file on time.

At Bowers CPAs & Advisors, we recommend keeping detailed records throughout the year so that when the time comes, you can easily aggregate your claim and submit it before the deadline.

About Bowers CPAs & Advisors

Bowers aims to offer helpful information to our clients and friends. Learn more about how we can help should your construction business need consulting and financial services.

Bowers CPAs & Advisors has served private and closely held businesses with strategic financial advice for over 40 years. Whether traditional Tax and Audit, Business Valuation, Accounting/Bookkeeping, Forensic Accounting, or Financial Planning services, our approach is the same:

"Master an in-depth knowledge of our clients and their industry to provide proactive, innovative analysis and recommendations to build and maintain net worth."

At Bowers CPAs & Advisors, we set the tone by being readily available to our clients and maintaining close relationships built on integrity and trust. With 31 Partners and a staff of more than 130 professionals, Bowers CPAs & Advisors has offices in Syracuse, Rochester and Watertown, New York.

Disclaimer: To ensure compliance with requirements imposed by the Department of Treasury, we inform you any U.S. federal tax advice contained in this document or video is not intended for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.