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Who Can Take a Credit for Federal Tax Paid On Fuels? 
 
by kmhagen September 26, 2005

Final purchasers, and in some cases, ultimate vendors of certain types of fuels may be able to claim a refund or credit for the federal excise tax that applies on the fuel if it is for specific nontaxable uses, such as on a farm, for off-highway business use, for commercial fishing, in certain types of intercity, local, and school buses, and for exclusive use by a non-profit educational organization.

A credit can be taken for U.S. federal income tax purposes for certain non-taxable uses of fuels.  This credit can be claimed on Form 4136, Credit for Federal Tax Paid on Fuels, filed with the annual federal income tax return.  Certain taxpayers may be entitled to claim a periodic refund for the federal excise tax on fuels, by filing Form 8849, Claim for Refund of Excise Taxes.  A credit can also be claimed on Schedule C of Form 720, Quarterly Federal Excise Tax Return, if a liability for excise taxes is reported on that form.

Types of Fuels That May Qualify for a Credit or Refund

There are different types of fuels for which the final purchaser and user may be able to claim a tax credit for non-taxable use of the fuel.  These fuels include:

  • Gasoline, including all products commonly and commercially sold as gasoline, that have an octane rating of 75 or more and are suitable for use as a motor fuel.  This also includes gasoline blends other than ethanol and methanol fuel, and denatured gasoline.
  • Aviation gasoline, including all special grades of gasoline suitable for use in aviation reciprocating engines.
  • Undyed diesel fuel.  Diesel fuel includes any liquid that without further processing or blending is suitable for use as a fuel in a diesel-powered highway vehicle or train.  Diesel fuel also includes transmix and diesel fuel blendstocks.  Transmix is a by-product of refined products that are mixed while being transported by pipeline.
  • Undyed kerosene.  One of the two grades: No. 1-K and No. 2-K.
  • Aviation-grade kerosene.  Kerosene-type jet fuel.
  • Liquefied petroleum gas (LPG).  Propane, butane, and pentane, or mixtures of those gases.

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