Not an exciting topic, but sure enough, not all new entrants into the motorcoach industry are aware of this federal tax benefit until they have filed several tax returns. Reasons for this costly oversight may be that the operator had yet to hear of it from industry peers, has not explored all the information that is available at the association level, or that their tax accountant is not aware of industry nuances when it comes to the federal tax code. It is not too late if you are one of these operators. And by the way, welcome to the industry!
Motorcoach operators are eligible for a federal diesel fuel tax credit if any part of their bus operations includes intercity or local transportation, or the transportation of students or school employees. These credits are based on the number of gallons of diesel fuel used for these nontaxable uses. The rates are 17 cents or 24.3 cents per gallon of diesel, depending on what the fuel is used for.
In other words, you are due at least 17 cents per gallon of diesel fuel pumped into your buses and motorcoaches. And if you have not filed for such credits, you are eligible to go back three years and file for the credits. These are credits, dollars back to you, not expense deductions. This credit is fully refundable should your business have no tax liability or can help the company pay any federal taxes due.
Note: You are not due a credit if the diesel fuel was purchased without the federal excise tax added.
Eligibility rules
A bus used for intercity or local travel, designed for 20 or more passengers, qualifies for a tax credit of 17 cents per gallon.
A school bus is defined as a bus used to transport students and employees of schools. Schools are defined as any educational institution with regular faculty, curriculum, and enrolled body of students. Schools are not limited to kindergarten through 12th grades.
Make sure you track the student-purposed miles so you can use your average MPG to determine the gallons used for student runs, which qualify for a higher tax credit of 24.3 cents per gallon. This is not limited to “yellow bus” mileage.
Your company can file for this credit either quarterly or annually. If filed quarterly, use IRS Form 8849 and Schedule 1 of Form 8849 to record your information. Line 3a for student travel, Line 3d for all other. The claim must be filed during the quarter following the last quarter included in the claim and be at least $750.
If you choose to file annually or you are late filing the quarterlies, use IRS Form 4136 and file it with your annual income tax return. Line 3a for Student Travel, Line 3d for all other.
Seek assistance from BUSBooks or your CPA when filing for credits you may have missed in previous years.
The information contained in this communication is general in nature and is not intended, and should not be considered, as legal, accounting, or tax advice provided by BUSBooks, LLC to the reader. The reader is also notified that this material may not apply to or be suitable for the reader’s specific circumstances or needs and may require consideration of additional factors including other tax and non-tax facts and circumstances. BUSBooks, LLC recommends that the reader contact his/her tax professional before taking any action based on this information. BUSBooks, LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.
UMA Member Tracy Fickett, CPA, operates BUSBooks, a specialty accounting firm dedicated to the motorcoach industry. If you have a question, you can reach Fickett at tracy@busbooks.co.
