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Landscaping Businesses – Are you eligible for the Fuel Tax Credit?

The Fuel Tax Credit is a refundable credit for businesses that use certain fuels in qualifying work‑related, nontaxable activities. It is not a broad write‑off for anyone who buys gas and has a side hustle, despite what deceptive social media “strategies” are communicating.  Be careful of social media tax advice. Before you claim the Fuel Tax Credit, check if you’re eligible.

Note: The Fuel Tax Credit is not available to most taxpayers.  To qualify, you must:

  • Own or operate a business
  • Meet certain requirements, such as running a farm or purchasing aviation gasoline

What the Fuel Tax Credit Actually Covers

The credit applies only for nontaxable uses of gasoline, aviation gasoline, undyed diesel and undyed kerosene. Nontaxable uses are purposes where fuel isn’t used for regular driving purposes. Common qualifying nontaxable uses are:

  • On a farm for farming purposes
  • Off-highway business use (for equipment, machines, vehicles and tools that operate on private property, farms, or construction sites, not public roads)
  • Commercial fishing
  • Certain types of buses (intercity, local, or school)

To see the full list of uses refer to the instructions on Form 4136, Credit for Federal Tax Paid on Fuels.

What clearly does not qualify

The IRS highlights several non‑qualifying uses:

  • Fuel for vehicles used for personal activities, commuting, or driving for Uber/Lyft
  • Non‑business off‑highway use such as minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment used personally
  • Fuel used in any vehicle that is registered or required to be registered to drive on public highways

What is an example of an eligible taxpayer

A landscaping company using gasoline in power lawn mowers and chain saws when performing landscaping services for client work qualifies as fuel used for off-highway business use

Made an incorrect claim?

Taxpayers who claimed the credit in error may receive Notice CP321C. The IRS instructs affected taxpayers to either:

  • Follow the directions in the notice, or
  • File an amended return to correct the claim, depending on the situation

Note: The above does not constitute tax advice and is for informational purposes only. Please consult your tax advisor.