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, and 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 your 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 your company uses 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.
Eligibility rules
Note: You are not due a credit if the diesel fuel was purchased without the federal excise tax added.
A bus used for intercity or local use bus, designed for 20 passengers or more, qualify 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 previous year credits you may have missed.
How about tires? Are you paying the federal excise tax on tires used for intercity, local or school buses? You do not need to! Apply for a federal excise tax exemption number from the IRS. Once received, providing that information to your tire retailer will allow you to purchase and lease those tires without paying the federal excise tax. There is no reason to pay that tax if you are exempt from it! Save over $50 on a typical bus tire, or $400 on a full set. Receive more information from your tire retailer who will be happy to assist.
Let us at BUSBooks guide you in obtaining tax benefits that are available to your company right now!
Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator
BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.