The Chronicles Of Grant County
Federal Tax Credits For Farmers And Ranchers Using Fuel For Agricultural Purposes
The IRS offers information on Federal tax credits available to farmers and ranchers that use fuel off-the-highway for agricultural purposes. (The logo was provided courtesy of the IRS.)Farmers and ranchers in Catron, Grant, Hidalgo, and Grant Counties have the ability to seek tax credits if they have used fuel for agricultural purposes at their farms and ranches.
The amounts of the credits could be modest or could be considerable, depending on the type and the amount of fuel used for farming or ranching operations.
Each time someone purchases a gallon of gasoline, for example, the price paid includes a Federal fuel tax. These taxes have been assessed for the purpose of highway construction, maintenance, and repair.
That Federal tax, though, does not apply to fuel used for off-the-highway purposes.
To get any of that fuel tax money back, taxpayers have to file a specific form with the Internal Revenue Service (IRS): IRS Form 4136 for Credit for Federal Tax Paid On Fuels.
This Federal tax credit is available for farmers and ranchers in Southwest New Mexico when they purchase gasoline, undyed diesel fuel, and undyed kerosene fuel.
The specific tax credit amounts are 18.3 cents per gallon of gasoline, 24.3 cents per gallon of undyed diesel fuel, and 24.3 cents per gallon of undyed kerosene.
The credit is based on the number of gallons of each type of fuel used on a farm or ranch.
“A farm,” according to the IRS, “includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms; orchards; plantations; ranches; nurseries; ranges; and feed yards for fattening cattle. It also includes structures such as greenhouses used primarily for the raising of agricultural or horticultural commodities...”
Credits for fuel taxes are generally available when a farmer or rancher, for example, uses the fuel to operate tractors or other equipment, when they use a car or pick-up truck to travel about their farm or ranch, to heat a structure, in the application of fertilizers and pesticides, or for other farming or ranching purposes.
Fuel used for personal purposes – such as when someone mows the lawn at their home – does not qualify for credits.
Farmers and ranchers need to keep records documenting their usage of each type of fuel for which they are requesting credit.
IRS Form 4136 is to be filed at the same time a farmer or rancher files their Federal income taxes.
While most Americans are required to file their Federal income tax forms by April 15 each year, some farmers and ranchers file their Federal income tax forms by March 3.
Though it’s not required – some farmers and ranchers can wait until April 15 like other Americans – farmers and ranchers need to file their Federal income tax forms by March 3 if they don’t make one estimated Federal income tax payment by January 15. The estimated tax payment is for the taxes due for the previous year.
That estimated Federal income tax payment is required to be either the amount of the Federal income taxes due for the year prior to the previous year or 66.67% of the amount of the Federal income tax due for the previous year, whichever is the smaller amount.
For example, for an estimated Federal income tax payment made on January 15, 2025, the amount would have to have been either 100% of the Federal income taxes that were due in 2023 or 66.67% of the Federal income taxes that were due for 2024.
Many farmers and ranchers that had made that one estimated tax payment can then delay filing their Federal income tax forms until April 15.
In comparison, non-farmers and non-ranchers who don’t work for employers that deduct taxes from regular paychecks generally are required to pay estimated Federal income taxes four times each – one estimated tax payment for each individual Federal tax quarter.
The IRS may assess interest and penalties if the estimated taxes are not paid in a timely manner or within the parameters set by the IRS.
Please note that the specific deadlines for filing Federal tax forms can vary depending on the year if the standard deadlines fall on weekends or holidays. In 2025, January 15 and April 15 do not fall on weekends or holidays, so those standard deadlines apply. Because March 1, 2025, is on a Saturday, the deadline is deferred to March 3, 2025.
Before filing for a fuel tax credit from the IRS, a farmer or rancher should be certain that they aren’t already getting an exemption from paying the Federal fuel tax. Fuel deliveries made to farms and ranches may already include an exemption that removes the Federal fuel tax from the invoices for those fuel deliveries. In that case, a farmer or a rancher would not be able to file for a credit for those fuel amounts because they haven’t actually paid the Federal fuel tax.
Credits received for Federal fuel taxes are considered income by the IRS. Farmers and ranchers will likely have to report that income when they file their Federal income tax forms the following year on IRS Schedule 3 – Additional Credits and Payments.
Other businesses – beyond farms and ranches – may also be able to seek these Federal tax credits for fuel utilized for business purposes in off-the-highway situations.
The IRS provides information on fuel tax credits in the agency’s Publication 510 – Excise Taxes (Including Fuel Tax Credits and Refunds), while details about estimated taxes can be found in IRS Publication 505 – Tax Withholding and Estimated Tax.
Please contact the IRS or an accountant, attorney, or another tax professional of your choice to determine whether you might be able to seek credits or refunds for the use of fuel in your farming or ranching operations, the timing to make such requests, and the forms that need to be completed to secure these fuel tax credits or refunds.
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