A new income tax credit goes into effect in January 2018, and the South Carolina Department of Revenue (SCDOR) has released guidance to help taxpayers prepare. Beginning July 2017, the motor fuel user fee increased from 16 cents a gallon to 18 cents a gallon. It will increase by two cents a gallon each year for the next five years. The funds raised by the increase will be used for repairs, maintenance, and improvements to South Carolina existing transportation system.
To offset the motor fuel user fee increase, a tax credit was created to allow a resident taxpayer a refundable motor fuel income tax credit.
Taxpayers may claim the motor fuel income tax credit when filing their state income tax returns in 2019. Please note, this credit is applied to your 2018 SC Individual Income Taxes which are filed in 2019.
What You Need to Know
• This is a refundable credit on up to two private passenger motor vehicles or motorcycles registered in South Carolina per resident taxpayer and is provided to offset the motor fuel user fee increase.
• The taxpayer must be a South Carolina resident. A resident may be an individual, partnership, corporation, trust, estate or any other entity subject to South Carolina income tax or required to file an income tax return. A nonresident taxpayer does not qualify for the credit. A resident individual includes a “part-year” resident. A “resident corporation” is a corporation whose principal place of business is located in South Carolina. A “resident partnership” is a partnership whose principal place of business is located in South Carolina. Note: An entity “doing business” in South Carolina whose principal place of business is not in South Carolina does not qualify for the credit.
• Each individual filing a joint return is a “taxpayer.” In other words, there are two taxpayers on a joint return and each resident individual is eligible for a credit. Each spouse may claim a credit for up to two private passenger motor vehicles or motorcycles registered in his or her name in South Carolina during the year. They may not both claim a credit on the same vehicle.
• A sole proprietorship is not regarded as an entity separate from its individual owner. Accordingly, the sole proprietorship is treated as owned by the individual owner and the individual is the taxpayer eligible for the credit.
• To calculate and claim the credit amount and for personal tax records, taxpayers must save receipts and invoices from:
o Fuel purchases beginning in January 2018.
o Vehicle preventive maintenance costs beginning in 2018 (includes new tires, oil changes, and regular vehicle maintenance).
• Taxpayers receive a credit on the lesser amount paid for either the motor fuel user fee increase or the vehicle’s preventative maintenance.
• Taxpayer’s will calculate and claim the credit on Form I-385, “Motor Fuel Income Tax Credit” when filing state income tax returns in 2019. (This form will be available in January 2019).
If you have any other questions regarding this Motor Fuel Income Tax Credit, don’t hesitate to call our office!