The new year is ushered in with thoughts of a clean slate and resolutions about change we want to see in our lives. This year, the new year is accompanied by changes in Federal and South Carolina tax laws. One of the law changes involves the South Carolina motor fuel user fee. Most everyone is affected by this change. Following is a synopsis of the law change and how it affects you.
WHAT HAS CHANGED?
The South Carolina Infrastructure and Economic Development Reform Act (“the Act”) was passed into law by the SC General Assembly in May 2017. The Act increased the motor fuel user fee by two cents per gallon beginning July 2017 and provided that the user fee would increase by two cents per gallon for each of the next five years.
To offset the effect of this user fee increase on South Carolina taxpayers, the Act provided for a resident taxpayer refundable income tax credit for up to two private passenger vehicles per taxpayer.
HOW DOES THIS AFFECT YOU?
Whether you have noticed it or not, you have been paying two more cents per gallon of gas each time you visited the gas pump since July 2017. This two cents will increase again each July until July 2022 when the user fee increase is fully phased in at 12 cents per gallon.
Beginning with the South Carolina resident income tax return filed in 2019 for the 2018 tax year, resident taxpayers will be allowed to take a refundable income tax credit related to the purchase of motor fuel in South Carolina for private passenger vehicles. Resident taxpayers include an individual, partnership, corporation, trust, estate or any other entity subject to South Carolina income tax and required to file an income tax return. Generally, a private passenger vehicle is one that is registered in South Carolina and carries 10 or fewer persons.
WHAT DO YOU NEED TO DO?
You need to maintain records that will enable you to calculate the credit. Taxpayers should accumulate receipts from fuel purchases and vehicle preventative maintenance costs paid for during 2018. Taxpayers can receive a credit equal to the lesser of the motor fuel user fee increase or the vehicle’s preventative maintenance (new tires, oil changes, regular maintenance, etc.) paid for during 2018.
HOW MUCH CREDIT CAN I EXPECT TO RECEIVE?
The amount of the credit you receive depends on the amount of fuel you purchase in South Carolina and the amount of preventative maintenance costs you incur. For illustrative purposes, let’s assume that during 2018 you pay $200 for preventative maintenance and drive 15,000 miles. Further, assume you average 20 miles per gallon of gas. So, you would purchase approximately 750 gallons of gas in 2018. The allowable 2018 credit amount is 3 cents per gallon. Therefore, your 2018 credit would be $22.50 which is the lesser of $200 (preventative maintenance) or $22.50 (3 cents per gallon of gas purchased in 2018).
This is a general description of the South Carolina Refundable Motor Fuel Income Tax Credit. As with all tax law, there are nuances and exceptions. If you have specific questions about how this or any other tax law affects you, please let us know and we will be happy to address your particular tax situation.