The focus has been on the impact of new federal tax legislation, particularly with regard to the change in deductions beginning with the 2018 tax year.
While most Americans use the standard deduction on their federal income taxes, the change in deductions for expenses such as state and local taxes, and mortgage interest will impact many. The year will become a test of how effective the new law is in simplifying the filing process by making the standard deduction appealing to nearly all.
As the need to track a seemingly endless trail of expenses for tax purposes may lesson for federal taxes, South Carolina is giving people a reason to get serious about doing so in 2018.
A new income tax credit went into effect on Jan. 1, and the South Carolina Department of Revenue has released guidance to help taxpayers. The credit was approved by the General Assembly as a way to offset the increase in the state gas tax, which is to fund infrastructure repairs.
The state's 16-cent-per-gallon gas tax will increase by 12 cents over six years, to 28.75 cents in 2022. The first 2-cent increment took effect July 1, 2017.
Taxpayers may claim the motor fuel income tax credit when filing their state income tax returns beginning in 2019. The key is tracking expenses in 2018.
“The South Carolina Department of Revenue is committed to keeping taxpayers informed on this new legislation and how it can benefit them. We are here to assist all South Carolina taxpayers in understanding and easily complying when claiming the new motor fuel tax credit,” said Hartley Powell, SCDOR director.
Some things you need to know:
• The refundable credit is on up to two vehicles per resident taxpayer.
• To calculate and claim the credit amount and for personal tax records, taxpayers must save receipts and invoices from fuel purchases beginning Jan. 1 and vehicle preventative maintenance costs beginning in January 2018.
• Taxpayers receive a credit on the lesser amount paid for either the motor fuel user fee increase or the vehicle’s preventative maintenance.
• Taxpayers will calculate and claim the credit on Form I-385 when filing state income tax returns in 2019. The form will be available in January 2019.
During the legislature’s long battle to approve an increase in the gas tax to fund road and bridge improvements, critics of the tax credits for the gas purchases and/or vehicle maintenance called the plan a token gesture.
The belief is that while all motorists will pay the increased gas tax, few will offset the cost by tracking gasoline expenses for a year and keeping track of vehicle preventative maintenance costs.
Doing so is worth considering unless you are among those just wanting to contribute even more to roads than you are paying at the pump. Think about it the next time you decide to punch the “no” button when asked about a receipt.