Gas Tax Legislation comes with New Income Tax Credits
Irmo, S.C. (June 20, 2017) – Liberty Tax, Inc. (NASDAQ: TAX) - In May 2017, S.C. passed legislature increasing the gas tax for the first time in 30 years. Beginning July 1, 2017, the tax per gallon of motor fuel will go up by two cents each year for six consecutive years.
“We found that many of our customers were not aware of the S.C. Income Tax Credits that were also part of the gas tax legislation,” said Larry Slaughter, a South Carolina franchisee of Liberty Tax Service. “For example, qualifying full-year South Carolina residents will receive a non-refundable Earned Income Tax Credit of up to 125% of their federal Earned Income Tax Credit.”
This is the first time S.C. has offered an Earned Income Tax Credit for residents to offset their income tax liability. Since the Earned Income Tax Credit (EITC or EIC) is a benefit for working people with low to moderate income, this tax savings will be welcomed by anyone who qualifies for it. Although the maximum federal credit won’t be announced until 2018, in 2016, it was $6,269 for taxpayers with three qualifying children.
There is more positive news for S.C.’s college students and/or their parents. Beginning with tax year 2018, the maximum in-state college tuition tax credit available to qualified full-time college students will increase significantly from $850 to $1,500. While only certain students qualify for the credit, since it is a refundable tax credit that can be claimed on the parent’s or student’s individual income tax return, it could offset the expense of higher education.
Another credit increase is coming for working married couples filing a joint income tax return, which makes S.C. even more attractive to those considering moving to the state. This “Two Wage Earner Credit” will increase each year starting in 2018 until it’s fully phased in by 2023, when the credit will apply to up to $50,000 of earnings.
A preventive vehicle maintenance credit will also become available to eligible S.C.’s full-year residents starting with tax year 2018. This credit can be used to offset costs of vehicle maintenance for up to two personal passenger vehicles or up to four vehicles for a married couple filing jointly. According to the legislation, preventive maintenance “includes costs incurred within this State for new tires, oil changes, regular vehicle maintenance, and the like.” S.C. residents will be able to receive a refund of the lesser of each year’s actual preventive vehicle maintenance expenses or the amount they paid in gas taxes resulting from the increase. They can qualify for the refund even if they owe no income tax.
“Although this credit will not be available until the 2018 tax year,” Slaughter said, “I will be advising our clients to begin saving those receipts!” To claim the credit, taxpayers will need to know both the actual amount of preventive maintenance expenses, and 2 how many gallons of gas they purchased.”
Since motorists may be required to document both amounts, keeping these records and receipts now is a good idea.
“Although the S.C. Department of Revenue has not yet issued guidance for documenting the claim for refund, saving your receipts now will help you ‘get in the habit’ and document your pattern of vehicle use and care, if ever needed,” advised Slaughter. “Remember, even if you don’t owe SC income tax or are not required to file a tax return, this preventive maintenance credit could still qualify you for a refund.”
About Liberty Tax, Inc.
Founded in 1997 by CEO John T. Hewitt, Liberty Tax, Inc. (NASDAQ: TAX) is the parent company of Liberty Tax Service. Liberty Tax is one of the fastest-growing tax preparation franchises. Last year, Liberty Tax prepared over two million individual income tax returns in more than 4,400 offices and online. Liberty Tax's online services are available through eSmart Tax, Liberty Online and DIY Tax, and are all backed by the tax professionals at Liberty Tax locations and its nationwide network of approximately 22,000 seasonal tax preparers. Liberty Tax also supports local communities with fundraising endeavors and contributes as a national sponsor for many charitable causes. For a more in-depth look, visit Liberty Tax Service and interact with Liberty Tax on Twitter and Facebook.