If you have your own authority or are leased onto a company that requires you to file your own IFTA, chances are, you have to do the calculations yourself.
Or maybe you are just curious about how it is done.
In either case, there are six steps to follow to accurately calculate your IFTA tax.
I know IFTA can be scary and you may think there's a lot of tedious math involved, but it really isn't so bad if you follow the steps below.
Also, you only need to follow all of the steps in the worst case scenario, which is: you've decided to file your IFTA return by hand and your state doesn't have an online IFTA filing portal.
Before you start, here's how you can make IFTA easier on yourself
First, you can use a tool like Rigbooks that will do the calculations for you.
Since you'd already want to enter your fuel receipts and state-to-state miles as you go—or import them to skip having to enter them by hand—when it comes time to file your IFTA return, you can just run a report with the push of a button.
Second, you can use an ELD that provides an IFTA reporting feature, like KeepTruckin.
Third, you can hire an accountant to do your IFTA filing.
If none of these are an option for you, or you just want to do it yourself, then read on and I'll tell you what you need to do.
What you'll need
- All of your fuel receipts for the reporting quarter.
- All of your state-to-state miles for the reporting quarter.
- The current IFTA tax rates for the reporting quarter (found here: https://www.iftach.org/taxmatrix4/choose_tableqnew.php)
Before we get into the nitty gritty details of how to calculate your IFTA return, here's what we are doing at a high level:
Your IFTA fuel tax is calculated based on how many gallons of fuel you burn in each state.
We won't know that upfront, so we will have to calculate it based on what you do know.
- You know how many miles you traveled in each state.
- You know how many gallons you purchased in each state.
- You'll need to calculate your fuel mileage over the entire quarter.
- You'll need to calculate your total gallons burned in each state using the results from Steps 2 & 3.
- You'll need to calculate your tax owed in each state.
- You'll need to calculate the total amount owed on your IFTA return.
Remember all those miles that you have been tracking from state line to state line? Those are about to come in really handy.
If you were tracking your miles manually, you will need to add those up for each state or Canadian province in which you have traveled during the previous quarter.
If you were using a GPS, ELD, or routing software that kept track for you, you need to find the device's report that gives you the total miles traveled for each state. This may be part of a web portal they provide as a service.
You'll also need to total all miles driven in all states during the quarter for Step 3.
You can do this by adding up all the miles for each state or subtracting the odometer reading from the beginning of the quarter from the odometer reading at the end of the quarter.
Next, add up all the gallons of fuel you purchased in each state. You will also want to keep a running total of all gallons purchased in all states during the quarter for Step 3.
If you have a pile of fuel receipts, this part will not be much fun. You'll need to go through each receipt and add the gallons purchased to the total for the state as well as the running total.
If you are using a fuel card, they may provide a report that gives you this information when you log into your fuel card account.
If you are using Rigbooks trucking software, it will add all this up for you so long as you enter the state purchased when you enter your fuel receipts.
Important note! If your state has an online IFTA return filing portal, you can stop here. All they require you to enter is the state-to-state miles and the total gallons purchased per state and they calculate the rest of the return for you.
You need to know your fuel mileage across all states for the entire quarter (to two decimal places) in order to complete Step 4.
You calculate the fuel mileage for the entire quarter like this:
Total Miles Driven in All States ÷ Total Gallons Purchased in All States = Overall Fuel Mileage
You should have already calculated the Total Miles Driven in All States from Step 1, and the Total Gallons Purchased in All States from Step 2.
Now, calculate your gallons burned in each state.
Total Miles Driven in Each State ÷ Overall Fuel Mileage = Gallons Burned in that State
You will need to do this for every state you traveled in—even if you didn't buy any fuel there.
Then you will calculate the fuel tax required and the fuel tax you already paid to each state (at the pump).
Use the rates table at https://www.iftach.org/taxmatrix4/choose_tableqnew.php to get the latest fuel tax rates for each state.
Calculate the tax required for each state, based on the gallons of fuel you burned there. You will use the results from Step 4.
Total Gallons Burned in Each State x Fuel Tax Rate for that State = Fuel Tax Required for that State
Some states also have a surcharge (currently Indiana, Kentucky, and Virgina). To calculate the surcharge tax owed:
Total Gallons Burned in Each State x Surcharge Rate for that State = Surcharge Required for that State
Next, calculate the fuel tax paid for each state, based on the results from Step 2.
Total Gallons Purchased in Each State x Fuel Tax Rate for that State = Fuel Tax Paid for that State
Finally, you calculate how much tax you actually owe for each state:
Fuel Tax Required for Each State – Fuel Tax Paid in that State = Fuel Tax Owed to that State
Some of these values may be negative, which means you bought more fuel in that state than you burned, and therefore you paid more in fuel taxes to that state than you were required to pay.
If that's the case, you won't get a refund from each state. You just add it all up across all states for your IFTA return, which is Step 6.
For states that charge a surcharge, you will not have paid the surcharge until you file your IFTA return, so it will never be a negative amount.
Now you need to calculate the total amount owed on your IFTA return.
To do this, just add up all the Fuel Tax Owed to Each State values from Step 5. Some of them may be negative and you subtract those amounts from the total.
If your state has an online IFTA filing portal, you can just enter the totals you got from Steps 1 & 2 into the portal and it will calculate your IFTA return and tell you what you owe.
If your state requires a paper filing, then you will need to enter the values from each of the 6 steps above into the appropriate places on the form they provided.
Some of the states' forms will have all the states listed out for you and others will have you write in only the states you actually traveled in.
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More resources for trucking business owners:
- What’s the difference between HVUT, Form 2290, and IFTA?
- "How long do I have to keep these?": FMCSA record retention for owner-operators and small fleet owners
- Top tax filing tips for owner-operators
- Tips for owner-operators with tax problems
- How are fuel surcharges calculated?
- Simple rules for maintaining long-term profitability in your trucking business
- Starting out with an owner-operator trucking business
- Owner-operator expenses: Fixed costs vs variable costs
- Understanding owner-operator expenses and costs
- Gaining half an MPG can put more money in your pocket than adding $90,000 in revenue
- Cutting fuel costs and improving fuel efficiency for Owner Operators
- Top truck-buying tips for owner-operators
- New versus used truck pros and cons table
- Buying a truck: Should you get a new or used rig?
- Preventative maintenance strategies to avoid major repair costs
- IFTA fuel-buying strategies: Where is the best place to buy fuel?
- Calculating your cost per mile
- Owner Operator Expenses - Fixed Costs vs Variable Costs
- How do I calculate IFTA?
- How does IFTA work?
- How did IFTA start?
- What exactly is IFTA?
- Tracking miles for IFTA
- Fitness for the road
- Acronym cheatsheet for the trucking industry