Fuel Tax Credit

Wouldn’t it be super cool if we as a nation could reduce our usage of fossil fuels? The federal government says yes, and that is why fuel tax credits exist.

A fuel tax credit is basically a deduction that we, as businesses and/or as individuals, can claim at tax time if we can prove we’re actively participating in the reduction of fossil fuel usage. It goes against our taxable income, which means we could end up owing substantially less.

Businesses get to claim a dollar-for-dollar tax deduction when they use certain approved alternative fuel sources to run their operations. For example, if we retrofit all of the equipment on our farm so that it runs on aviation fuel (seriously), we might be eligible for a fuel tax credit. On a personal level, we might be eligible for a fuel tax credit if we, say, buy an electric car.

Or we might not, and this is where fuel tax credits get really fun. They can vary by location, and they also change over time. What got a big credit five years ago might not get such a big credit today. Also, these credits only kick in if we owe. So if we owe $100 in taxes and we’re eligible to receive $600 in fuel tax credits, they’re only going to apply $100 of that toward our debt, and they’ll hold onto the other $500. We’re not going to get it back. But hey, we’re saving the planet, so who needs that $500 anyway, right?