Alternative Fuels Tax Credit

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DEFINITION of 'Alternative Fuels Tax Credit'

A non-refundable tax credit awarded to taxpayers who use non-alcohol alternative fuels that are either sold commercially by the taxpayer or used in the taxpayer's vehicles for business. The alternative fuels tax credit is computed by multiplying the number of gallons of alternative fuel or gas by 50 cents (as of 2008).

BREAKING DOWN 'Alternative Fuels Tax Credit'

For the purpose of the credit, there are several types of alternative fuels that qualify, including compressed or liquefied natural gas, liquid petroleum gas, P-series fuels, liquid hydrocarbons and any liquid fuel that is derived from coal. Ethanol, methanol and biodiesel fuels are excluded.