Fuel tax credits are one of the most overlooked tax benefits available to truck drivers. While most drivers focus on deductions like fuel costs and maintenance, the IRS also offers tax credits for using certain types of fuel and for blending alternative fuels. Unlike deductions that reduce your taxable income, tax credits reduce your actual tax bill dollar for dollar. This fuel tax credit guide explains every credit available and how to claim them.
Understanding fuel tax credits can put real money back in your pocket. For example, if you use 5,000 gallons of B20 biodiesel (20% biodiesel content), you have used 1,000 gallons of pure biodiesel, qualifying for a $1,000 credit (1,000 gal x $1.00). That is a direct dollar-for-dollar reduction in your tax bill. Whether you use biodiesel, renewable diesel, or blended fuels, or you are involved in fuel blending operations, you may qualify for credits worth thousands of dollars. For a broader understanding of how fuel expenses fit into your overall tax picture, see our truck driver tax deductions guide and fuel receipts guide.
Table of Contents
1. Overview of Fuel Tax Credits
Fuel tax credits are incentives created by Congress to encourage the use of alternative and renewable fuels. The credits are part of the Internal Revenue Code (IRC Sections 40-41) and are claimed using specific IRS forms. The most common credits relevant to truck drivers are the biodiesel and renewable diesel credit, the alternative fuel credit, and the fuel blending credit.
These credits work differently from deductions. A tax credit directly reduces the amount of tax you owe, while a deduction reduces your taxable income. A $1,000 tax credit reduces your tax bill by $1,000, while a $1,000 deduction might save you only $220 if you are in the 22% tax bracket. This makes credits significantly more valuable than deductions of the same amount. If the credit exceeds your total tax liability, you may be able to carry it forward or claim a refund in some cases.
2. Biodiesel and Renewable Diesel Credit
The biodiesel and renewable diesel credit provides a tax credit of $1.00 per gallon for biodiesel (B100) and renewable diesel used in a trade or business. To qualify, the fuel must be blended with petroleum diesel or used in its pure form. The credit is available to the person who blends the biodiesel with petroleum diesel, or to the person who uses pure biodiesel in their business. Owner-operators who purchase biodiesel blends like B5, B10, or B20 at the pump may still qualify for the credit if the blender has not already claimed it.
For truck drivers, the most common scenario for claiming the biodiesel credit is when you purchase biodiesel or renewable diesel directly and use it in your truck. You must obtain a certificate from the fuel supplier stating that the fuel qualifies as biodiesel or renewable diesel and that no one else has claimed the credit for that fuel. The credit is claimed using IRS Form 4136 (Credit for Federal Tax Paid on Fuels).
Real-World Biodiesel Credit Example
Consider an owner-operator who fills up at a truck stop that sells B20 biodiesel. Over the course of a year, they purchase 8,000 gallons of B20. Since B20 is 20% biodiesel, they have effectively used 1,600 gallons of pure biodiesel. At $1.00 per gallon credit, that is $1,600 directly off their tax bill. To claim it, they need a certificate from the fuel station confirming the biodiesel content and that no one else has claimed the credit. Some stations provide this automatically; others may need to be asked.
3. Alternative Fuel Credit
The alternative fuel credit provides a tax credit for using alternative fuels like compressed natural gas (CNG), liquefied natural gas (LNG), liquefied petroleum gas (propane), hydrogen, and other fuels. The credit amount is typically $0.50 per gallon of alternative fuel used or gasoline gallon equivalent for gaseous fuels. This credit is designed to encourage the use of non-petroleum fuels in transportation.
Truck drivers who operate natural gas trucks (CNG or LNG) may qualify for this credit. The credit is available to the person who sells the alternative fuel for use as a motor vehicle fuel or who uses it in their own motor vehicle. If you buy natural gas from a public fueling station, the credit is generally claimed by the station. However, if you have a private fueling arrangement or operate your own natural gas fueling equipment, you may be able to claim the credit directly. The credit is claimed on IRS Form 8849 (Claim for Refund of Excise Taxes).
Important: The alternative fuel credit is scheduled to expire periodically and must be extended by Congress. Check the current status of the credit before making fuel purchasing decisions based on the credit. The IRS website and IRS Publication 510 (Excise Taxes) have the most up-to-date information on available credits.
4. Fuel Blending Credit
The fuel blending credit applies to persons who blend biodiesel, renewable diesel, or alternative fuels with petroleum-based fuels. If you mix biodiesel with petroleum diesel to create a blended fuel, you may qualify for a credit of $1.00 per gallon of biodiesel used in the blend. The credit is available to the blender, not the end user, unless the end user performs their own blending.
Most truck drivers do not blend their own fuel and therefore do not qualify for the blending credit directly. However, if you have a bulk fuel storage tank and purchase biodiesel or renewable diesel separately, blending your own fuel could qualify you for the credit. This is more common for fleet operators than for individual owner-operators. If you are considering on-site blending, consult a tax professional to ensure you comply with all IRS requirements for claiming the credit.
5. How to Claim Fuel Credits
Fuel tax credits are claimed using specific IRS forms depending on the type of credit. The most common forms are Form 4136 (Credit for Federal Tax Paid on Fuels) and Form 8849 (Claim for Refund of Excise Taxes). Form 4136 is filed with your annual income tax return and reports credits for biodiesel, renewable diesel, and alternative fuels used in your business. Form 8849 is used to claim refunds of excise taxes on fuels used for non-taxable purposes or for alternative fuel credits.
To claim any fuel credit, you must maintain detailed records including fuel purchase receipts showing the type and quantity of fuel, supplier certificates for biodiesel or renewable diesel, and records of your business use of the fuel. You cannot claim a credit for fuel used for personal purposes. The IRS may require you to substantiate your credit claim during an audit, so proper record keeping is essential. For tips on organizing your fuel records, see our IFTA reporting guide.
6. Fuel Credit Amounts Table
| Credit Type | Rate Per Gallon | Qualifying Fuels | IRS Form |
|---|---|---|---|
| Biodiesel (pure) | $1.00 | B100 biodiesel | Form 4136 |
| Renewable Diesel | $1.00 | Renewable diesel fuel | Form 4136 |
| Biodiesel Blend | $1.00 per gallon of biodiesel in blend | B5, B10, B20 (biodiesel blends) | Form 4136 |
| Alternative Fuel | $0.50 | CNG, LNG, propane, hydrogen | Form 8849 |
| Fuel Blending | $1.00 per gallon of biodiesel blended | Biodiesel mixed with petroleum | Form 4136 |
To calculate your potential credit, multiply the number of qualifying gallons used in your business by the applicable credit rate. For example, if you used 5,000 gallons of B20 biodiesel (which contains 20% biodiesel), you would have used 1,000 gallons of pure biodiesel, qualifying for a $1,000 credit (1,000 gallons x $1.00). The credit directly reduces your tax liability and is claimed when you file your annual tax return.
Pro Tip: If you purchase biodiesel blends at the pump, ask the fuel station for a certificate or statement confirming the percentage of biodiesel in the blend and confirming that the blender has not claimed the credit. Without this documentation, the IRS may disallow your credit claim. Some fuel stations provide this documentation automatically; others may need to be asked.
Frequently Asked Questions
How much is the biodiesel tax credit per gallon?
The biodiesel and renewable diesel credit is $1.00 per gallon of pure biodiesel or renewable diesel used in a trade or business. For blended fuels, the credit applies to the biodiesel content only. For example, B20 contains 20% biodiesel, so the credit on one gallon of B20 is $0.20 (20% of $1.00). The credit is claimed on Form 4136 filed with your tax return.
Can I claim the fuel tax credit as a company driver?
Company drivers generally cannot claim fuel tax credits because they do not own or purchase the fuel used in their trucks. The credit is available to the person who owns the fuel and uses it in their business, which is typically the carrier or owner-operator. If you are a company driver who is reimbursed for fuel, the credit belongs to the carrier, not to you.
What records do I need to keep for fuel tax credits?
You need to maintain detailed records of all fuel purchases, including receipts showing the date, location, number of gallons, fuel type, and price. For biodiesel or renewable diesel credits, you also need a certificate from the supplier confirming the fuel qualifies and that no one else has claimed the credit. You should keep a log of your business miles and fuel usage to substantiate the business-use percentage of the fuel.
What is the difference between Form 4136 and Form 8849?
Form 4136 (Credit for Federal Tax Paid on Fuels) is used to claim a credit against your income tax for federal excise taxes paid on fuels used in your business or for certain alternative fuel credits. Form 8849 (Claim for Refund of Excise Taxes) is used to claim a refund of excise taxes already paid, rather than a credit against income tax. For most truck drivers claiming biodiesel credits, Form 4136 is the correct form.
Can I carry forward unused fuel tax credits?
Fuel tax credits claimed on Form 4136 that exceed your total tax liability can generally be carried back one year and forward up to 20 years. The carryback and carryforward rules for fuel credits are similar to those for general business credits. If you expect your credit to exceed your tax liability, consider whether filing for a refund using Form 8849 might be more advantageous than carrying the credit forward.