Fuel can be a significant operating cost for business fleets, but did you know some of what you spend on fuel may be refundable? If your business purchases fuel for vehicles or equipment not subject to road taxes, you could be eligible for a fuel tax credit. The Internal Revenue Service (IRS) and certain states enable businesses to recover taxes paid at the pump on fuel used for non-taxable purposes—providing an opportunity to turn those gallons into savings.
Like other deductible business expenses, fuel purchases should be reviewed closely for potential tax credits. This guide outlines the essentials: what a fuel tax credit is, eligibility requirements, and how to file at both the federal and state levels. We’ll also cover how to use fuel cards to easily track qualifying gallons so you can maximize your refund and simplify the filing process.
Table of Contents
- What is a fuel tax credit?
- Who qualifies for the fuel tax credit?
- How to claim fuel tax credit
- How to track qualifying gallons with a fuel card
- How much is the fuel tax credit?
- How to calculate fuel tax credit
What Is a Fuel Tax Credit?
A fuel tax credit is a refund businesses can claim to recover taxes paid on fuel that isn’t subject to road use taxes. Federal and state road taxes, designed to fund the maintenance of highways and other transportation infrastructure, are included in the price of fuel—currently 18.4¢ per gallon for gasoline and 24.4¢ per gallon for diesel at the federal level. However, not all uses of fuel are taxable.
Businesses operating off-road equipment, farm vehicles, or participating in certain exempt industries are not required to pay road taxes, despite still incurring these charges at the pump. To address this, the IRS and state agencies permit companies to file for a fuel tax credit, enabling them to reclaim taxes paid on fuel used for non-taxable purposes.
Who Qualifies for the Fuel Tax Credit?
Your eligibility for a fuel tax credit depends on the specific use of the fuel and the type of vehicle or equipment powered by it. Here are the different types of uses that are eligible for a fuel tax credit:
| No. | Type of Use |
| 1 | On a farm for farming purposes |
| 2 | Off-highway business use (for business use other than in a highway vehicle registered or required to be registered for highway use) |
| 3 | Export |
| 4 | In a boat engaged in commercial fishing |
| 5 | In certain intercity and local buses |
| 6 | In a qualified local bus |
| 7 | In a bus transporting students and employees of schools (school buses) |
| 8 | For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel in the propulsion engine of a train or diesel-powered highway vehicle (but not off-highway business use) |
| 9 | In foreign trade |
| 10 | Certain helicopter and fixed-wing aircraft uses |
| 11 | Exclusive use by a qualified blood collector organization |
| 12 | In a highway vehicle owned by the United States that isn’t used on a highway |
| 13 | Exclusive use by a nonprofit educational organization |
| 14 | Exclusive use by a state, political subdivision of a state, or the District of Columbia |
| 15 | In an aircraft or vehicle owned by an aircraft museum |
| 16 | In military aircraft |
Source: Internal Revenue Service
How to Claim Fuel Tax Credit
If your business qualifies, you’ll need to file for a fuel tax credit at the federal level and with your state (if they offer a fuel tax refund program) when you file your annual taxes.
File for a Federal Fuel Tax Credit: Complete IRS Form 4136
- Download IRS form 4136
- Enter your name and taxpayer identification number
- Find the section for the fuel type that you purchased
- Find the nontaxable use that applies to your business
- Enter the number of gallons that you purchased (that are nontaxable)
- Multiply those gallons by the tax rate (cents per gallon) to calculate the credit amount
- Add up all entries if multiple products were claimed to get the total credit amount
The IRS has instructions for how to enter all of this information onto their form. The total credit amount that you claim is then used when filing your income tax. It’s important that you know (and can show) how many gallons were purchased during the year. In fact, the IRS stipulates that you’ll need to have records of where and when fuel was purchased when claiming a credit.
File for a State Fuel Tax Credit
You should also check whether your state offers a fuel tax refund program. A quick search of your state’s name plus “fuel tax refund” will usually take you to the right page on your state’s government website.
How to Track Qualifying Gallons with a Fuel Card
Manually tracking gallons for a fuel tax credit can be a headache. Paper receipts are easily lost, and credit card statements fail to show the gallons purchased, leaving you searching through paperwork at tax time.
Fuel cards eliminate this hassle by automatically capturing Level 3 data at every transaction, recording details such as gallons, fuel type, vehicle, driver, and fuel taxes. With these records, identifying which gallons qualify for a refund and generating the necessary reports for your fuel tax credit filing becomes straightforward and efficient.
1. Fuel Cards Collect the Data You Need to Identify Qualifying Purchases
Because fuel cards require stations to provide Level 3 data with every purchase, you automatically capture details like gallons, fuel type, vehicle, driver, and odometer. With this information, it’s simple to identify and total the gallons that qualify for a fuel tax credit.
2. Log in to Your Fuel Card Portal to View and Download Reports
You can log in to your fuel card portal and download transaction reports in CSV by account, driver, vehicle, or card to total up gallons for your fuel tax credit. Save the file to your records or access it anytime in your portal if proof of purchases is ever needed for an IRS audit.
3. Sort Transactions by Fuel Type to Summarize Gallons by Qualifying Fuel Type
Once you download your fuel report into CSV, open it in Excel. Then go to the product column and filter for the qualifying fuel type to get all the qualifying transactions. You can total the transactions in the quantity column to get your total for the fuel tax credit form.
| A | B | C | D | E | F | G | H | I | J | |
| 1 | Date | Time | Card | Driver | Vehicle | Product | Quantity | Price | Amount | Odometer |
| 2 | 9/2/2025 | 3:15 PM | 9675352 | BLAKE PALMER | BACK LOADER | DIESEL | 18.453 | $2.85 | $52.59 | 25,987 |
| 3 | 9/2/2025 | 3:18 PM | 9675352 | BLAKE PALMER | GRADER | DIESEL | 15.012 | $2.85 | $42.78 | 28,897 |
4. Sort Transactions by Qualifying Vehicles to Summarize Gallons Purchased by Qualifying Vehicle
If there are specific vehicles or equipment that qualify for the fuel tax credit you can sort the vehicle column to choose vehicles that qualify fuel tax credits.
| A | B | C | D | E | F | G | H | I | J | |
| 1 | Date | Time | Card | Driver | Vehicle | Product | Quantity | Price | Amount | Odometer |
| 2 | 9/2/2025 | 3:15 PM | 5675352 | ELI TURNER | BULLDOZER | CNHG | 12.453 | $2.95 | $36.74 | 3,590 |
| 3 | 9/12/2025 | 6:18 PM | 5675352 | ELI TURNER | BULLDOZER | DIESEL | 15.012 | $3.01 | $46.54 | 3,595 |
5. Drivers Can Use Odometer Field to Identify Qualifying Purchases
At the pump, drivers are prompted to enter both a PIN and the odometer reading before fueling. To clearly identify nontaxable fuel purchases, you can instruct drivers to input a unique value—such as “1”—when making these transactions. Any fueling session logged with “1” in the odometer field will be easily identifiable in your fuel reports as fuel tax credit eligible. This practice is particularly effective for companies operating refrigeration units (reefers). In these cases, a driver records the actual odometer reading when fueling the truck, and then enters “1” during a separate fill for the reefer tank to mark it as a nontaxable purchase.
| A | B | C | D | E | F | G | H | I | J | |
| 1 | Date | Time | Card | Driver | Vehicle | Product | Quantity | Price | Amount | Odometer |
| 2 | 9/2/2025 | 3:15 PM | 8965352 | ALEX MARTINEZ | TRUCK 1 | DIESEL | 112.423 | $3.95 | $443.96 | 356,228 |
| 3 | 9/2/2025 | 3:18 PM | 8965352 | ALEX MARTINEZ | TRUCK 1 | DIESEL | 11.012 | $3.95 | $43.50 | 1 |
How Much is the Fuel Tax Credit?
The per-gallon fuel tax credit amount varies based on both the type of fuel purchased and its intended use. Review the chart below to determine the exact refund rate that applies to your specific situation.
| Type Of Use By Fuel | Refund Rate (Per Gallon) |
| Nontaxable use of gasoline | |
| Off-highway business use | $0.183 |
| Use on a farm for farming purposes | $0.183 |
| Other nontaxable use | $0.183 |
| Exported | $0.184 |
| Nontaxable use of aviation gasoline | |
| Use in commercial aviation (other than foreign trade) | $0.15 |
| Other nontaxable use | $0.193 |
| Exported | $0.194 |
| LUST tax on aviation fuels used in foreign trade | $0.001 |
| Nontaxable use of undyed diesel fuel | |
| Nontaxable use | $0.243 |
| Use on a farm for farming purposes | $0.243 |
| Use in trains | $0.243 |
| Use in certain intercity and local buses | $0.17 |
| Exported | $0.244 |
| Nontaxable use of undyed kerosene (other than kerosene used in aviation) | |
| Nontaxable use taxed at $.244 | $0.243 |
| Use on a farm for farming purposes | $0.243 |
| Use in certain intercity and local buses (see Caution above line 1) | $0.17 |
| Exported | $0.244 |
| Nontaxable use taxed at $.044 | $0.043 |
| Nontaxable use taxed at $.219 | $0.218 |
| Kerosene used in aviation | |
| Kerosene used in commercial aviation (other than foreign trade) taxed at $.244 | $0.200 |
| Kerosene used in commercial aviation (other than foreign trade) taxed at $.219 | $0.175 |
| Nontaxable use (other than use by state or local government) taxed at $.244 | $0.243 |
| Nontaxable use (other than use by state or local government) taxed at $.219 | $0.218 |
| LUST tax on aviation fuels used in foreign trade | $0.001 |
| Sales by registered ultimate vendors of undyed diesel fuel | |
| Use by a state or local government | $0.243 |
| Use in certain intercity and local buses | $0.17 |
| Sales by registered ultimate vendors of undyed kerosene (other than kerosene for use in aviation) | |
| Use by a state or local government | $0.243 |
| Sales from a blocked pump | $0.243 |
| Use in certain intercity and local buses | $0.17 |
| Sales by registered ultimate vendors of kerosene for use in aviation | |
| Use in commercial aviation (other than foreign trade) taxed at $.219 | $0.175 |
| Use in commercial aviation (other than foreign trade) taxed at $.244 | $0.20 |
| Nonexempt use in noncommercial aviation | $0.025 |
| Other nontaxable uses taxed at $.244 | $0.243 |
| Other nontaxable uses taxed at $.219 | $0.218 |
| LUST tax on aviation fuels used in foreign trade | $0.001 |
| Biodiesel, renewable diesel, or sustainable aviation fuel mixture credit | |
| Biodiesel (other than agri-biodiesel) mixtures | $1.00 |
| Agri-biodiesel mixtures | $1.00 |
| Renewable diesel mixtures | $1.00 |
| Nontaxable use of alternative fuel | |
| Liquefied petroleum gas (LPG) | $0.183 |
| “P Series” fuels | $0.183 |
| Compressed natural gas (CNG) | $0.183 |
| Liquefied hydrogen | $0.183 |
| Fischer-Tropsch process liquid fuel from coal (including peat) | $0.243 |
| Liquid fuel derived from biomass | $0.243 |
| Liquefied natural gas (LNG) | $0.243 |
| Liquefied gas derived from biomass | $0.183 |
| Alternative fuel credit | |
| Liquefied petroleum gas | $0.50 |
| “P Series” fuels | $0.50 |
| Compressed natural gas (CNG) | $0.50 |
| Fischer-Tropsch process liquid fuel from coal (including peat) | $0.50 |
| Liquid fuel derived from biomass | $0.50 |
| Liquefied natural gas (LNG) | $0.50 |
| Liquefied gas derived from biomass | $0.50 |
| Compressed gas derived from biomass | $0.50 |
| Registered credit card issuers | |
| Diesel fuel sold for the exclusive use of a state or local government | $0.243 |
| Kerosene sold for the exclusive use of a state or local government | $0.243 |
| Kerosene for use in aviation sold for the exclusive use of a state or local government taxed at $.219 | $0.218 |
| Nontaxable use of a diesel-water fuel emulsion | |
| Nontaxable use | $0.197 |
| Exported | $0.198 |
| Diesel-water fuel emulsion blending | |
| Blender credit | $0.046 |
| Exported dyed fuels and exported gasoline blendstocks | |
| Exported dyed diesel fuel and exported gasoline blendstocks taxed at $.001 | $0.001 |
| Exported dyed kerosene | $0.001 |
Source: Internal Revenue Service
How to Calculate Fuel Tax Credit
| Fuel Tax Credit Refund Formula |
| (Total gallons * federal refund rate) + (total gallons * state refund rate) = total refund |
To calculate your total fuel tax credit, take the number of gallons by category on the form and multiply it by the refund rate per gallon. For example, if you purchased 1,000 gallons of diesel used exclusively off-road, you would calculate 1,000 x $0.24, resulting in a $240 federal refund. Be sure to apply your state's refund rate as well if it offers its own program.
If you have more than one qualifying fuel type, complete this calculation for each and add the totals together to arrive at your total fuel tax refund.
Keep Track of Your Fuel Tax Refund Gallons with P-Fleet Fuel Cards
Each time your drivers fuel, P-Fleet Voyager and CFN fuel cards automatically record Level 3 data, including gallons purchased, fuel type, vehicle, driver, and odometer readings. This ensures you have clear, detailed records to identify which gallons qualify for a refund. Through our online portal, you can quickly download comprehensive reports, filter transactions by vehicle or fuel type, and easily total the gallons required for your IRS or state fuel tax refund forms.
Instead of sorting through paperwork during tax season, P-Fleet fuel cards provide accurate reporting year-round, reducing your manual workload and helping ensure your business receives the maximum refund available.
