What Is the Alternative Fuel Tax Credit?

As part of the Energy Act of 2005, one of the tax credits passed was the Alternative Fuel Tax credit (AFT). This tax credit is a part of an overhaul credit for those who purchase and utilize hybrid vehicles or other alternative fuel vehicles. The maximum amount of tax credit available is $4000.00. States also provide tax incentives for persons purchasing alternative fuel vehicles. The credit can only be taken on new vehicles that have been identified as qualifying vehicles. In addition, the tax can be used to offset the Alternative Minimum Tax (AMT). Those claiming the AFT credit are ineligible to claim the electric vehicle tax credits.

Eligibility

In order to be eligible to claim this credit, the following items must be met:

  • Vehicle must run on alternative fuel (compressed natural gas, liquefied natural gas, hydrogen, etc…).
  • Vehicle use must begin with the taxpayer.
  • Vehicle was acquired for use or lease by taxpayer and not to be resold.
  • Vehicle is primarily used in the United States.
  • Must complete a Form 8910 to claim credit on taxes.

To determine if your vehicle meets these standards, please check with the Department of Energy, or the auto dealer, for more information about your tax credit.

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