United States

Gasoline gallon equivalents for alternative fuel tax credits


If your business uses alternative fuels, you may be eligible to claim the alternative fuels tax credit. Doing so requires some careful consideration of the way the credit is determined.

The credit for alternative fuels is the product of the credit rate, currently $0.50 per gasoline gallon, multiplied by the amount of fuel sold or used by a taxpayer. At first blush, this may appear to be a straight-forward calculation.

However, the amount of fuel sold is based on the gasoline gallon equivalent of the alternative fuel sold.

Alternative fuels generally require more gallons of fuel to equal the amount of energy contained in one gallon of gasoline. Therefore, in order to compute the tax or credit on alternative fuels, a gasoline gallon equivalent (GGE) is needed.

The GGE varies depending upon what type of alternative fuel is used. For liquefied petroleum gas (LPG or propane), the GGE is 1.353 gallons, meaning it takes 1.353 gallons of propane to equal the energy in one gallon of gasoline. Liquefied natural gas (LNG) has a GGE of 1.71.

In order to calculate the credit, you must first find the GGE for the total amount of alternative fuel used by dividing the gallons of alternative fuel used by the GGE for one gallon. That amount is then multiplied by $0.50 to find the amount of the credit.

Make sure you are receiving the full credit you are owed for your commitment to alternative fuels. Consult an excise tax specialist for assistance with the alternative fuel computation or to discuss GGEs for other alternative fuels. 

Tom Windram


Tom leads the technical research and analysis for RSM’s federal credits and incentives team nationally. Reach him at tom.windram@rsmus.com.

Areas of focus: Federal Credits & IncentivesWashington National Tax