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How Do I Get a Biodiesel Tax Credit?

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  • Written By: Geri Terzo
  • Edited By: PJP Schroeder
  • Last Modified Date: 26 September 2014
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Contributing to the reduction of fossil fuels in the environment can be rewarding in some regions because it leads to fewer harmful emissions in the air. One way to promote clean energy is to use biodiesel fuel for transportation instead of more traditional fuels such as natural gas and crude oil. A biodiesel tax credit is a financial benefit offered by a government for promoting clean air and using renewable resources to do it. A biodiesel tax break is available for people who make or use biodiesel or related equipment and apply to the appropriate government office. The value of the tax credit varies but is based on the type and amount of biodiesel used or produced over a specific time period.

Biodiesel is a clean alternative fuel that is made from renewable resources including vegetable oil, animal fat, and even waste. Although no oil or gas are used to make biodiesel, the alternative fuel might be used in combination with a fossil fuel source, such as petroleum-based diesel gas, in order to meet the standards of a particular vehicle or law. In order for a vehicle — including trucks, cars, or boats — to run on biodiesel, the engine and the fuel tank must be built to use the alternative fuel. All participants in these related industries may be eligible for the tax benefit.

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To reward the use of clean energy, there are incentives carved out for the biodiesel industry, and one of those benefits is a biodiesel tax credit. To obtain the tax credit, an applicant must meet certain standards and fill out official government forms to qualify. It's important to find out which programs are designed for the type of biodiesel being made or used before starting the process. Potential applicants should ask the appropriate government department about specific requirements or qualifications.

Producers of biodiesel can be eligible to receive a biodiesel tax credit based on the ingredients used to make the alternative fuel. As biodiesel can be made from one of several different renewable resources, one type might warrant a higher tax benefit than another. For instance, a certain government biodiesel tax credit might only be applicable when animal fat or vegetable oils are used in the production process. Manufacturers of the equipment that dispense the biodiesel fuel, such as makers of the fuel tanks and pumps, represent another category of industry participants who might qualify for this tax credit.

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