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Federal Tax Credit for Natural Gas Vehicles

Dedicated alternative fuel vehicles, placed in service after December 31, 2005, qualify for up to 80% of the incremental cost. Credit value is on sliding scale based on vehicle weight and emission standards that are available for that particular vehicle.

Vehicle Size Incremental Cost Cap 50% Credit 80% Credit 
Light-Duty vehicles up to 8,500 pounds$5,000$2,500$4,000
Medium-Duty vehicles up to 14,000 pounds$10,000$5,000$8,000
Medium-Heavy-Duty vehicles up to 26,000 pounds$25,000$12,500$20,000
Heavy-Duty vehicles over 26,000 pounds$40,000$20,000$32,000

Seller of vehicle can take credit if buyer is a tax exempt entity

  • Tax exempt entities can negotiate with seller to capture value of tax credit
  • This provision allows cities, municipalities and special district fleets like schools to take advantage of incentives

Federal Motor Fuels Excise Tax Credit

This provision provides $.50 excise tax credit per gallon of Liquefied Natural Gas (LNG) or gasoline-gallon-equivalent of Compressed Natural Gas (CNG), payable to the seller or the user can take credit (e.g. fleet operates its own station)

  • Credit took effect October 1, 2006
  • Businesses and tax-exempt entities (Federal, State and local governments) – excise tax offset against alternative fuel used or sell and the remainder as a refundable credit
  • Individual using fuel for personal vehicles – incentive is limited to an excise tax offset
  • Tax exempt entities – Full credit will be paid in form of "rebate"
  • Entities that operate their own stations get full credit as users of fuel before sale
  • Those who purchase from fuel provider will benefit from lower fuel costs from seller
  • Measure increases CNG motor fuels excise tax to same as gasoline ($.183) and LNG tax to same as diesel ($.243), which offsets some benefit of the tax credit for tax paying entities

CNG Fueling Station Credit

  • Federal tax credit equal to 50% of refueling equipment placed into service during 2009 and 2010, maximum $50,000 credit per year
  • Federal tax credit equal to 30% of refueling equipment placed into service during 2011, maximum $30,000 credit per year
  • Fueling station owners who install qualified equipment at multiple sites are allowed to use the credit towards each location
  • The existing $100,000 tax deduction for refueling equipment is repealed

Bonus Depreciation –Vehicles and Equipment

  • For 2011, bonus depreciation is worth 100% of the cost of property placed in service. The new law includes an incentive allowing companies to expense 100% of the cost of new capital acquisitions in 2011. The bonus depreciation provision also extends to capital equipment placed in service after December 8, 2010.
  • For 2012, bonus depreciation is worth 50% of the cost of property placed in service.

Source: Natural Gas Vehicles for America 

Incentive information is provided as a service to our customers. Yankee Gas is not responsible for errors, omissions or changes.