Aviation fuel tax is a levy imposed on the fuel used by aircraft, primarily jet fuel and aviation gasoline (avgas). The tax can be applied at federal, state, or local levels and may vary based on factors such as flight type (domestic or international), aircraft type (commercial or private), and the fuel used.
There are two main types of aviation fuel subject to taxation under state laws:
Aviation Gasoline (Avgas): Used in smaller, propeller-driven aircraft.
Jet Fuel: Used in turbo-propeller or jet engine aircraft.
Both avgas and jet fuel are typically subject to excise taxes, although commercial airlines may qualify for exemptions when purchasing fuel.
The aviation industry is responsible for approximately 2% of global energy-related emissions annually, contributing to environmental damage and climate change. Experts estimate that without intervention, these emissions could triple by 2050.
The aviation fuel tax serves several key purposes:
Encouraging Reduced Air Travel: By imposing taxes on aviation fuel, governments aim to make people reconsider the frequency of air travel, potentially reducing air traffic and associated emissions.
Promoting Cleaner Technologies: The tax provides a financial incentive for the aviation industry to invest in more sustainable solutions, such as clean fuels, energy-efficient technologies, and the development of zero-emission aircraft.
Overall, the tax helps mitigate the environmental impact of aviation and encourages the industry to adopt greener practices.
The aviation fuel tax rates differ depending on the type of operation (commercial or non-commercial) and the type of fuel used. Here’s a breakdown:
Non-commercial Operations:
Jet Fuel: 21.9 cents per gallon, including the Leaking Underground Storage Tank (LUST) tax.
Aviation Gasoline (Avgas): 19.4 cents per gallon, also including the LUST tax.
Commercial Operations:
Aviation Gasoline (Avgas): 6 cents per gallon.
Jet Fuel: 4 cents per gallon, which includes a 0.1 cent per gallon LUST tax.
These taxes help generate revenue for maintaining aviation infrastructure and environmental protection programs like the LUST fund.
Yes, there are several exemptions from the federal excise tax on aviation fuel for specific users and operations. The following are exempt:
Foreign Trade Operations: Flights transporting passengers or goods for hire between the U.S. and another country.
Commercial Airlines: Exempt from paying aviation fuel excise taxes.
Nonprofit Educational Organizations: Operations related to educational purposes are exempt.
Aircraft Museums: Operations of aircraft museums are also exempt.
U.S. Military: All U.S. military operations are exempt from aviation fuel taxes.
State or Local Governments: Government aircraft operations at these levels are tax-exempt.
Another notable exemption is the Sustainable Aviation Fuel (SAF) credit, introduced under the Inflation Reduction Act of 2022. This credit applies to fuel mixtures containing SAF sold or used between December 31, 2022, and January 1, 2025.
Credit Amount: $1.25 per gallon of SAF in a qualifying mixture.
Eligibility: SAF must reduce lifecycle greenhouse gas emissions by at least 50%. A supplemental credit of $0.01 per gallon is available for each percentage point that the reduction exceeds 50%, up to an additional $0.50 per gallon.
The credit can be claimed in two ways:
Excise Tax Claim: Direct tax credit.
General Business Credit: Nonrefundable and must be included as income.
Find more details about Inflation Reduction Act of 2022
File your Federal Excise Tax for Aviation Fuel with our IRS-Approved online portal Simple720
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After reading this blog, you will have a comprehensive understanding of aviation fuel tax, including its purpose and the reasons for its imposition. You will also learn about the specific tax rates applied to aviation fuel and the various exemptions available. Additionally, you will gain insight into sustainable aviation fuel (SAF) credits and how they promote cleaner alternatives within the aviation industry.