Alternative Fuel Tax

Alternative fuels used as vehicle fuel are taxed as follows:

• Compressed natural gas is subject to the state fuel excise tax of $0.31 per gasoline gallon equivalent, measured at 5.66 pounds (lbs.) or 126.67 cubic feet at a base temperature of 60 degrees Fahrenheit and a pressure of 14.73 lbs. per square inch;
• Liquefied natural gas is subject to the excise tax of $0.325 per diesel gallon equivalent (DGE), measured at 6.06 lbs.;
• Propane is subject to the excise tax of $0.30 per gallon;
• Hydrogen is subject to the excise tax of $0.65 per DGE, measured at 2.49 lbs.; and
• Electricity will be subject to the excise tax of $0.026 per kilowatt-hour of fuel delivered or placed into a battery or other energy storage device of an electric motor vehicle at any location in Iowa other than a residence. For electric fuel sold or dispensed for a nontaxable purpose, an exemption may be requested.

Before July 1, 2030, ethanol (E15 and higher) and biodiesel (B20 and higher) are subject to an excise tax calculated based on a distribution percentage that the Department of Revenue will determine. Additional conditions apply.

(Reference House File 976, 2025 and Iowa Code 452A.2, 452A.3, 452A.41, and 452A.86)