Qualified Alternative Fuel Vehicle Refueling Property Tax Credit Explained
Learn how the Qualified Alternative Fuel Vehicle Refueling Property Tax Credit works, including eligibility, credit calculation, and the filing process.
The U.S. government offers incentives to promote alternative fuel vehicles, including the Qualified Alternative Fuel Vehicle Refueling Property Tax Credit. This credit offsets the cost of installing refueling equipment for electricity, hydrogen, and other qualifying fuels, making cleaner transportation more affordable for businesses and individuals.
Equipment Types That Qualify
The credit applies to residential and commercial refueling equipment for alternative fuel vehicles. Eligible equipment includes electric vehicle (EV) charging stations, such as Level 2 chargers for homes and businesses, and direct current fast chargers (DCFC) for public and fleet use. These stations must meet safety and efficiency standards.
Hydrogen refueling stations also qualify if they are designed for fuel cell vehicles. These require specialized infrastructure, including high-pressure storage tanks and compliant dispensing nozzles. Given their complexity and cost, the tax credit can significantly ease financial burdens for businesses investing in this technology.
Other eligible equipment includes refueling stations for natural gas, propane, and biodiesel used for transportation. This includes compressed natural gas (CNG) and liquefied natural gas (LNG) dispensers at refueling locations. Propane autogas dispensers, commonly used for fleet vehicles like school buses and delivery trucks, also qualify.
Eligibility Criteria
To qualify, the refueling property must be installed in the U.S. and used for fueling vehicles with alternative energy sources. It must be operational in the tax year for which the credit is claimed.
Both individuals and businesses can apply, though eligibility rules vary. Homeowners can claim the credit for personal-use installations, such as an EV charger in a garage. Businesses qualify when installing refueling equipment at commercial or fleet locations. If equipment serves both personal and business purposes, the credit applies only to the business portion. Documentation, such as usage logs or billing records, may be required.
Under the Inflation Reduction Act of 2022, commercial installations must be in designated census tracts to qualify after 2022. These include low-income and non-urban areas as defined by the U.S. Census Bureau. Residential installations are not subject to this requirement.
Calculating the Credit
The credit covers 30% of the cost of purchasing and installing eligible refueling equipment. For residential installations, the credit is capped at $1,000 per property. For businesses, the cap is $100,000 per location, up from the pre-2023 limit of $30,000.
Only direct costs, such as labor, wiring, and site modifications, are included. Maintenance, network fees, and software updates do not qualify. If businesses receive other federal grants or incentives for the same equipment, the eligible cost basis for the tax credit may be reduced.
Filing the Claim
To claim the credit, taxpayers must file IRS Form 8911 with their federal tax return. The form calculates the credit amount based on eligible expenses and applies any limitations based on tax liability. Since this is a nonrefundable credit, it can reduce taxes owed to zero but does not generate a refund if the credit exceeds the liability. However, businesses structured as partnerships or S corporations can pass the credit through to their owners.
Taxpayers must retain invoices, receipts, and installation records verifying the purchase date, cost breakdown, and operational status. Businesses should maintain internal records such as depreciation schedules if the equipment is capitalized or lease agreements if installed on rented property. Companies leasing refueling infrastructure to third parties may face additional tax considerations, including potential limitations under passive activity loss rules.