The Alternative Fuel Infrastructure Tax Credit Explained
Understand the federal tax credit for alternative fuel property, including how new location and labor standards can significantly impact its value.
The Alternative Fuel Infrastructure Tax Credit provides a financial incentive for installing refueling equipment for clean-energy vehicles. This credit, governed by Section 30C of the Internal Revenue Code, was extended and modified by the Inflation Reduction Act of 2022. The primary goal of the credit is to support the expansion of the nation’s refueling network for alternative fuels, making clean transportation more accessible. The updated provisions apply to property placed in service between the beginning of 2023 and the end of 2032.
Eligibility Requirements for Taxpayers
The tax credit is available to a broad range of taxpayers, including individuals and businesses. For individuals, the credit applies to qualifying refueling property installed at their principal residence for personal use. The property does not need to be depreciable, meaning its value is not written off over time as a business expense. For businesses, the credit is available for property that is subject to depreciation. This means the equipment must be used in a trade or business or for the production of income, including by corporations, partnerships, and sole proprietorships that invest in refueling infrastructure.
Certain tax-exempt entities can also benefit from the credit. This includes state, local, and tribal governments, which may not have a tax liability to offset. Through a provision known as elective pay, these entities can receive the credit amount as a direct payment from the IRS.
Qualifying Property and Location Rules
The credit covers refueling property for a wide array of alternative fuels. This includes equipment for electricity, hydrogen, natural gas, propane, and certain biofuels like E85 or biodiesel blends of at least 20%. A single item of property is defined as one charging port or fuel dispenser. The cost of the property includes the dispenser itself, any necessary energy storage technology, and parts essential to its operation, along with the labor for installation.
A location requirement applies to all qualifying property placed in service after December 31, 2022. The equipment must be located within an “eligible census tract.” This rule is designed to direct investment toward underserved areas and promote equitable development of refueling networks.
An eligible census tract is defined as either a low-income community or a non-urban census tract. A low-income community is defined by specific poverty rates or median family income levels relative to state or metropolitan area figures. A non-urban census tract is one that is not designated as an “urban area” by the U.S. Census Bureau. To assist taxpayers, the Department of Energy and Argonne National Laboratory have developed the 30C Tax Credit Eligibility Locator tool, an online map to determine if an address is in a qualifying census tract.
Credit Calculation and Limitations
The value of the tax credit depends on the type of taxpayer and whether certain labor standards are met. For property that is depreciable and used for business purposes, the base credit is 6% of the cost of the refueling property. A higher credit rate of 30% is available for businesses that satisfy specific prevailing wage and apprenticeship requirements. The prevailing wage requirement mandates that laborers and mechanics involved in the installation are paid at least the prevailing local wage rates. The apprenticeship requirement involves utilizing a certain percentage of labor hours from qualified apprentices.
For individuals installing property at their primary home for personal use, the credit is 30% of the cost of the qualified property. These installations are not subject to the prevailing wage and apprenticeship requirements that apply to business property. The credit is also subject to monetary caps. For business property, the credit is limited to a maximum of $100,000 per item, while personal use property is capped at $1,000 per item.
Claiming the Credit on Your Tax Return
To claim the Alternative Fuel Infrastructure Tax Credit, taxpayers must complete and file IRS Form 8911 with their annual income tax return. This form is used to calculate the specific credit amount for which the taxpayer qualifies based on the costs they have incurred. Once the total allowable credit is calculated, the final amount is transferred to the appropriate line on the taxpayer’s main tax return, such as Form 1040 for individuals.
It is important to maintain detailed records supporting the claim. This includes receipts for the purchase of the equipment, documentation of installation costs, and, for businesses claiming the 30% credit, records demonstrating compliance with the prevailing wage and apprenticeship requirements.