What Is the Section 30C Alternative Fuel Property Credit?

The Section 30C tax credit, known as the Alternative Fuel Vehicle Refueling Property Credit, provides a financial incentive for installing refueling equipment for clean-energy vehicles. Its purpose is to offset a portion of the cost for both individuals and businesses that invest in this infrastructure. The credit was first established by the Energy Policy Act of 2005 but was updated and extended by the Inflation Reduction Act of 2022. These changes, which apply to property placed in service from January 1, 2023, through December 31, 2032, altered the credit’s value and eligibility rules.

Qualifying for the Alternative Fuel Property Credit

Eligibility for the credit hinges on three factors: the taxpayer, the type of property installed, and its geographic location. The credit can be claimed by individuals for their primary home, as well as by businesses and certain tax-exempt organizations. For individuals, the property is not required to be depreciable, which simplifies qualification for residential installations. Businesses, however, must be installing property that is depreciable under tax rules.

The credit applies to “qualified alternative fuel vehicle refueling property.” This encompasses equipment used to recharge electric vehicles, including bidirectional chargers that can send electricity back to the grid. It also covers property for storing and dispensing other clean fuels like hydrogen, compressed natural gas, liquefied petroleum gas, and certain ethanol or biodiesel blends. The credit is for the refueling station itself, not the vehicle.

A requirement introduced by the Inflation Reduction Act is that the property must be placed in service within an “eligible census tract.” This means the installation address must be in a low-income community or a non-urban census tract. The IRS provides specific definitions for these areas, and taxpayers can verify if their location qualifies by using the 30C Tax Credit Eligibility Locator tool, a mapping tool from the Department of Energy.

Calculating the Credit Amount

The calculation of the Section 30C credit depends on who is claiming it and whether certain labor standards are met. For property placed in service by individuals at their principal residence, the credit is 30% of the cost of the refueling equipment, with a maximum limit of $1,000 per item.

For businesses, the credit structure is two-tiered. The base credit is 6% of the cost of the depreciable property. However, the credit amount can increase to 30% if the business satisfies prevailing wage and apprenticeship requirements set by the Department of Labor.

These rules mandate that laborers and mechanics involved in the construction or installation of the property are paid at least the local prevailing wage. The apprenticeship requirement stipulates that a certain percentage of the total labor hours for the project must be performed by qualified apprentices from a registered program. Meeting these standards allows a business to claim the higher 30% credit. For businesses, the credit is capped at $100,000 for each single item of property. A “single item” is defined as each individual charging port or fuel dispenser, allowing a location with multiple chargers to claim the credit for each one.

Required Information and Tax Forms

To claim the Alternative Fuel Vehicle Refueling Property Credit, taxpayers must complete and file Form 8911 with the IRS. This requires the total cost of the property, which covers the equipment and any labor for construction and installation, the full address where the property was installed, and the date it was placed in service.

On Form 8911, you will enter the property’s cost and use the address to certify that it is located in an eligible census tract. The form guides the calculation of the credit based on the cost. For businesses aiming for the higher 30% credit, they must also certify on the form that they have met the prevailing wage and apprenticeship requirements.

A tax consequence of claiming this credit is the requirement to reduce the basis of the property. The tax basis, which is the cost of the asset, must be lowered by the amount of the credit claimed. This adjustment affects businesses that will depreciate the asset over time and any taxpayer when calculating the gain or loss if the property is ever sold.

The Filing Process

Form 8911 must be attached to the taxpayer’s annual federal income tax return. For individual taxpayers, this means including it with their Form 1040. The final credit amount calculated on Form 8911 is then transferred to Schedule 3 (Form 1040), “Additional Credits and Payments,” where it combines with other credits to reduce the individual’s overall tax liability.

The credit from Form 8911 is reported on Form 3800, “General Business Credit.” The Section 30C credit becomes part of the total general business credit, which then flows to the business’s main income tax return, such as Form 1120 for corporations or Form 1065 for partnerships.