As the world continues to shift toward sustainable energy sources, tax incentives are playing a significant role in encouraging the adoption of green technologies. One of the most notable incentives in the United States is the Alternative Fuel Vehicle Refueling Property Credit, which was recently updated under the Inflation Reduction Act.
These changes offer businesses and individuals the opportunity to offset some of the costs associated with installing alternative fuel vehicle refueling equipment. This blog post provides an in-depth look at the proposed regulations issued by the Department of Treasury and the Internal Revenue Service (IRS), outlining who qualifies, how to calculate the credit, and what the benefits are for those investing in this technology.
What Is the 30c Alternative Fuel Vehicle Refueling Property Credit?
The 30c alternative fuel vehicle refueling property credit is a tax credit that applies to the installation of qualified clean-fuel vehicle refueling property. It covers infrastructure such as recharging property for electric vehicles, fuel dispensers, and other recharging of a motor vehicle stations for qualified alternative fuel vehicle refueling projects.
Under this income tax credit, the credit is allowable for both personal-use and business-use properties, depending on the property described and the cost of any qualified alternative fuel vehicle refueling property installed.
What Are the Key Changes to the 30c Credit?
How Has the Timeframe Been Extended?
The refueling property credit is available for property placed in service between January 1, 2023, and December 31, 2032. This extended timeframe allows eligible taxpayers to take advantage of the credit for eligible property like energy storage property and vehicle refueling and recharging property over the next decade.
What Is the Credit Amount for Non-Depreciable Property?
For property that is not subject to depreciation, such as personal-use property, the 30c tax credit allows 30% of the cost of any qualified alternative fuel vehicle refueling property to be claimed, up to $1,000 per single item of 30c property. This includes electric vehicle charging stations and other qualified vehicle refueling and recharging property. Homeowners who install recharging property may receive a tax credit for up to $1,000 per item of property.
What Is the Credit Amount for Depreciable Property?
For depreciable property, like business-use refueling infrastructure, the base credit is 6% of the cost of such property. But, if certain prevailing wage and apprenticeship requirements are met, the credit so allowed can rise to 30%, with a maximum credit of $100,000 per single item of property.
The credit is allowable for property installed at businesses, and the amount of any credit allowable can be used to offset the tax liability. If you install qualified vehicle refueling equipment at a business location, the credit may help offset costs. To claim it, you must file Form 8911, the IRS form used to apply to property placed in service during the tax year.
Further Reading: Learn how to deduct and claim a depreciation deduction on your tax return
How Does Location Impact Eligibility?
What Are Eligible Census Tracts?
To qualify, refueling property placed in service must be located in certain eligible property locations. The IRS uses tools like the 30c tax credit eligibility locator to help identify eligible census tracts, which include low-income communities or non-urban areas. These designations are essential for determining whether property qualifies.
How Can You Identify Eligible Locations?
The IRS and Treasury Department have provided updated guidance, including Notice 2024-64, to help taxpayers use the 30c tax credit eligibility locator. For property placed in service, use of these tools is essential for determining if the property described is in an eligible area. Businesses in underserved areas that install vehicle refueling and recharging property can benefit greatly from this incentive.
What Additional Guidelines Should You Know?
How Is the Credit Calculated?
The credit applies to both recharging property for electric vehicles and fuel dispensers for alternative fuel vehicle refueling projects. The credit is calculated on a per-item basis, meaning the single item of qualified alternative fuel vehicle refueling property is critical for understanding the total credit.
The cost of any property taken into account includes not just the equipment but also installation and construction costs. For refueling property that serves both personal and business uses, the credit must be apportioned accordingly, based on how much of the property is placed in service for business purposes.
What Are the Wage and Apprenticeship Requirements?
To qualify for the full credit allowed on depreciable property, businesses must meet prevailing wage and apprenticeship standards. Failing to meet these standards reduces the credit from 30% to 6% of the cost of any property. For those eligible, the credit against the tax imposed provides a significant incentive for businesses to invest in alternative fuel vehicle refueling infrastructure.
Businesses that meet these requirements for the 30c alternative fuel vehicle refueling property credit will be able to claim more significant deductions on their tax return.
Further Reading: Find out if your business vehicle qualifies for a Section 179 deduction
What Are Other Important Rules?
What About Basis Reduction, Recapture, and Apportionment?
- Basis of any property: The basis of the property referred to in section 30c must be reduced by the amount of the tax credit claimed.
- Recapture: If the property is placed in service but later sold or ceases to qualify, the taxpayer may need to recapture part of the credit for qualified alternative fuel vehicle refueling property.
- Apportionment: If the property is used for both personal and business purposes, it must be apportioned, ensuring that only the part used for business is eligible for the credit.
What Is the Role of Form 8911?
To claim the 30c tax credit, taxpayers must file Form 8911. This form applies to the taxpayer that placed such property in service, helping to determine the credit per item of property. Also, the form tracks the cost of such property and confirms whether the property to the person installed qualifies for the credit so allowed.
How Does the IRS Provide Guidance on the Alternative Fuel Vehicle Refueling Property Credit?
What Is the Role of the IRS in 2024?
The Internal Revenue Service (IRS) has provided updated guidance on the alternative fuel vehicle refueling property credit, specifically for property placed in service in 2022, 2023, and 2024. This guidance helps taxpayers understand how to calculate and claim the refueling infrastructure tax credit for installing fuel vehicle refueling property and transportation fuel systems.
Businesses that install property of a character subject to depreciation, such as vehicle refueling property the use of which supports diesel fuel or a vehicle operated exclusively on alternative fuels, must follow IRS rules to properly calculate the credit.
How Is the Credit Calculated for Different Properties?
The amount of the credit is determined by various factors, including the property for the recharging of external to such motor vehicle systems or fuel vehicle refueling property placed at eligible locations. The credit determined can vary, especially in the case of property that is used for both personal and business purposes, requiring apportionment.
The IRS has specific guidelines on how property must be placed in service and installed on property to qualify. Consulting a tax professional can help ensure that the amount of the credit claimed is accurate and adheres to IRS regulations.
What Happens When the Property Is Installed and Used?
For businesses or individuals installing certain property, the property if the taxpayer qualifies can be used to claim the credit. In the case of any qualified alternative fuel property, such as property for which a credit is allowed, the taxpayer can claim the credit for property into service.
If the construction of any qualified alternative fuel infrastructure meets IRS guidelines, the credit for the property will be applicable, including for entity using such property or the person who sold such property. It is vital that respect to any property used in alternative fuel vehicle refueling projects is maintained to maximize the tax benefits.
Further Reading: Learn how to qualify for the federal tax credit on fuel cell electric vehicles
Conclusion
The section 30c alternative fuel vehicle credit provides significant federal tax benefits for eligible installations, including a vehicle operated exclusively on alternative fuels. Properties may qualify for the alternative fuel credit if they meet the conditions of the motor vehicle described and property to which this paragraph applies.
The credit is attributable to property and can be claimed by the person or business installing it, whether tax exempt or not. It's vital to maintain respect to such property, as the credit applies property solely because such property qualifies under IRS guidelines.
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