March 29, 2023
The Alternative Fuel Vehicle Refueling Property Credit (the credit) is a federal tax credit available to individuals and businesses that install qualified alternative fuel vehicle refueling stations. The credit is designed to encourage the use of alternative fuels, such as electricity, hydrogen, natural gas, and propane, as transportation fuels.
The credit had expired December 31, 2021, but was renewed and revamped in The Inflation Reduction Act in 2023. The renewed version applies to any qualified equipment placed in service between January 1, 2023, and December 31, 2032.
Business Tax Credit for Refueling Stations
Businesses that dispense fuel(s) that meet the IRS definition of alternative fuels may qualify for the credit in the year they install the new equipment. The business tax credit was available in 2022 and was limited to the smaller of 30% or $30,000 of the installation cost for each location. The revamped credit that starts in 2023 is up to 30% of the cost of the qualified refueling equipment, up to a maximum of $100,000 per each item of property installed. Eligible properties include electric vehicle charging stations, hydrogen refueling stations, compressed natural gas refueling stations, and liquefied natural gas refueling stations. The cost of any buildings is not considered part of the qualified costs.
To be eligible for the credit, the property housing the equipment must meet certain census track requirements, such as not being in an urban area (designated by the Secretary of Commerce). The property must also meet certain technical requirements, such as being designed for the fueling of vehicles with an electric drive motor or a motor powered by compressed natural gas. For a full list of limitations, please visit the IRS website.
Individual Tax Credit for Refueling Stations
Individuals who purchase qualified residential refueling equipment between January 1, 2022, and December 31, 2032, may also be eligible for the lower of a $1,000 credit, or 30% of the installation cost. Additionally, if you were to change residences in the year and install another station at your new residence, you may qualify for an additional credit of the lower of $1,000, or 30% of the installation cost.
There may be additional tax credits available for these installations at the state level.
For questions on how this credit may apply to your specific tax situation, or to discuss adding this into your tax planning scenario, please contact your Faw Casson advisor.