The Alternative Fuel Infrastructure Tax Credit expired at the end of December 2021, but it is now back. This means you can once again receive a tax credit of a percentage of the cost of electric vehicle (EV) charging equipment. The Alternative Fuel Infrastructure Tax Credit wasn’t in effect in 2022 but was renewed in 2023 through The Inflation Reduction Act (IRA). According to the U.S. Department of Energy, the IRA makes the single largest investment in climate and energy in American history and secures America’s position as a world leader in domestic clean energy.
Amendments passed through the Act made some major changes and the new EV infrastructure tax credit looks quite a bit different than the old tax credit. Read on to learn more about the Alternative Fuel Infrastructure Tax Credit and how it works for 2023.
What is the Alternative Fuel Infrastructure Tax Credit?
The Alternative Fuel Infrastructure Tax credit, also known as The Alternative Fuel Vehicle Refueling Property Credit, was put into law by the Energy Policy Act of 2005. It is a tax credit available for the cost of installing alternative fueling equipment in both commercial and residential situations. It previously applied to equipment placed into service after December 31, 2005, and expired multiple times, but was also renewed multiple times by different Acts passed into law.
The most recent time it expired was on December 31, 2021. It has since been renewed by The Inflation Reduction Act under Section 13404. The current law applies to EV charging equipment put into service between January 1, 2023 and December 31, 2032.
Who can apply for the Alternative Fuel Infrastructure Tax Credit?
The Alternative Fuel Infrastructure Tax Credit applies to fueling equipment for natural gas, propane, hydrogen, electricity, E85, or diesel fuel blends containing a minimum of 20% biodiesel.
Commercial fueling equipment is eligible for the alternative fuel tax credit of up to 30% of the cost or 6% in the case of EV charging property subject to depreciation, not to exceed $100,000. The credit does not cover permitting or inspection fees. Residential fueling equipment is eligible for a tax credit of up to $1,000.
There are some special requirements with the reinstatement of the new tax credit that will influence who can apply, which we go over down below.
What is new for the Alternative Fuel Infrastructure Tax Credit for 2023?
The Alternative Fuel Tax Credit was amended with The Inflation Reduction Act of 2022. Here are the major amendments that you should be aware of if you plan to apply for the new tax credit:
- The taxpayer applying for the tax incentive must ensure any laborers, mechanics, contractors, or subcontractors employed on any qualified alternative fuel vehicle refueling project are paid not less than prevailing wages and should meet apprenticeship requirements similar to those that the Inflation Reduction Act applies to new renewable energy projects. Projects that do not meet these requirements can still apply for the credit, but the credit would be reduced by 6%.
- Eligible refueling equipment must be installed in locations that meet the following census tract requirements:
- The census track is not an urban area.
- A population census tract where the poverty rate is at least 20% or a metropolitan and non-metropolitan area census tract where the median family income is less than 80% of the state medium family income level.
- Bidirectional charging equipment is now included as qualified alternative fuel vehicle refueling property.
What other tax credits related to clean energy were included in the Inflation Reduction Act of 2022?
The Act also established a new credit for sustainable aviation fuel (SAF) mixtures sold or used after December 31, 2022, through December 31, 2024.
The credit is $1.25-per-gallon of sustainable aviation fuel in a qualified mixture, plus an applicable supplementary amount. A qualified mixture under the credit is a mixture of sustainable aviation fuel and kerosene produced by the taxpayer in the United States. To qualify for the credit, the fuel must reduce greenhouse gas emissions by at least 50% as compared to petroleum-based jet fuel.
The applicable supplementary amount is a $0.01 per gallon tax credit for each percentage point above the 50% greenhouse gas emission reduction with a maximum of $1.75 per gallon.
The biodiesel tax credit which was set to expire December 31, 2022, was extended until the end of 2024. The tax credit amount is $1.00 per gallon of biodiesel, agri-biodiesel, or renewable diesel used by a taxpayer for a vehicle used in their trade or business.
The clean vehicle credit, a tax break that incentivizes businesses and individuals to invest in electric vehicles, was updated through the IRA. Learn more about the clean vehicle credit or EV tax credit here.
The IRA also created the Clean Hydrogen Production Tax Credit (CHPTC). To be qualified, the clean hydrogen must be produced at a facility after December 31, 2022, and from a facility that began construction before January 1, 2033. The base credit is 60 cents per kilogram multiplied by a percentage determined by the applicable lifecycle greenhouse gas emissions rate.
What other types of EV charging incentives besides the Alternative Fuel Infrastructure Tax Credit are available?
While the EV charging federal tax credit is sure to spur interest in EV charging installations, you can save even more money on an EV charging station or stations, whether it is for a business or home. There are hundreds of other types of EV charging incentives that aren’t tax-focused. Some even come in the form of a cash rebate. There are EV charging incentives offered by utility providers, local and state agencies, and other types of organizations looking to support the expansion of EV charging infrastructure.
How do I apply for the Alternative Fuel Infrastructure Tax Credit?
Fill out Internal Revenue Service IRS Form 8911 and follow the Instructions for Form 8911. The IRS says partnerships and S corporations must file an IRS Form 8911 to claim the credit. All other taxpayers aren’t required to complete or file a Form 8911 if their only source for the tax incentive is a partnership or S corporation. In that case, they can report the credit directly on line 1s in Part III of Form 3800, General Business Credit. Unused credits that qualify as general business tax credits must be carried backward one year and carried forward 20 years.
The most current version of Form 8911 is the 2023 revision. There are forms for the years 2005-2018 and 2020-2022 if you need access to prior year forms.
How do I make sure my EV charging installation is eligible for the Alternative Fuel Infrastructure Tax Credit?
If you need help applying for the tax credit or need to ensure your installation meets the requirements for the EV charging investment tax credit, WattLogic can be your guide! WattLogic has been researching and applying for energy efficiency rebates and incentives on behalf of our clients for over a decade. It is all part of the WattLogic turnkey package that includes the above-mentioned rebate management as well as product selection, design of the EV charger system, installation of the EV charging stations, permitting if necessary, and set-up of the chargers.
Not only that, WattLogic has made the commercial and residential EV charging installation quote process easier than ever. Fill out WattLogic’s quick commercial EV charging survey or residential EV charging survey and you’ll receive your no-obligation quote in no time. You can complete it all without ever having to pick up the phone!