IRS New Guidelines on Alternative Fuel Vehicle Refueling Property Credit: 2024 Update

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Written By Eliss

Eliss is an experienced content writer with a background in finance from St. Xavier's College, UK. She is passionate about economic dynamics and frequently integrates her views on economic shifts into her content.

As the world continues its transition towards cleaner energy and more sustainable transportation, the U.S. government has been actively supporting eco-friendly initiatives through various tax credits and incentives. One such incentive is the Alternative Fuel Vehicle Refueling Property Credit. This credit, designed to promote the installation of refuelling infrastructure for alternative fuel vehicles, has recently seen updates from the IRS in collaboration with the U.S. Treasury Department.

In 2024, the IRS released new guidelines surrounding the credit, which aim to further incentivize businesses and individuals to adopt alternative fuel vehicle refuelling stations. In this post, we’ll delve into the details of the updated IRS guidelines, eligibility requirements, the scope of the credit, and its potential benefits.

What Is the Alternative Fuel Vehicle Refueling Property Credit?

The Alternative Fuel Vehicle Refueling Property Credit is a federal tax credit aimed at encouraging the installation of refuelling equipment for vehicles that run on alternative fuels such as electricity, hydrogen, and other non-fossil fuel sources. This tax credit is part of the government’s broader effort to reduce greenhouse gas emissions and promote the widespread use of clean energy in the transportation sector.

The credit was initially introduced as part of the Energy Policy Act of 2005 and has been modified several times since then. The latest modifications in 2024 reflect the increasing emphasis on electrification and alternative fuels as a central component of U.S. environmental policy.

IRS New Guidelines for 2024

The IRS, in partnership with the Treasury Department, issued updated guidelines on the Alternative Fuel Vehicle Refueling Property Credit in September 2024. These guidelines provide clarity on several key areas, including eligibility, credit amount, and qualified properties.

1. Expanded Eligibility

The new guidelines expand the scope of eligibility for the credit. Previously, the credit was limited to businesses and individuals installing refuelling property at commercial or residential locations. The 2024 guidelines have broadened this definition to include a wider range of public locations, particularly community-based refuelling stations. This change is expected to foster a significant expansion of refuelling infrastructure, making it easier for consumers to access charging or refuelling options for their alternative fuel vehicles.

Furthermore, the new rules allow businesses to claim credit for installations at multiple sites. This is especially beneficial for large corporations, fleet owners, and businesses looking to establish electric vehicle (EV) charging networks or hydrogen refuelling stations at numerous locations.

2. Credit Amount

Under the updated guidelines, the credit amount has been increased to incentivize the installation of alternative fuel infrastructure further. The credit provides a 30% tax credit for the cost of purchasing and installing refuelling property, capped at $100,000 per item of property for businesses. For individuals, the credit is still available for up to 30% of installation costs, with a maximum credit of $1,000 per residence.

A significant change in 2024 is the removal of the previous restrictions on credit claims for larger infrastructure projects. Businesses installing multiple charging stations or large hydrogen refuelling systems can now claim the full 30% credit without the former cap on total project size. This is expected to accelerate the adoption of charging infrastructure in commercial properties such as retail spaces, hotels, and gas stations.

3. Qualified Properties

The definition of qualified properties eligible for the credit has also been updated. Properties that qualify include:

  • Electric vehicle (EV) charging stations: This includes both Level 2 and DC fast charging stations, making it easier for businesses to offer rapid charging services to EV owners.
  • Hydrogen refuelling stations: Hydrogen infrastructure, crucial for fuel-cell electric vehicles (FCEVs), has been a focal point in the updated guidelines. With hydrogen vehicles expected to play a significant role in the transportation of heavy goods, the IRS is promoting the establishment of a broader hydrogen refuelling network.
  • Natural gas refuelling property: Infrastructure for compressed natural gas (CNG) and liquefied natural gas (LNG) vehicles is also eligible under the guidelines. These fuels are often used in heavy-duty transportation and public transit systems.

4. Location-Based Incentives

The 2024 guidelines introduce a new focus on underserved and rural communities. Businesses installing refuelling property in areas where access to alternative fuel infrastructure is limited may qualify for bonus credits. This provision encourages the expansion of charging and refuelling stations in regions that have been left behind in the transition to alternative fuels.

For example, rural areas with limited access to EV charging stations or urban areas with historically high levels of pollution are considered priority locations under the new guidelines. Businesses investing in these areas can claim an additional 10% tax credit, on top of the standard 30%, resulting in a potential 40% credit on total costs.

Steps Taken by the IRS and Treasury Department

In response to the growing need for clean energy infrastructure, the IRS and Treasury have streamlined the application process for claiming the Alternative Fuel Vehicle Refueling Property Credit. In September 2024, the agencies launched a new online portal where businesses and individuals can submit their claims, track the status of their credit applications, and receive guidance on eligibility and documentation requirements.

Additionally, the IRS has made it easier to track which locations qualify for location-based incentives by releasing an interactive map of underserved areas that qualify for additional credits. This map helps businesses identify optimal locations for installing refuelling properties to maximize their credit claims.

The Treasury Department is also working closely with state governments and private companies to promote the use of this credit and encourage the adoption of alternative fuel vehicles. Through public-private partnerships, more businesses are being incentivized to install refuelling stations, particularly in areas that are crucial for the growth of alternative fuel adoption.

Benefits of the Alternative Fuel Vehicle Refueling Property Credit

The updated guidelines for the Alternative Fuel Vehicle Refueling Property Credit offer several benefits, both for businesses and individuals:

  • Cost savings: Businesses and individuals installing refuelling infrastructure can significantly reduce their installation costs by claiming up to 30-40% of the total expense as a tax credit.
  • Increased adoption of clean energy vehicles: By expanding the availability of charging and refuelling stations, the credit is expected to accelerate the adoption of electric, hydrogen, and natural gas vehicles across the U.S.
  • Environmental benefits: The expansion of refuelling infrastructure plays a crucial role in reducing greenhouse gas emissions and promoting sustainability in the transportation sector.
  • Job creation: With more businesses installing alternative fuel infrastructure, the need for skilled labour in construction, installation, and maintenance is expected to increase, creating new jobs in the clean energy sector.
Conclusion

The IRS’s updated guidelines for the Alternative Fuel Vehicle Refueling Property Credit in 2024 reflect the U.S. government’s commitment to promoting clean energy and sustainable transportation. By offering expanded eligibility, higher credit amounts, and incentives for underserved locations, the guidelines are designed to encourage the widespread adoption of alternative fuel vehicle infrastructure.

Whether you are a business looking to install multiple EV charging stations or a homeowner interested in setting up a home charging unit, the updated credit offers substantial financial benefits. As the transportation landscape continues to shift towards eco-friendly solutions, the Alternative Fuel Vehicle Refueling Property Credit will play a critical role in supporting this transition.

For more detailed information, you can refer to the official IRS announcement here.

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