Search Federal and State Laws and Incentives

Alternative Fuel Excise Tax Credit

NOTE: This incentive was originally set to expire on December 31, 2021, but has been extended through December 31, 2024, by Public Law 117-169.

For an entity to be eligible to claim the credit they must be liable for reporting and paying the federal excise tax on the sale or use of the fuel in a motor vehicle. Tax exempt entities such as state and local governments that dispense qualified fuel from an on-site fueling station for use in vehicles qualify for the incentive. Eligible entities must be registered with the Internal Revenue Service (IRS). The incentive must first be taken as a credit against the entity’s alternative fuel tax liability; any excess over this fuel tax liability may be claimed as a direct payment from the IRS. The tax credit is not allowed if an incentive for the same alternative fuel is also determined under the rules for the ethanol or biodiesel tax credits.

For more information about claiming the credit, see IRS Form 4136, which is available on the IRS Forms and Publications website.

(Reference 26 U.S. Code 6426 and Public Law 117-169)

Biodiesel Mixture Excise Tax Credit

NOTE: This incentive was originally set to expire on December 31, 2022, but has been extended through December 31, 2024, by Public Law 117-169.

For more information about claiming the credit, see IRS Form 4136, which is available on the IRS Forms and Publications website.

(Reference 26 U.S. Code 6426 and Public Law 117-169)

Biodiesel Income Tax Credit

NOTE: This incentive was originally set to expire on December 31, 2022, but has been extended through December 31, 2024, by Public Law 117-169.

For more information about claiming the credit, see Internal Revenue Service (IRS) Forms 637 and 8864, which are available on the IRS Forms and Publications website. For information about registering with the EPA, see the EPA Fuels Registration, Reporting, and Compliance Help website.

(Reference 26 U.S. Code 40A and Public Law 117-169)

Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit

The Inflation Reduction Act of 2022 (Public Law 117-169) amended the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), now known as the Clean Vehicle Credit, and added a new requirement for final assembly in North America that took effect on August 17, 2022. Additional requirements apply for vehicles placed in service (delivered) on or after January 1, 2023, and the amount of the credit will depend on whether the vehicle meets new critical minerals and battery components requirements for vehicles placed in service after April 17, 2023. See the IRS Plug-In Electric Drive Vehicle Credit for more information. Taxpayers who purchase an eligible vehicle may qualify for a tax credit of up to $7,500. Additional details are provided below based on when the vehicle is purchased or placed-in-service.

Vehicles Placed in Service on or After April 18, 2023

For vehicles delivered on or after April 18, 2023, limitations apply that went into effect January 1, 2023, related to the vehicle’s manufacturer’s suggested retail price (MSRP), the buyer’s modified adjusted gross income, and the vehicle’s battery capacity. A North American final assembly requirement applies for vehicles purchased on or after August 17, 2022. Additional critical mineral and battery component requirements also apply as of April 18, 2023, which alter how the tax credit is calculated and may alter the amount of the tax credit available. These latter requirements came into effect upon the publication of the Treasury Department’s guidance document regarding the critical mineral and battery component requirements. Vehicles that meet the critical mineral requirements are eligible for a $3,750 tax credit, and vehicles that meet the battery component requirements are eligible for a $3,750 tax credit. Vehicles meeting both the critical mineral and the battery component requirements are eligible for a total tax credit of $7,500.

Vans, sport utility vehicles, and pickup trucks must not have an MSRP above $80,000, and all other vehicles may not have an MSRP above $55,000. The MSRP can be found on the vehicle’s window sticker, which is also known as the “Monroney label”; the MSRP for this purpose includes any trim, options, or accessories for the particular vehicle and excludes the destination fee and dealer-provided options and accessories.

Additionally, a taxpayer’s eligibility for the tax credit may be limited by thresholds for modified adjusted gross income (modified AGI); only individuals having a modified AGI below the following thresholds for the current tax year or the prior tax year are eligible for the tax credit:

• $300,000 for joint filers
• $225,000 for head-of-household filers
• $150,000 for all other filers

To be eligible for the Clean Vehicle Credit, the battery powering the vehicle must have a capacity of at least seven kilowatt-hours (kWh). The amount of the credit depends on whether the vehicle meets certain critical minerals and battery component requirements.

Critical Minerals: To be eligible for the $3,750 critical minerals portion of the tax credit, the percentage of the value of the battery’s critical minerals that are extracted or processed in the United States or a U.S. free-trade agreement partner or recycled in North America, must meet or exceed the following thresholds:

Battery Components: To be eligible for the $3,750 battery components portion of the tax credit, the percentage of the value of the battery’s components that are manufactured or assembled in North America must meet or exceed the following thresholds:

Further guidance on additional 30D requirements is forthcoming. For more information, including additional eligibility requirements, see the IRS Plug-In Electric Drive Vehicle Credit website.

Vehicles Sold on or After January 1 and Placed-in-Service Before April 18, 2023

Beginning January 1, 2023, the Clean Vehicle Credit (CVC) provisions removed the manufacturer sales caps for vehicles sold after January 1, 2023, expanded the scope of eligible vehicles to include both EVs and FCEVs, and required that the battery powering the vehicle has a capacity of at least seven kilowatt-hours (kWh). An available tax credit under the CVC may be limited by the vehicle’s manufacturer suggested retail price (MSRP) and the buyer’s modified adjusted gross income (as addressed above). The North American final assembly requirement continues to apply.

For vehicles placed in service before April 18, 2023, the available CVC tax credit is a base amount of $2,500 plus, for a vehicle that draws propulsion energy from a battery with at least 7 kWh of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kWh. The total tax credit available for a vehicle may not exceed $7,500.

Vehicles Purchased Between August 17 and December 31, 2022

Qualifying EVs purchased and delivered between August 17, 2022, and December 31, 2022, are eligible for the tax incentive as described below for vehicles purchased before August 17, 2022, but are limited to vehicles with final assembly in North America. Manufacturer sales caps on vehicles apply. Note that for some manufacturers, the assembly location may vary because some models are produced in multiple locations. The assembly location of a particular vehicle should be confirmed by referring to its Vehicle Identification Number (VIN) using the U.S. Department of Transportation’s VIN decoder or an information label affixed to the vehicle.

Vehicles Purchased Before August 17, 2022

Qualifying EVs purchased before August 17, 2022, are eligible for a tax credit that is available for the purchase of a new qualified EV that draws propulsion from a battery that has at least five kilowatt-hours (kWh) of capacity, uses an external source of energy to recharge the battery, has a gross vehicle weight rating of up to 14,000 pounds, and meets specified emission standards. The minimum credit amount is $2,500, and the credit may be up to $7,500 based on each vehicle’s traction battery capacity. The credit will begin to be phased out for each manufacturer in the second quarter following the calendar quarter in which a minimum of 200,000 qualified PEVs have been sold by that manufacturer for use in the United States. This tax credit is also available for future EV owners with a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022. For more information, including qualifying vehicles and sales by manufacturer, see the Internal Revenue Service (IRS) Qualified Plug-in Electric Drive Motor Vehicle Credit website.

(Reference U.S. Code 30D and Public Law 117-169)

Advanced Technology Vehicle (ATV) and Alternative Fuel Infrastructure Manufacturing Incentives

The U.S. Department of Energy’s (DOE) Advanced Technology Vehicles Manufacturing Loan Program may offer direct loans to eligible manufacturers for up to 30% of the cost of re-equipping, expanding, or establishing manufacturing facilities in the United States used to produce qualified ATVs, ATV components, or alternative fuel infrastructure, including associated hardware and software. Qualified ATVs are light-, medium-, and heavy-duty ultra-efficient vehicles that meet specified federal emission standards and fuel economy requirements, and emit low or zero exhaust. Ultra-efficient vehicles are fully closed compartment vehicles, designed to carry at least two adult passengers, which achieve at least 75 miles per gallon while operating on gasoline or diesel fuel, as hybrid electric vehicles operating on gasoline or diesel fuel, or as fully electric vehicles. Qualified components must be designed for ATVs and installed for the purpose of meeting ATV performance requirements, as determined by DOE. For more information, see the DOE’s ATVs Manufacturing Loan Program website and ATVs Manufacturing Loan Program fact sheet.

(Reference 42 U.S. Code 17013 and Public Law 117-169)

Alternative Fuel Mixture Excise Tax Credit

NOTE: This incentive was originally set to expire on December 31, 2021, but has been extended through December 31, 2024, by Public Law 117-169.

For more information about claiming the credit, see IRS Form 720, which is available on the IRS Forms and Publications website.

(Reference 26 U.S. Code 6426 and Public Law 117-169)

Alternative Fuel Infrastructure Tax Credit

Fueling equipment for natural gas, propane, liquefied hydrogen, electricity, E85, or diesel fuel blends containing a minimum of 20% biodiesel installed through December 31, 2022, is eligible for a tax credit of 30% of the cost, not to exceed $30,000. Permitting and inspection fees are not included in covered expenses. Fueling station owners who install qualified equipment at multiple sites are allowed to use the credit towards each location. Unused credits that qualify as general business tax credits, as defined by the Internal Revenue Service (IRS), may be carried backward one year and carried forward 20 years. For more information about claiming the credit, see IRS Form 8911, which is available on the IRS Forms and Publications website.

Beginning January 1, 2023, fueling equipment for natural gas, propane, hydrogen, electricity, E85, or diesel fuel blends containing a minimum of 20% biodiesel, is eligible for a tax credit of 30% of the cost or 6% in the case of property subject to depreciation, not to exceed $100,000. Eligible projects that meet prevailing wage and apprenticeship requirements may be eligible to receive the full 30% tax credit, regardless of depreciation status. Permitting and inspection fees are not included in covered expenses.

Qualified fueling equipment must be installed in locations that meet the following census tract requirements:

• The census tract is not an urban area;

• A population census tract where the poverty rate is at least 20%; or

• Metropolitan and non-metropolitan area census tract where the median family income is less than 80% of the state medium family income level.

Consumers who purchase qualified residential fueling equipment between January 1, 2023, and December 31, 2032, may receive a tax credit of up to $1,000.

Additional requirements may apply. For further details, please see the IRS Inflation Reduction Act of 2022 website.

(Reference 26 U.S. Code 30C, 30D, and 38 and Public Law 117-169)

Pre-Owned Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit

Beginning January 1, 2023, the Clean Vehicle Credit provides a tax credit of up to $4,000 for the purchase of a pre-owned EV or FCEV. Eligible vehicles must be of a model year at least two years prior to the year of purchase and may not have a purchase price above $25,000. Individuals with a gross annual income below the following thresholds are eligible for the tax credit:

• $150,000 for joint filers

• $112,500 for head-of-household filers

• $75,000 for single filers

Only one tax credit may be claimed per vehicle. Individuals may not claim more than one pre-owned vehicle tax credit in a three-year period.

(Reference Public Law 117-169)

Commercial Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit

Beginning January 1, 2023, a tax credit will be available to businesses for the purchase of new EVs and FCEVs. Vehicles with a gross vehicle weight rating (GVWR) below 14,000 pounds (lbs.) must have a battery capacity of at least seven kilowatt-hours (kWh) and vehicles with a GVWR above 14,000 lbs. must have a battery capacity of at least 15 kWh. The tax credit amount is equal to the lesser of the following amounts:

• 15% of the vehicle purchase price for plug-in hybrid electric vehicles
• 30% of the vehicle purchase price for EVs and FCEVs
• The incremental cost of the vehicle compared to an equivalent internal combustion engine vehicle

Maximum tax credits may not exceed $7,500 for vehicles under 14,000 lbs. and $40,000 for vehicles above 14,000 lbs. Businesses may not combine this tax credit with the Clean Vehicle Tax Credit.

See the IRS Commercial Clean Vehicle Credit for more details.

(Reference Public Law 117-169)

Heavy-Duty Zero Emission Vehicle (ZEV) and Infrastructure Grants

By February 12, 2023, the U.S. Environmental Protection Agency must create a grant program for heavy-duty ZEVs and associated infrastructure. Grant award amounts vary and may cover up to 100% of total project costs. Eligible project costs include:

• The incremental cost of a Class 6 or 7 electric vehicle;
• Capital, installation, operation, and maintenance costs of ZEV charging or refueling infrastructure;
• Workforce development and training programs to support the maintenance, charging, fueling, and operation of ZEVs; and,
• Planning and technical activities that support the adoption and deployment of ZEVs.

Eligible applicants include state governments, municipalities, tribal governments, and non-profit school transportation associations. Additional funding is available for projects located in nonattainment communities. For more information, see the EPA Clean Heavy-Duty Vehicle Program website.

(Reference Public Law 117-169)

Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Manufacturing Tax Credit

Qualified advanced energy projects are eligible for a 30% tax credit for project investments to reequip, expand, or establish certain manufacturing facilities. Credits cannot be allocated to projects located in census tracts where projects have been previously allocated. Qualifying advanced energy project include, but are not limited to, projects that re-equip, expand, or establish a manufacturing or industrial facilities that produce or recycle light-, medium-, and heavy-duty EVs, FCEVs, EV charging stations, and hydrogen fueling stations. Additional terms apply.

(Reference Public Law 117-169 and 26 U.S. Code 48C)

Port Electrification Grants

The U.S. Environmental Protection Agency (EPA) must establish a competitive Clean Ports grant program for the purchase or installation of zero emission port equipment or technology. Eligible applicants must include port authorities, state governments, local governments, tribal governments, air pollution control agencies, and private entities that own, operate, or use port. Zero emission technology includes all-electric vehicles and fuel cell electric vehicles (FCEVs). Additional funding is available for projects located in nonattainment communities. For more information, see the EPA Ports Initiative website.

(Reference Public Law 117-169)

Sustainable Aviation Fuel (SAF) Tax Credit

Producers of SAF are eligible for a tax credit of $1.25 per gallon. Qualifying SAF must reduce greenhouse gas (GHG) emissions by 50%. SAF that decreases GHG emissions by more than 50% is eligible for an additional $0.01 per gallon for each percent the reduction exceeds 50%, up to $0.50 per gallon. To be eligible, SAF producers must be registered with the Internal Revenue Service (IRS). Additional terms and conditions apply. For more information, see the IRS SAF Credit website.

(Reference Public Law 117-169 and 26 U.S. Code 40B)