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How to maximize alternative fuel tax credits

Businesses that utilize alternative fuel can take advantage of tax incentives—if you know where to look.
A line of white EV vans are plugged in and charging at a station.

From charging incentives to government rebates, businesses that invest in critical infrastructure for electric vehicles already enjoy a number of financial perks. In some cases, those benefits repeat every year during tax season.

Alternative fuel tax credits can help your business save money while simultaneously preparing for the future. But in order to maximize those alternative fuel credits, you’ll have to understand what they are and how they apply to your business.

Whether your business is based in the United States or Canada, you should take advantage of every incentive available. Here’s how to figure out what alternative fuel tax credits are available and whether or not your business qualifies. 

Qualifying for alternative fuel tax credits

The first step in maxing out your tax benefits is understanding which incentives you qualify for. When you hear “alternative fuel,” you probably think of electric vehicles, but that’s only one of the 12 power sources the United States and Canadian governments define as alternative fuels. Others include:

  • Biodiesel and renewable diesel: Biodiesel fuel can be manufactured from vegetable oils, animal fats, or recycled cooking grease, while renewable diesel is a biomass-derived fuel.
  • Hydrogen: While not yet commercially widespread, hydrogen cars could theoretically provide another potentially emissions-free alternative.
  • Natural gas: This abundant fuel often has significant cost advantages over traditional gasoline and diesel fuels.
  • Ethanol: Made from corn and other plant materials, ethanol is frequently blended with gasoline for use in vehicles.

It’s important to note that EVs dominate the market share of alternative fuel vehicles on the road today. While there are technically a number of alternative fuels that might qualify for tax credits, the current landscape prioritizes businesses that own, manufacture, or maintain electric vehicles and infrastructure, like charging stations.

The type of business you run also matters when you’re trying to cash in on tax incentives. For example, the Alternative Fuel Infrastructure Tax Credit (AFITC) applies to those who install EV chargers and other alternative refueling stations, including multi-family buildings, hotels, commercial parking lots, and more. In those cases, the type of alternative fuel matters less than the infrastructure itself.

Examples of alternative fuel tax credits 

The best way to ensure you max out your tax savings is to stay current on various state, province, and federal-level incentives. This helps you figure out which credits you already qualify for and enables you to plan future expansions. For example, if you know that you’ll receive 30% of the depreciable costs back under the AFITC, you can properly budget for business growth.

Currently, over 70% of the United States is covered by EV charger rebates or incentives. If your business is built on making electric vehicles more accessible, you can use ChargeLab’s Rebate Finder to hone in on incentives specific to your business and location. All you need to do is fill in your zip code and answer a few questions about the types of chargers you’re installing, as well as where you’re installing them.

In 2023, the Canadian government proposed five new investment tax credits to encourage clean energy adoption. If passed, these proposals would make Canadian business owners who use alternative fuels eligible for tax refunds for their infrastructure investments.

Many other incentives already exist throughout Canada, though they may vary by province. For example, municipalities in Alberta are eligible for up to $5,000 per Level 2 charger or $75,000 per direct-current fast charger (DCFC, also known as Level 3 charger) under the MCCAC Electric Vehicle Charging Program.

Combining tax credits with rebates for maximum savings

Typically, tax credits appear as refunds granted after the completion of the tax cycle. In other words, you’ll pay the upfront costs and get the money back after filing your taxes. But alternative fuel tax credits are only one way to benefit financially; by combining tax credits with other incentives, you may get some funds upfront and more when tax season ends.

Here are a few types of rebates you’ll want to consider:

    • Prescriptive rebates: These rebates offer businesses a fixed dollar amount per unit and often carry a qualification focus specific to charger types and specific charger features.
  • Point-of-purchase rebates: These rebates are more common for residential projects and often come from EV manufacturers or third-party manufacturers and vendors.
  • Make-ready rebates: These rebate programs typically target Level 3 chargers, which are far more expensive to install than Level 2 chargers. These rebates can offset necessary construction and electrical work and often require plans to be submitted ahead of time for consideration.
  • Turnkey rebates: These rebates can include coverage for everything from the materials to the installation of the equipment and are commonly used by installers.
  • Case-by-case rebates: Other rebates, grants, and promotions with different criteria may help your business save money with EV installation projects.

As the world moves toward the growing use of alternative fuel sources, it’s likely that additional legislation will make its way through the proper channels to offer even more benefits to business owners. Be sure to discuss all possible tax credits with the accountant or team member handling your taxes, and stay on top of rebates by regularly checking government websites.

Charge into the future

Over 4.1 million plug-in hybrid and battery electric vehicles were sold in the United States between 2010 and 2023. That number is only going to keep growing. As EVs become more affordable, the demand for charging infrastructure is also increasing; our data shows that 60% of EV drivers use public chargers despite having at-home options.

That means savvy business owners have the opportunity to tap into this growing market while saving money through alternative fuel tax credits. Of course, installing EV chargers isn’t just about the hardware; you’ll need software as well. That’s where ChargeLab comes in.

Our backend software powers North America’s leading EV charger manufacturers, turnkey installers, and network operators. As the only true operating system for EV chargers, our platform transforms any OCPP device into a smart charger, making it easier for you to run your business. Want to learn more? Reach out to the ChargeLab team today.

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