New IRS proposal clarifies tax credit rule for EV charging stations

On September 18, 2024, the IRS released proposed rules that clarify and expand various aspects of the alternative fuel vehicle refueling property tax credit. The credit is not limited to EV charging stations but does apply to them and was significantly expanded under the Inflation Reduction Act of 2022.

The credit offers up to a 30% tax savings on the cost of EV charger projects for businesses and individuals who install charging stations at eligible locations. The credit is capped at $100,000 per item of depreciable property and $1,000 for non-depreciable property placed in service at a principal residence.

Taxpayers have been seeking guidance on various aspects of implementing the tax credit, and the proposed rules clarify several vital pieces:

• The cost of “functionally Interdependent” and “integral” components required for the installation and function of EV chargers are eligible for the tax credit. This is beneficial because many taxpayers will need to complete additional electrical and site work to allow them to have functional EV chargers on their property.
• Clarification that an item of EV charging property is defined as a single port, which is important because of the single-item credit limitations of $100,000 for businesses and $1,000 for personal use chargers. Also, the proposed rules clarify that electrical storage property (e.g., batteries) are creditable as separate items of property.
• Definition of a “project” as all chargers and related property meeting certain requirements including being placed in service in a single tax year, by a single taxpayer, and on a single contiguous piece of land.
• If EV charging property becomes ineligible for the credit after being placed in service, the credit can be recaptured. Recapture rules are clarified to apply within three years of the EV charger’s placement in service, and the proposed rules outline in detail what constitutes a recapture event.
• Rules are laid out for credit treatment when EV charging property is used for both business and personal purposes.

Taxpayers interested in the alternative fuel vehicle refueling tax credit will want to evaluate potential installations of charging property to take advantage of this credit. Importantly, IRS-defined prevailing wage and apprenticeship requirements must be met to access the 30% credit level for businesses; otherwise, the credit is 6% of the cost.

Taxpayers can refer to the full text of the proposed regulations for more details and are encouraged to consult with potential installers and a tax professional to help ensure that requirements are met and that the necessary supporting documentation can be obtained.

How Wipfli can help

If you are considering the potential tax benefits of adding EV charging capabilities to your property, Wipfli can help you understand the implications. Our energy advisory professionals can offer the guidance you need to make the most of green energy incentives. Contact us today to get started.