Credit for Carbon Sequestration 45Q

A federal tax credit for carbon capture from the atmosphere or industrial and power facilities.

Projects that capture carbon oxides (including CO2) directly from the atmosphere or from industrial and power facilities. The credit can be realized for 12 years after the carbon capture equipment is operational or 5 years if transferred. Projects must meet carbon capture thresholds.

Eligible projects include:

• Secure storage of captured CO2 in appropriate geologic formations, including saline or other geologic formations or oil and gas fields.
• Reuse of captured CO2 or carbon monoxide as a feedstock to produce low embodied carbon products such as fuels, chemicals, and building materials.

Credit amounts are determined by technology type and the amount of CO2 sequestered or reused. Additional details on credit amounts can be found on congress.gov.

Tax exempt entities can utilize direct pay. All other entities are allowed a one-time transfer to sell their credits to another entity.

Owners of eligible carbon capture equipment, including tax-exempt entities.

For qualifying projects that start construction between January 1, 2023, and January 1, 2033.

Use Form 8933 to claim the 45Q carbon oxide sequestration credit. Preregister with the IRS and submit annual tax paperwork, typically a Form 990-T for most entities that don’t normally file a tax return.