How the 45Q Credit Works
Eligibility
Facility must meet minimum annual capture thresholds (18,750 MT/yr for power plants; 12,500 MT/yr for industrial; 1,000 MT/yr for DAC), which apply to facilities whose construction began after August 16, 2022. Construction must begin before January 1, 2033.
Calculation
Credit = tons captured × applicable rate ($85 geologic, $180 DAC; utilization depends on the placed-in-service date, see the table below). Prevailing wage and apprenticeship required for full rates; non-compliant projects receive one-fifth of these amounts.
Claim
File Form 8933 (Carbon Oxide Sequestration Credit) annually for up to 12 years. Credits are transferable or available as direct pay for nonprofits and governments.
Credit Rates by Placed-in-Service Date
| Disposition Type | Pre-IRA Rate | In Service 2023 to 7/4/2025 | In Service After 7/4/2025 |
|---|---|---|---|
| Geologic Storage | $50/ton | $85/ton · $180 DAC | $85/ton · $180 DAC |
| EOR (Monitored) | $35/ton | $60/ton · $130 DAC | $85/ton · $180 DAC |
| Other Utilization | $35/ton | $60/ton · $130 DAC | $85/ton · $180 DAC |
Note: IRA rates apply to carbon capture equipment placed in service after December 31, 2022. For equipment placed in service after July 4, 2025, the One Big Beautiful Bill Act set utilization and EOR at the geologic storage rate. Prevailing wage and apprenticeship compliance is required to receive the above rates; without compliance the rates are one-fifth of these amounts. Amounts are adjusted for inflation after 2026. Source: 26 U.S.C. §45Q, as amended by P.L. 117-169 and P.L. 119-21.
Capture Thresholds — IRA Expansion
One of the IRA's most impactful changes was drastically lowering the minimum annual capture thresholds that make a facility eligible for 45Q credits, opening the program to a much wider range of industrial emitters.
| Facility Type | Pre-IRA Threshold | Post-IRA Threshold | Reduction |
|---|---|---|---|
| Electric Generating | 500,000 MT/yr | 18,750 MT/yr | -96% |
| Industrial Emitter | 100,000 MT/yr | 12,500 MT/yr | -87% |
| Direct Air Capture | 100,000 MT/yr | 1,000 MT/yr | -99% |
Example Calculation
Assumes prevailing wage compliance and consistent annual capture. Subject to MRV verification and recapture rules. Consult a tax advisor before filing.
Recapture Rules & MRV Requirements
Section 45Q includes recapture provisions to ensure CO2 remains permanently stored. If credited CO2 leaks or is otherwise released, previously claimed credits must be repaid to the IRS.
Recapture Period
- 5-year recapture window post-storage
- Annual monitoring reports required
- EPA Underground Injection Control compliance
- Third-party verification often required
MRV Requirements
- Measurement, Reporting & Verification plan
- Annual CO2 injection and storage reporting
- EPA Greenhouse Gas Reporting Program compliance
- Site characterization and integrity monitoring
Recapture Insurance: Some project developers purchase geological risk insurance to protect against recapture liability. This cost should be modeled as part of the project's overall economics.
Stack 45Q with Compatible Programs
CFO Checklist
- 01Confirm facility type and annual capture volume meets the applicable minimum threshold
- 02Establish construction-start and placed-in-service dates: they decide the capture threshold, the rate, and whether utilization earns the storage rate (equipment placed in service after July 4, 2025)
- 03Document prevailing wage and apprenticeship compliance for full credit rates
- 04Prepare MRV (Monitoring, Reporting & Verification) plan before the credit period begins
- 05File Form 8933 (Carbon Oxide Sequestration Credit) for each year of the 12-year credit window
Frequently Asked Questions
What is the 45Q credit rate for carbon capture?
With prevailing wage and apprenticeship compliance, 45Q pays $85 per metric ton for geologic storage and $180 per ton for direct air capture with geologic storage, for carbon capture equipment placed in service after 2022. Utilization, including EOR, earned $60 per ton ($130 for direct air capture) under the IRA. For equipment placed in service after July 4, 2025, the One Big Beautiful Bill Act raised utilization to the geologic storage rate. Amounts are adjusted for inflation after 2026.
What are the capture threshold requirements for 45Q?
The IRA significantly lowered capture thresholds. Electric generating facilities must capture at least 18,750 metric tons/year (down from 500,000). Industrial facilities must capture at least 12,500 metric tons/year (down from 100,000). Direct air capture facilities must capture at least 1,000 metric tons/year.
How long can 45Q credits be claimed?
Credits are earned for 12 years beginning on the date the carbon capture equipment was originally placed in service. Construction must begin before January 1, 2033.
What is recapture under Section 45Q?
If CO2 that was stored and credited leaks back into the atmosphere, the taxpayer must repay (recapture) previously claimed credits. The recapture period is generally 5 years. Robust monitoring, reporting, and verification (MRV) plans are required to manage recapture risk.
Can 45Q be transferred or sold?
Yes. The IRA made 45Q credits transferable to unrelated third parties. Nonprofit organizations and government entities can elect direct pay. This significantly improves the monetization options for carbon capture project developers who may not have sufficient tax appetite.
Can 45Q stack with the ITC?
45Q is compatible with the ITC when the CCS system is a separate piece of equipment from the energy generation system. This is a common structure for power plants that add carbon capture alongside clean energy equipment.