Carbon Oxide Sequestration Tax Credit (Section 45Q)
Internal Revenue Service
$17–$85/metric ton
Tax credit for every metric ton of CO₂ you capture
Section 45Q provides a per-metric-ton tax credit for carbon oxide captured and stored or utilized. The IRA (2022) expanded credit amounts and opened direct pay (elective payment) for the first time, allowing for-profit businesses to receive cash from the IRS rather than an offset. Enhanced by 5x for projects meeting prevailing wage and registered apprenticeship standards. Applies to carbon capture at industrial facilities, power plants, and direct air capture (DAC) systems. Minimum annual capture thresholds apply.
- Funding type
- Tax Credit
- Level
- Federal
- Amount
- Base credit: $17/metric ton for industrial/power plants storing CO₂ geologically; $12/metric ton for CO₂ used in enhanced oil recovery; $36/metric ton for direct air capture. Enhanced rate (5x base) for projects meeting prevailing wage + registered apprenticeship requirements: up to $85/metric ton for industrial/power, $180/metric ton for DAC. 2026 inflation-adjusted geological storage rate: ~$29.28/MT.
- Realistic amount
- Varies widely by scale. A mid-size industrial facility capturing 15,000 MT/year at the enhanced rate earns ~$1.275M/year…
- Deadline
- Ongoing — claimed annually on federal tax return
- Status
- active
- States
- Nationwide
- Payment model
- tax offset
Who qualifies
- Must operate a qualified carbon capture facility or equipment placed in service after February 9, 2018
- Geological storage pathway: must capture at least 12,500 metric tons of qualified carbon oxide per year (for non-power, non-DAC facilities)
- Electric generating facility pathway: must capture at least 18,750 metric tons per year and capture ≥75% of baseline CO₂ production
- Direct air capture pathway: minimum 1,000 metric tons per year
- Captured carbon oxide must be measured and verified per EPA Greenhouse Gas Reporting Program (40 CFR Part 98)
- For direct pay (elective payment under §6417): for-profit entities may elect direct pay only for §45Q, §45V (clean hydrogen), and §45X (advanced manufacturing) — no other credits available as direct pay to for-profits
- Credit is also transferable to a third party under §6418
Hard requirements
- Must be incorporated
What it covers
Eligible expenses
- Carbon capture equipment and systems (amine absorbers, membrane systems, pressure swing adsorption)
- Transport and storage infrastructure for captured CO₂
- Direct air capture systems
- Monitoring, reporting, and verification costs are not separately credited but support qualification
Ineligible expenses
- Carbon capture equipment that does not meet minimum annual tonnage thresholds
- CO₂ captured from biomass combustion unless specific requirements met
- Projects where CO₂ is not verified per EPA GHGRP
How to apply
-
1
Verify facility qualification and minimum thresholds
Confirm your facility meets the applicable minimum annual CO₂ capture threshold (1,000 MT for DAC; 12,500 MT for industrial; 18,750 MT for power plants). Engage an environmental engineer to model projected capture volumes.
-
2
Register facility and establish EPA monitoring
Register with EPA's Greenhouse Gas Reporting Program (GHGRP) Subpart RR (geological storage) or Subpart PP (suppliers). Annual monitoring, reporting, and verification (MRV) is required.
-
3
Document prevailing wage and apprenticeship compliance
To qualify for the 5x enhanced credit rate, pay prevailing wages and hire registered apprentices for construction, alteration, and repair. Maintain certified payroll records.
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4
File Form 8933 with tax return
Complete IRS Form 8933 (Carbon Oxide Sequestration Credit). For direct pay, also file Form 3800 and make an elective payment election. For transfer, execute a written agreement with the transferee.
The 12,500 MT/year minimum for most industrial facilities is a major barrier for SMBs. DAC's 1,000 MT floor is lower but capital costs are prohibitive at small scale. Best fit: large industrial emitters (cement, steel, ethanol, ammonia) or oil-field operators with EOR projects.
Deadline & timing
Claimed on Form 8933 filed with annual federal income tax return. For direct pay elections, file Form 3800. The enhanced IRA credit rates apply to facilities beginning construction after January 1, 2023. DAC qualifications under IRA apply to facilities placed in service after December 31, 2022.
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Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.