Buy transferable tax credits at a discount
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Since the 2022 energy law, many clean energy projects can sell their tax credits for cash. A buyer pays, say, 90 to 95 cents for each dollar of credit and uses the full dollar against their own tax bill.
For a company with a predictable tax bill, it can be a straightforward way to lower what it owes. For individuals, the passive activity rules usually limit who can use the credits.
How it works
Clean energy projects can sell their credits. A buyer pays, say, 90 to 95 cents per dollar of credit and uses it against their own tax.
What makes it hold up
- The purchase agreement and the seller’s credit documentation
- The transfer election filed with the return
- Proof of payment in cash
Risks
Moderate. For individuals, bought credits are generally treated as passive and only offset tax on passive income. If the project’s credit is reduced later, the buyer can owe it back, so look for insurance or an indemnity.
Questions to ask your CPA
- Can I use bought credits against my tax, given the passive rules?
- Who stands behind the credit if it’s challenged?
Common questions
Can an individual use bought credits?
Generally only against tax on passive income, such as from rental property or passive business interests. Without enough passive income, the credits can't be used.
How is the purchase made?
Through a written purchase agreement, paid in cash. The seller makes the transfer election with its return, and you claim the credit on yours.
What if the credit is challenged later?
If the IRS reduces the project's credit, the buyer can owe the difference. Look for tax insurance or a seller indemnity before buying.
Why is the discount there?
It reflects the risk, the time until the credit can be used, and the cost of the transaction. Bigger discounts often mean more risk.
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Education, not advice. Tax law changes and every situation is different, so confirm the details with your CPA or tax advisor before acting. This page was last checked against tax law as of October 2026, including the 2025 tax law, in October 2026.