Questions to ask a tax credit broker before buying transferable credits
By the Tax Field Guide editorial team. Published 2026-10-26. Facts checked 2026-10-26. Related strategies: Purchased Energy Credits, Solar Investment Credits.
Education only; not tax, legal or investment advice. Tax rules change, and how they apply depends on your facts. No outcome is guaranteed.
Clean energy credits can be sold for cash under section 6418. Brokers and marketplaces now offer them to individuals as well as corporations. The rules put real risk on the buyer, so ask these questions before you sign.
About the credit
- What is the registration number? The seller must complete IRS pre-filing registration and give the buyer the registration number for the credit; you report it on your return.12
- Which credit and which facility? Get the credit section (for example, §48E or §45Y), the facility, the placed-in-service date and the tax year. See Form 3468 walkthrough.
- How was the amount calculated? If the credit was increased for prevailing wage and apprenticeship, energy community or domestic content, ask for the documentation. See prevailing wage and apprenticeship and energy community and domestic content.
- Has the credit already been transferred? A transferee cannot transfer it again.1
About price and payment
- Is the whole price paid in cash? Consideration must be paid in cash. The buyer cannot deduct it, and the seller does not include it in income.1 Any discount to face value is what you earn.
- Who are the parties? Transfers must be to an unrelated person.1 Ask who the broker represents and how it is paid.
About risk
- What happens if the credit is reduced? If the IRS finds an excessive credit transfer, the buyer's tax increases by the excess plus a 20% penalty, unless the buyer shows reasonable cause.1 Ask what indemnity or insurance covers that, and who stands behind it.
- What about recapture? For an investment credit, recapture during the 5-year period falls on the buyer, and the seller must notify the buyer.13 See solar ITC recapture.
- What due diligence can I see? Ask for the cost basis support, appraisals if any, and prevailing wage payroll records.
About you
- Can I actually use it? For individuals, purchased credits are generally treated as passive activity credits, usable only against tax on passive income.45 See buying transferable solar tax credits.
Be cautious with anyone who will not answer these in writing.
Related reading
To check credentials and fee practices before you hire anyone, see how to find and vet a tax mitigation advisor. For state credit transfers, see how state tax credit transfers work.
Common questions
Can an individual buy transferable clean energy credits?
Yes, but for individuals the purchased credit is generally a passive activity credit, so it can offset only tax on passive income. Most people with wage income have little or none.
What happens if a purchased tax credit is disallowed?
The buyer's tax increases by the excessive credit transfer plus a 20% penalty, unless the buyer shows the excess resulted from reasonable cause.
Do I need a registration number to claim a purchased credit?
Yes. The seller must register the credit with the IRS before transferring it and give the buyer the registration number.
Education only; not tax, legal or investment advice. Talk to a qualified professional before acting.
Sources
- 26 U.S.C. §6418, https://www.law.cornell.edu/uscode/text/26/6418
- IRS, Elective pay and transferability FAQs: transferability, https://www.irs.gov/credits-deductions/elective-pay-and-transferability-frequently-asked-questions-transferability
- IRS, Instructions for Form 4255, https://www.irs.gov/instructions/i4255
- Treas. Reg. §1.6418-2(f), https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR97a4759977382b4/section-1.6418-2
- IRS Publication 925, Passive Activity and At-Risk Rules, https://www.irs.gov/publications/p925