Clean Hydrogen Investment Tax Credit

Insider Tip

The 40% rate applies only to hydrogen with carbon intensity below 0. 75 kg CO2e/kg H2 — effectively green hydrogen from clean electricity. Budget 2025 added methane pyrolysis as an eligible pathway, opening this credit to turquoise hydrogen producers. Alberta and Quebec (cheap hydro) are best positioned.

Success Profile

A Quebec electrolyzer manufacturer producing green hydrogen using cheap hydroelectric power, claiming 40% on $10M in eligible equipment for a $4M refundable credit.

Evaluation Criteria

Entitlement-based — no competitive evaluation. Eligibility is binary: the corporation must be a taxable Canadian corporation, the property must be eligible clean hydrogen property, and the hydrogen production pathway must meet carbon intensity thresholds verified by a qualified third party. The credit rate is determined solely by the assessed carbon intensity: Tier 1 (<0.75 kg CO2e/kg H2) = 40%; Tier 2 (0.75-2.0) = 25%; Tier 3 (2.0-4.0) = 15%. Labour compliance election adds 10 percentage points to each tier.

Application Steps

Required Documents 5

Eligible Expenses 16

• Electrolysis equipment: electrolysers (PEM, alkaline, AEM), rectifiers, ancillary electrical equipment
• Water treatment and conditioning equipment for electrolysis
• Hydrogen compression equipment
• Hydrogen storage equipment
• Natural gas reforming equipment: pre-reformers, auto-thermal reformers, steam methane reformers
• Pre-heating equipment for reforming processes
• Syngas coolers and shift reactors
• Hydrogen purification equipment (PSA units, membrane separators)
• Fired heaters for reforming processes
• Methane pyrolysis equipment (eligible for property acquired on or after December 16, 2024)
• Clean ammonia production equipment (when integrated with clean hydrogen)
• Dual-use electricity and heat equipment supporting hydrogen production
• Dual-use hydrogen and ammonia equipment
• Safety and integrity equipment solely supporting eligible hydrogen equipment
• Control and monitoring systems solely supporting eligible hydrogen equipment
• Property physically and functionally integrated with eligible equipment above

Ineligible Expenses 11

• Land and buildings (structures housing the equipment)
• Equipment used for hydrogen distribution or end-use applications (fueling stations, pipelines)
• Equipment not used all or substantially all for clean hydrogen production
• Used or refurbished equipment (must be new, previously unused property)
• Equipment not located in and used in Canada
• Equipment acquired from non-arm's length parties (related-party transactions)
• Soft costs: engineering studies, feasibility assessments, environmental assessments, permitting
• Working capital, operating expenses, or consumables
• Equipment for hydrogen production pathways not meeting carbon intensity thresholds (above 4.0 kg CO2e/kg H2)
• Vehicle or mobile equipment
• Property that is part of a tax shelter

Intake Periods

No intake period — entitlement-based. Credit is claimed on annual T2 corporate tax return for the taxation year in which eligible property becomes available for use. Available for property acquired March 28, 2023 through December 31, 2034. Full rates through 2033; rates reduced by 50% for property available for use in 2034.

Deadline Notes

Available for eligible property that becomes available for use from March 28, 2023 through December 31, 2034. Budget 2025 added methane pyrolysis as an eligible pathway. Full rates apply through 2033; 50% reduction for 2034.

Open Application Portal →

Ineligible Organizations

• Non-taxable entities (Crown corporations, non-profit organizations, charities, cooperatives exempt from Part I tax)
• Partnerships directly (the credit flows through to taxable corporate partners)
• Trusts (unless structured as taxable Canadian corporations)
• Individuals and sole proprietorships
• Foreign corporations without a taxable presence in Canada
• Tax-exempt entities under section 149 of the Income Tax Act

Compatible Programs

Clawback Risk

High Risk