Oklahoma business owners and high-income earners have access to a tax strategy that goes well beyond standard deductions. Here’s how transferable tax credits work and who they make sense for.
By Courtney Hoffman, CFP®, AAMS™ EverPar Advisors
When most people think about reducing their tax bill, they think about deductions. Charitable giving, property taxes, retirement contributions. These are familiar tools, and for good reason. But there is another category of tax planning strategy that goes largely unnoticed, even among high earners: transferable tax credits.
In this video, I sat down with Shawn Alexander, CPA and owner of Alexander Accounting Services, to walk through exactly how these credits work, where they come from, and whether they might be worth exploring in your own financial plan. Shawn brings a perspective that is hard to find. Before running her own firm, she spent time at the IRS, which gives her a firsthand understanding of tax regulations and audit processes that directly benefits the clients she advises today.
Deductions vs. Credits: Why the Distinction Matters
Before getting into transferable credits specifically, it helps to understand the difference between a deduction and a credit, because they are not the same thing.
A deduction lowers the amount of income that gets taxed. Depending on your bracket, a $1,000 deduction might save you anywhere from $200 to $370. A credit, on the other hand, reduces your actual tax bill dollar for dollar. A $1,000 credit can save you exactly $1,000, regardless of your bracket.
That distinction matters because it changes the math significantly, and it is the foundation for understanding why transferable tax credits can be such a meaningful planning tool.
What Is a Transferable Tax Credit?
A transferable tax credit is a credit that was earned by one person or business but can be sold to another taxpayer. The original credit holder is typically a developer or investor who completed a qualifying project, such as a historic renovation or an energy project. Rather than waiting years to use the credit themselves, they prefer to sell it now and free up cash flow for their next investment.
As the buyer, you purchase that credit at a discount. Right now, buyers are typically paying 94 to 96 cents on the dollar. That means you are buying $1 of tax savings for roughly $0.95. There is no generalized framework that applies to all transferable credits. Each credit type has its own rules, so it is important to verify transferability before moving forward.
A Real Oklahoma Example: The Historic Rehabilitation Credit
Oklahoma has offered the Historic Rehabilitation Credit for decades, and the statutes expressly allow transfers. The credit is based on qualified rehabilitation expenditures for certified historic structures, and the Oklahoma credit mirrors the federal rehabilitation credit dollar for dollar.
Here is how it works in practice. A developer rehabilitates a historic property in downtown Tulsa. The Oklahoma credits come out to $500,000. The developer wants that value in cash now so they can move on to their next project, so they sell the credit at a discount. You, as the buyer, purchase $500,000 in credits for approximately $475,000. That is an immediate $25,000 in savings, plus the full $500,000 credit applied to your Oklahoma tax bill.
One thing worth noting: there is a risk of recapture with these credits. In practice, credits are typically not sold until the recapture period has passed, which means the purchaser generally carries no recapture risk. That said, this is something to confirm with your CPA before proceeding.
Other Transferable Credits Available in Oklahoma
The Historic Rehabilitation Credit is one of the more well-known examples, but it is not the only option. Oklahoma is an energy-producing state, and there are quite a few energy-related credits available, including the coal credit and a variety of others that have appeared in state law over the years. The landscape does shift as legislation adds, modifies, or sunsets different programs, which is why working with a CPA and financial planner who track these changes is important.
At Everpar, we work with a significant number of clients in the oil and gas industry, so this conversation comes up regularly. When we identify a client who may be a candidate, we bring in a CPA like Shawn early so the planning is done properly and proactively.
How to Purchase a Transferable Credit
If you think this might apply to your situation, here is how the process generally works.
- Consult your CPA and financial planner first. Make sure the strategy actually works within your tax situation before going further.
- Find a seller. This is typically a bank that has purchased credits from a developer, investor, or project owner.
- Verify transferability. Confirm that the specific credit is legally transferable under Oklahoma law. Many credits are not.
- Execute the transfer. States often require a written transfer agreement, notice to the tax agency, and sometimes surrender of the original certificate with a replacement certificate issued to the buyer.
- Claim the credit. Once you have the replacement certificate or state acknowledgment, you can apply the credit on your Oklahoma tax return with the required documentation attached.
This is not something you can do overnight. Starting the conversation early is critical so you are not working against the clock come tax season.
How This Fits Into Your Broader Financial Plan
A transferable tax credit does not live in isolation. Before pursuing one, there are several factors that need to be evaluated alongside the potential tax benefit.
Cash flow and liquidity. You have to purchase the credit upfront, so timing and available cash matter.
Risk. Like any strategy, this has to fit within your overall financial plan and risk profile.
Oklahoma tax liability. This is a state-level strategy, not a federal one. Your Oklahoma tax liability needs to be significant enough to make it worthwhile.
CPA and advisor collaboration. Your financial planner identifies the opportunity and evaluates the fit. Your CPA models the tax mechanics and handles the compliance. Both are necessary for this to work well.
At Everpar, when we identify a client who looks like a potential fit, we take a step back and look at the full picture before moving forward. Once we have confirmed it makes sense, we bring in the CPA to model it out and take it from a planning idea to an actionable strategy.
Who This Strategy Is Right For
Transferable tax credits are not a fit for everyone. This is a very specific planning tool that tends to apply to a narrow group of people.
It works well for business owners with significant Oklahoma tax liability, high-income earners with meaningful state income tax exposure, investors looking for tax-efficient strategies, and those with the cash flow to purchase the credit upfront.
It is generally not a fit for W-2 employees with standard employment income, those without meaningful Oklahoma tax liability, or anyone with limited liquidity or looking for a quick solution.
If you have heard of this strategy but are not sure whether it applies to your situation, that is exactly the kind of conversation we have with clients. Feel free to reach out to us or schedule an introductory strategy session.
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