Starting 2023, businesses and tax-exempt organizations may be eligible for a clean vehicle tax credit under Internal Revenue Code (IRC) 45W when they purchase a qualified commercial clean vehicle. The credit is based on the lesser of 15% of the vehicle’s basis (30% if it is not powered by gas or diesel), or the incremental cost of the vehicle. The maximum credit is $7,500 for qualified vehicles with gross vehicle weight ratings (GVWRs) under 14,000 pounds, and $40,000 for all other vehicles.
Who can claim the commercial clean vehicle tax credit?
Businesses and tax-exempt organizations can take advantage of the clean vehicle tax credit. There is no limit to the number of credits a business can claim, but the credits are nonrefundable and cannot exceed the amount of taxes owed. However, any unused credit can be carried over as a general business credit.
What makes a vehicle qualify for the commercial clean vehicle tax credit?
To qualify for the clean vehicle tax credit under Internal Revenue Code (IRC) 45W, the vehicle must meet certain requirements. It must be subject to a depreciation allowance, with the exception of vehicles placed in service by a tax-exempt organization and not subject to a lease.
The vehicle must also be made by a qualified manufacturer as defined in IRC 30D(d)(1)(C) and must be for use in your business, not for resale. It must be primarily used in the United States and cannot have already been allowed a credit under sections 30D or 45W.
In addition, the vehicle must either be treated as a motor vehicle for purposes of the Clean Air Act and manufactured primarily for use on public roads (not including a vehicle operated exclusively on a rail or rails), or it must be mobile machinery as defined in IRC 4053(8).
The vehicle or machinery must also either be a plug-in electric vehicle with a battery capacity of at least 7 kilowatt hours if the gross vehicle weight rating (GVWR) is under 14,000 pounds, or 15 kilowatt hours if the GVWR is 14,000 pounds or more, or a fuel cell motor vehicle that satisfies the requirements of IRC 30B(b)(3)(A) and (B).
Claiming the commercial clean vehicle tax credit
The Internal Revenue Service (IRS) is in the process of creating a form for businesses and tax-exempt organizations to claim the clean vehicle tax credit under Internal Revenue Code (IRC) 45W. Please check back for updates on the availability of this form.
To claim the credit, you will need to provide your vehicle’s VIN and the amount of the credit. It’s important to note that the depreciable basis of the vehicle will be reduced by the amount of the commercial clean vehicle credit received.
It is also worth noting that credits are also available for new clean vehicles, used clean vehicles, and new plug-in EVs purchased before 2023. More information on these credits can be found on the IRS website.