Navigating the Commercial Electric Vehicle Federal Tax Credit
If you’re planning to acquire a qualified electric commercial clean vehicle for your business, you may want to wait to take delivery after December 31, 2022 to take advantage of the Commercial Electric Vehicle Tax credit. We receive a number of questions about Electric Vehicles (EVs) and the Commercial Electric Vehicle Federal Tax Credit. Here are some of the most common that you may be asking yourself.
Common Questions CPAs Receive About the Commercial Electic Vehicle Tax Credit
What is the difference between a Commercial and Non-Commercial Electric Vehicle?
Commercial vehicles have some significant differences than Section 30D for non-commercial electric vehicles.
How much is the Commercial Electric Vehicle tax credit?
The credit is the lesser of:
- 30% of the basis of a vehicle not powered by a gasoline or diesel internal combustion engine, or;
- The incremental cost of such vehicle (i.e. the excess of the purchase price of such vehicle over the price of a comparable vehicle).
Note: The Internal Revenue Code Section 45W states that the credit cannot exceed $7,500 for vehicles weighing less than 14,000 pounds and $40,000 for other vehicles.
What is a Qualified Commercial Clean Vehicle?
The term “qualified commercial clean vehicle” means any vehicle which:
- Meets the requirements of Section 30D(d)(1)(C) and is acquired for use or lease by the taxpayer and not for resale;
- Is of a character subject to the allowance for depreciation;
- Either meets the requirements of subparagraph (D) of Section 30D(d)(1) and is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), or is mobile machinery, as defined in Section 4053(8) (including vehicles that are not designed to perform a function of transporting a load over the public highways), or;
- Either is propelled to a significant extent by an electric motor which draws electricity from a battery which has a capacity of not less than 15 kilowatt hours (or, in the case of a vehicle which has a gross vehicle weight rating of less than 14,000 pounds, 7 kilowatt hours) and is capable of being recharged from an external source of electricity, or is a motor vehicle which satisfies the requirements under subparagraphs (A) and (B) of Section 30B(b)(3).
What Special Rules should I be aware of?
Section 30D Rules
Commercial Electric Vehicles abide by the Section 30D Rules, except for paragraphs 10 (Limitation Based on Modified Adjusted Gross Income) and 11 (Manufacturer’s Suggested Retail Price Limitation).
Vehicles placed in service by tax-exempt entities shall not apply to any vehicle which is not subject to a lease and which is placed in service by that entity.
There is no double benefit allowed under this section with respect to any vehicle for which a credit was allowed under Section 30D.
How do I claim the credit?
You must include the vehicle identification number (VIN) on the tax return for the taxable year in which you purchase the vehicle. You can find eligible VIN numbers on the National Highway Traffic Safety Administration’s free VIN Decoder.
If a commercial EV is on your company’s list, do the due diligence ahead of time to avoid disappointment come tax time.
Who should I contact if I have questions about claiming the commercial electric vehicle tax credit for my business?
If you have questions about electric vehicles (EVs), the commercial electric vehicle tax deduction and how much you may be able to claim, give the corporate tax specialists at Insogna CPA a call..