Learn everything you need to know about the Commercial Clean Vehicle Credit, an incentive program promoting environmentally-friendly commercial vehicles.
The Commercial Clean Vehicle Credit provides a maximum federal income tax credit of $7,500 or $40,000 (if the gross vehicle weight is 14,000 pounds or above). Unlike the personal clean vehicle credit, there are no battery or critical mineral component requirements and final assembly does not have to occur in the United States.
What Is the Federal Commercial Clean Vehicle Credit?
The maximum federal income tax credit per commercial clean vehicle energy purchase is $7,500 (provided the gross vehicle weight is less than 14,000 pounds) or $40,000 (if the gross vehicle weight is 14,000 pounds or greater). If a hybrid commercial vehicle is purchased or leased, the credit amount is the lesser of
- $7,500 or $40,000, depending on weight
- 15% of the basis of the vehicle or
- Incremental cost of the hybrid vehicle when compared to a gasoline-powered vehicle
Similar limitations apply to commercial electric vehicles, but the percentage multiplied by the basis of the vehicle is increased to 30%.
What Is Considered a Commercial Clean Vehicle?
A qualified commercial clean vehicle must be:
- Made by a qualified manufacturer and acquired for use or lease by the taxpayer (not for resale)
- A motor vehicle under title II of the Clean Air Act
- Manufactured primarily for use on public streets, roads, and highways
- Be propelled to a significant extent by an electric motor which draws electricity from a battery that has a capacity of not less than 15-kilowatt hours (or, in the case of a vehicle that has a gross vehicle weight rating of less than 14,000 pounds, 7-kilowatt hours)
- Capable of being recharged from an external source of electricity.
The final assembly of the clean commercial vehicle can occur outside North America. In addition, there are no critical mineral or battery component requirements that must be met. Lastly, there is no MSRP limitation on the vehicle being purchased.
How Do I Claim a Commercial Clean Vehicle Credit?
For-profit entities claim the Commercial Clean Vehicle Credit on their income tax return. The Commercial Clean Vehicle Credit is non-refundable. For-profit entities will need to reflect an income tax liability to receive an immediate benefit from the credit. Unlike many of the energy credits, for-profit entities cannot transfer (i.e. sell) a Commercial Clean Vehicle Credit. Not-for-Profits can make a direct pay election, which would allow them to receive a tax refund for the Commercial Clean Vehicle Credit even if no unrelated business income (UBI) is identified.
Does the Commercial Clean Vehicle Credit Affect My Depreciable Tax Basis?
Yes, any amount of federal tax credit received must reduce the amount of the federal tax basis in the property for depreciation.
Contact Us
If you are interested in learning more about the Commercial Clean Vehicle Credit, contact Withum’s Tax Services Team.
