Commercial EV Tax Credit

Commercial electric vehicles purchased on or after January 1, 2023 are eligible for a tax credit of up to $7,500 for light duty vehicles and up to $40,000 for vehicles over 14,000 pounds.

Vehicle Eligibility

Vehicles must meet all of the following requirements:

1. The vehicle must be made by a qualified manufacturer.

2. Vehicles under 14,000 pounds must be propelled by an electric motor of at least 7kWh and be able to charge from an external source of electricity.

3. Vehicles over 14,000 pounds must be propelled by an electric motor of at least 15kWh and be able to charge from an external source of electricity.

4. The credit amount is the lower of:

30% of the sales price for all electric vehicles

or 

15% of the sales price for Plug-In Hybrid Electric Vehicles

or

the incremental cost of the vehicle

This amount is capped at:

$7,500 for vehicles under 14,000 pounds and $40,000 for vehicles over 14,000 pounds

Other Requirements

These other requirements must be met to receive the clean vehicle tax credit under 45w of the Clean Vehicle Tax Credit:

1. Vehicle must be new.

2. Vehicle must not be acquired for resale.

3. Each vehicle is only eligible for one tax credit.

4. Vehicle must be used for business purposes.

5. Seller must report required information to you and the IRS at the time of sale.

Tip: Not-for-profits and government fleets can take advantage of this tax credit because it is refundable for tax-exempt entities like nonprofits and municipal fleets.

Commercial EV Tax Credit Frequently Asked Questions

1. Can non-taxable entities like non-profits, cities, or government fleets get the commercial tax credit?

Yes, the Commercial Clean Vehicle Tax Credit (also known as 45W) is refundable (or direct pay) for tax-exempt entities like non-profits or government fleets like cities or counties. This means that tax-exempt entities can claim and receive the tax credit even though they don’t pay any taxes. The I.R.S. treats the tax credit as if it was an overpayment of taxes and refunds the money to the tax-exempt entity even though no taxes were paid.

2. What is incremental cost, and will that affect the amount of the tax credit?

The incremental cost is the cost difference between the new clean vehicle and a comparable new gas-powered (ICE) vehicle. The Department of Energy conducted a study that found that all EVs would have an incremental cost of at least $7,500 for 2023. The only exception is compact Plug-In Hybrid Electric Vehicles (PHEVs), which would have the tax credit capped at $7,000. The IRS issued a safe harbor notice for 2023 that all EVs have an incremental cost of at least $7,500 except compact PHEVs, which have an incremental cost of $7,000.

Pay attention to this number after 2024. As the cost of an EV gets closer to the cost of a comparable gas-powered vehicle, this number will eventually equal zero, meaning the lease won’t be eligible for this tax credit.

Disclaimer: The information provided on this website is for informational purposes only and should not be construed as legal advice. The laws and regulations governing clean energy taxes are complex and subject to change. Please consult with a qualified tax advisor to determine your eligibility for any tax credits or other incentives.