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Commercial Clean Vehicle Credit

Businesses and tax-exempt organizations that buy a qualified commercial clean vehicle may qualify for a clean vehicle tax credit of up to $40,000 under Internal Revenue Code (IRC) 45W.  The credit equals the lesser of:

• 15% of your basis in the vehicle (30% if the vehicle is not powered by gas or diesel)
• The incremental cost of the vehicle

The maximum credit is $7,500 for qualified vehicles with gross vehicle weight ratings (GVWRs) of under 14,000 pounds and $40,000 for all other vehicles.

Who Qualifies

Businesses and tax-exempt organizations qualify for the credit. 

There is no limit on the number of credits your business can claim. For businesses, the credits are nonrefundable, so you can’t get back more on the credit than you owe in taxes. A 45W credit can be carried over as a general business credit.

Vehicles That Qualify

To qualify, a vehicle must be subject to a depreciation allowance, with an exception for 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). See our index of qualified manufacturers
• Be for use in your business, not for resale
• Be for use primarily in the United States
• Not have been allowed a credit under sections 30D or 45W

In addition, the vehicle must either be:

• Treated as a motor vehicle for purposes of title II 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
• Mobile machinery as defined in IRC 4053(8) (including vehicles that are not designed to perform a function of transporting a load over a public highway)

The vehicle or machinery must also either be:

• A plug-in electric vehicle that draws significant propulsion from an electric motor with a battery capacity of at least:
  • 7 kilowatt hours if the gross vehicle weight rating (GVWR) is under 14,000 pounds
  • 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).

How to Claim the Credit

We’re finalizing a form for you to claim the credit. Please check back for updates.

You will need to provide your vehicle’s VIN along with the amount of the credit.

The depreciable basis of the vehicle is reduced by the amount of the commercial clean vehicle credit you receive.

The Section 179 deduction is a U.S. tax code provision that allows businesses to deduct the full purchase price of qualifying assets purchased or financed during the tax year. This means that if a business buys or leases qualifying property, it can deduct the full purchase price from its gross income. The provision is designed to encourage businesses to buy equipment and invest in themselves by offering an upfront tax relief instead of spreading the deduction over the life of the asset through depreciation.

As of my last update in April 2023, the Section 179 deduction had certain limits. For the tax year 2023, the deduction limit was $1,080,000, and the phase-out threshold started at $2,700,000. This means that the deduction begins to decrease on a dollar-for-dollar basis for purchases exceeding the phase-out threshold, and it completely phases out once purchases reach $3,780,000. These amounts are adjusted annually for inflation, so it’s important to check the current year’s limits.

Qualifying property includes tangible personal property such as machinery and equipment, off-the-shelf computer software, and certain vehicles. It also covers improvements to nonresidential real property like roofs, heating, ventilation, air-conditioning systems, fire protection, alarm systems, and security systems.

There are specific conditions and requirements to qualify for the Section 179 deduction, including business use percentage and the type of business entity. It’s also important to note that the total amount of the Section 179 deduction cannot exceed the taxable income of the business; however, any amount not deductible in the current year can be carried forward to future years.

Given the strategic value of this deduction for businesses, especially small and medium-sized enterprises, it’s an excellent tool for managing cash flow and reducing the tax burden. It encourages businesses to invest in their growth and operational efficiency. Entrepreneurs and innovators can leverage this deduction to offset the upfront cost of purchasing new equipment or software, effectively reducing the overall cost of investments that could drive their business forward.

For the most accurate and personalized advice, consulting with a tax professional or accountant who can provide guidance based on the latest tax laws and your specific business situation is highly recommended.

Section 179 Deduction 

Qualifying businesses can claim a deduction of up to $28,900 when purchasing a new Tesla vehicle with a gross vehicle weight rating (GVWR) of at least 6,000 pounds. To qualify for the tax deduction, vehicles must be operated for legitimate business use >50% the time.  

For the full list of current requirements and limitations, review the IRS website and consult your tax advisor.