Electric buses at the charging station.
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Plus, the tax credit for larger trucks is worth more money — up to $40,000 as opposed to the $7,500 maximum for smaller commercial electric and passenger cars.
“I think it would be much more straightforward and easier to take advantage of than the light vehicle tax credit,” Ingrid Malmgren, Policy Director at Plug in America, said of the commercial electric vehicle tax credit. “It really is a great opportunity for business owners to reduce emissions in a cost-effective way.”
Business owners can get the tax credit for new vehicles purchased on or after January 1, 2023. It is available for 10 years, until the end of 2032.
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Here are the basics of commercial vehicle credit.
The tax credit is available to business owners who purchase an electric vehicle or electric “mobile machines,” Including For construction, manufacturing, processing, farming, mining, drilling or timber.
The vehicle must be subject to depreciation allowance – meaning it is for commercial use, according to For Congressional Research Service.
“If you have a flower shop, for example, and you want to buy flower delivery cars, you buy a bunch of trucks, you’d be the one claiming the tax credit,” Malmgren said.
There are two limits to the business tax credit: cars under 14,000 pounds are eligible for the $7,500; Those who weigh more than that are eligible for up to $40,000.
The 14,000-pound line of demarcation includes commercial vehicles of Class 4 and above, or largely medium and heavy trucks and buses.
Medium and heavy trucks “are the fastest growing fuel users and greenhouse gas producers in the United States,” according to the 2019 US Department of Energy. Report.
Class 3 through Class 8 trucks make up less than 5% of the total number of U.S. vehicles on the road, but account for 27% of annual road fuel use, according to the report. It added that gasoline and diesel make up more than 90% of the fuel use of medium and heavy vehicles.
While the market for electrified commercial vehicles is “far behind” over the light vehicle market, battery performance has improved and battery costs have fallen dramatically over the past decade, making electrification of trucks and medium and heavy-duty buses “more attractive,” according to a DOE report.
Technically, the commercial vehicle tax credit is worth less than: (1) 30% of the vehicle’s purchase price; or (ii) the “extra cost” relating to a similar gasoline-powered vehicle. (The additional cost is the net difference in price between a commercial clean vehicle and a similar internal combustion engine vehicle.)
Whatever the amount from this account, its final value is set at $7,500 or $40,000, as mentioned earlier.
Experts said some aspects of the tax exemption won’t be clear until the US Treasury and the IRS issue guidance on the new rules. For example, how will business owners determine the price of a similar gas-powered vehicle for an “extra cost” analysis?
Because the financial benefit is structured as a tax credit for business owners He must have a tax obligation For the benefit of. One caveat: Tax-exempt entities can still get a financial benefit in the form of a direct check from the government, said Stephen Schmol, a director at KPMG.
In addition, business owners cannot retract by obtaining a tax exemption on the consumer (Tax Code Section 30D) and on the business end (Code section 45W) end.
One of the main differences between commercial and consumer tax credits for new clean vehicles is the lack of manufacturing and other requirements for a trade credit.
In order to be eligible for a “new clean cars” credit (ie, which is not for business owners), the final assembly of the vehicle must now take place in North America. The Ministry of Energy owns a existing Vehicles that meet this standard.
Some additional rules will take effect in 2023.
First, there is an income cap. The tax credit is not available to individuals who have Adjusted Adjusted Gross Income $150,000 and up. The maximum limit is higher for others – $225,000 for heads of household and $300,000 for married couples who file a joint tax return. (The test applies to income for the current or previous year, whichever is lower).
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Some cars may not qualify based on the price. Sedans with a retail price of more than $55,000 do not qualify, nor do vans, SUVs, or trucks over $80,000.
Two other rules apply to manufacturing: one bears the requirements for obtaining minerals important for a car battery; The second requires that part of the battery components be manufactured and assembled in North America. Consumers lose half the value of the tax credit—up to $3,750—if one of these requirements is not met; They will lose the entire $7,500 for failing to meet both.
He added inclusion of the five requirements under the Inflation Reduction Act, none of which apply to the Commercial Clean Car Credit.