Commercial Clean Vehicle Credit

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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.

Credit amount

Follow these steps to calculate the credit amount:

1. Find the maximum credit amount based on the gross vehicle weight rating (GVWR) of the vehicle:

  • Less than 14,000 pounds (typically cars, vans, trucks, and similar passenger-sized vehicles): maximum credit $7,500
  • 14,000 pounds or more (typically larger vehicles like school buses and semi-trucks): maximum credit $40,000

2. Calculate a percentage of your basis (the amount of your investment for tax purposes) in the vehicle based on engine type:

  • 30% of basis for a vehicle that is not powered by a gasoline or diesel internal combustion engine, such as an electric vehicle (EV) or fuel cell electric vehicle (FCEV).
  • 15% of basis for a vehicle that is powered (even partially) by a gasoline or diesel internal combustion engine, such as a plug-in-hybrid electric vehicles (PHEV).

3. Find the incremental cost of the vehicle (the excess of its purchase price over that of a comparable vehicle powered only by gas or diesel internal combustion).

For electric vehicles placed in service in 2024, use the Department of Energy’s incremental cost analysis for the appropriate class of vehicle:

  • $7,000 for compact plug-in hybrid electric vehicles (PHEVs) (includes minicompact and subcompact cars) with a GVWR of less than 14,000 pounds
  • $7,500 for all street electric vehicles, other than compact car PHEVs, with a GVWR of less than 14,000 pounds
  • $40,000 for all other vehicles with a GVWR of 14,000 pounds or more

For previous calendar years, please refer to the Department of Energy's incremental cost methodology page.

4. Compare the maximum credit amount, percentage of basis, and incremental cost. The smallest figure is your credit amount.

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

Partnerships and S corporations must file Form 8936, Clean Vehicle Credits.

All other taxpayers report this credit on line 1y in Part III of Form 3800, General Business Credit.

A tax-exempt entity must file a Form 990-T, Exempt Organization Business Income Tax Return PDF with an attached Form 3800, even if a Form 990-T would not otherwise be required to be filed.

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Page Last Reviewed or Updated: 06-Aug-2024