You may have heard that the newly enacted Inflation Reduction Act includes an expanded tax credit for electric vehicles.
Although this personal credit has gotten most of the publicity, the new law launched a new commercial clean vehicle credit—specifically for business-use electric vehicles. And it’s much better than the credit for personal-use electric vehicles.
The new law’s personal-use electric vehicle credit is now called the clean vehicle credit. It comes with many new restrictions:
• It is available only if your adjusted gross income is no more than $300,000 (married, filing jointly) or $150,000 (single).
• It applies only to electric vehicles with a manufacturer’s suggested retail price below $80,000 for vans, SUVs, and pickup trucks, or $55,000 for other vehicles.
• It must pass complex tax-law-defined North American assembly and sourcing requirements that prevent many electric vehicles from qualifying.
Luckily, if you purchase or lease an electric vehicle for business use in 2023 or later, none of the clean vehicle credit restrictions apply. Instead, you can qualify for the business-use electric vehicle credit. The credit is available for fully electric cars, plug-in hybrid electric vehicles, and fuel cell vehicles.
The maximum credit is $7,500 for electric vehicles with a gross vehicle weight rating (GVWR) of less than 14,000 pounds and a whopping $40,000 for electric vehicles with a GVWR of 14,000 pounds or more.
In conclusion, the rules are very complicated, so talk to a tax professional about electric vehicle credits before buying one!
We specialize in helping clients clarify their taxes so they keep more of their money. Many small business owners who come to see us in Fort Worth, TX generally do not understand the tax law enough to explain it to a fifth grader.