Clean Vehicle Tax Credit: Up to $40,000 for Businesses

Eligible businesses and organizations purchasing clean commercial vehicles may qualify for a clean vehicle tax credit of up to $40,000 under the U.S. Internal Revenue Code (IRC) 45W. This article from Xe Tai My Dinh will help you understand this attractive incentive program, especially for pickup trucks.

Calculating the Clean Vehicle Tax Credit for Pickup Trucks

To determine the amount of tax credit you can receive when purchasing a clean pickup truck or other clean commercial vehicle, follow these steps:

1. Determine the maximum tax credit based on the vehicle’s Gross Vehicle Weight Rating (GVWR):

   • Vehicles with a GVWR of 14,000 pounds or more (typically large pickup trucks, school buses): Maximum tax credit of $40,000
   • Vehicles with a GVWR of less than 14,000 pounds (typically cars, small trucks, vans): Maximum tax credit of $7,500

2. Calculate the percentage of the vehicle’s original cost based on engine type:

   • 30% of the original cost for vehicles not using an internal combustion engine powered by gasoline or diesel, such as electric vehicles (EVs) or fuel cell electric vehicles (FCEVs). This is particularly beneficial for the increasingly popular electric pickup truck models.
   • 15% of the original cost for vehicles using (even partially) an internal combustion engine powered by gasoline or diesel, such as plug-in hybrid electric vehicles (PHEVs).

3. Determine the vehicle’s incremental cost: This is the amount the vehicle’s purchase price exceeds the price of a comparable vehicle powered only by a traditional internal combustion engine.

   For electric vehicles placed in service in 2024, the U.S. Department of Energy provides the following incremental cost analysis:

   • $7,000 for small plug-in hybrid electric vehicles (PHEVs) (including mini and subcompact cars) with a GVWR of less than 14,000 pounds.
   • $7,500 for all on-road electric vehicles, except small 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, including many large pickup truck models.

   For previous years, you can refer to the Department of Energy’s incremental cost calculation methodology for detailed information.

4. Compare the maximum tax credit amount, the percentage of the original cost, and the incremental cost. The smallest number of these three is the amount of tax credit you will receive.

Which Businesses are Eligible for the Clean Vehicle Tax Credit for Pickup Trucks?

This tax credit program is available to businesses and tax-exempt organizations in the United States. This means that if you are a business owner or represent a non-profit organization, you may be eligible to benefit from this policy when purchasing a clean pickup truck or other clean commercial vehicle.

There is no limit to the number of tax credits a business can claim. However, for businesses, the tax credit is nonrefundable, meaning you cannot receive a refund for any tax credit amount exceeding your tax liability. The 45W credit can be carried forward as part of the general business credit.

Which Clean Pickup Trucks Qualify?

To qualify for the tax credit, your pickup truck must meet the following criteria:

• Be eligible for depreciation: Except for vehicles used by a tax-exempt organization and not leased.
• Be manufactured by a qualified manufacturer: As defined in IRC 30D(d)(1)(C).
• Be used in a business: Not for resale.
• Be used primarily in the United States.
• Never have been granted a credit under section 30D or 45W.

Additionally, your clean pickup truck must also:

• Be considered a motor vehicle: For the purposes of title II of the Clean Air Act and produced primarily for use on public streets, roads, and highways (not including vehicles operated exclusively on a rail or rails).
• Or be mobile machinery: As defined in IRC 4053(8).

Technologically, the pickup truck or machinery must be:

• A plug-in electric vehicle (PHEV or EV): Deriving motive power from an electric motor with a battery capacity of not less than:
  • 7 kilowatt hours if the GVWR is less than 14,000 pounds.
  • 15 kilowatt hours if the GVWR is 14,000 pounds or more.
• Or a fuel cell motor vehicle (FCEV): Meeting the requirements of IRC 30B(b)(3)(A) and (B).

Procedures for Claiming the Clean Vehicle Tax Credit for Pickup Trucks

To claim the clean vehicle tax credit for pickup trucks or other clean commercial vehicles, you need to follow these steps:

• Partnerships and S corporations: File Form 8936, Clean Vehicle Credits.
• Other taxpayers: Report the credit on line 1y in Part III of Form 3800, General Business Credit.
• Tax-exempt organizations: File Form 990-T, Exempt Organization Business Income Tax Return PDF with Form 3800, even if you are not otherwise required to file Form 990-T.

With attractive incentives from the U.S. government, investing in clean pickup trucks and other clean commercial vehicles is not only an economic choice but also contributes to environmental protection. Contact Xe Tai My Dinh for more advice on trucks and pickups that fit your business needs.

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Incremental purchase cost methodology and results for electric vehicles

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IRC 30D(d)(1)(C) – 30D Clean vehicle credit

IRC 4053(8) – Exemptions

IRC 30B(b)(3)(A) and (B)

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2024 Form 990-T (PDF)