The specific requirements for a commercial vehicle to qualify for the Commercial Clean Vehicle Tax Credit under the Inflation Reduction Act are as follows:
Qualification of the Vehicle
- The vehicle must be acquired for use or lease by a business or tax-exempt organization, not for resale.
- It must be subject to a depreciation allowance (except for certain tax-exempt organizations).
- The vehicle must be primarily for use in the United States and used in the taxpayer’s business.
- It must be manufactured by a qualified manufacturer as defined by the IRS.
- The vehicle must either:
- Be a motor vehicle primarily designed for use on public roads (not rail), or
- Be mobile machinery as defined in the tax code (including vehicles not designed mainly for public highway transport).
Technical Specifications
- The vehicle must be a plug-in electric vehicle drawing 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.
- Alternatively, it can be a fuel cell motor vehicle meeting specific IRS requirements.
- The vehicle must be charged by an external electricity source, confirming it is a clean vehicle.
Credit Limits and Special Conditions
- The tax credit amount is the lesser of:
- 15% of the vehicle’s cost (or 30% if the vehicle is not powered by a gas or diesel engine),
- The incremental cost of the vehicle over a comparable gas or diesel vehicle.
- The credit is capped at:
- $7,500 for vehicles with GVWR less than 14,000 pounds,
- $40,000 for vehicles with GVWR over 14,000 pounds.
Claiming the Credit
- Businesses and tax-exempt entities must file IRS Form 8936, Clean Vehicle Credits, including the vehicle identification number (VIN) on Schedule A to specify the vehicle.
- The credit is nonrefundable for businesses, meaning it can only reduce tax liability to zero, but unused credits can be carried back one year or forward for 20 years.
- Tax-exempt organizations can receive the credit as a direct cash payment rather than as a nonrefundable credit.
- Only one credit is allowed per VIN, but there is no overall limit on the number of credits a business can claim.
These requirements ensure that only new commercial clean vehicles used primarily for business purposes in the U.S., meeting electric or fuel cell criteria, qualify for the substantial tax credits designed to promote environmentally friendly commercial transportation.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-specific-requirements-for-a-commercial-vehicle-to-qualify-for-a-tax-credit/
