Many small business owners are seeking ways to embrace more sustainable operations. And if they can lower their tax bill simultaneously, that’s a win-win. And that’s exactly what the recently passed electric vehicle tax credit for businesses is designed to do.
Businesses that purchased a fuel cell, plug-in hybrid (PHEV) or fully electric (EV) vehicle for business in 2023 can qualify for up to $7,500 in tax credits. Or, up to $40,000 in tax credits for larger vehicles like buses, vans, and trucks.
Of course, the rule is not quite as simple as it sounds, just like most tax regulations. So, this mini guide will take you through the eligibility requirements and how to calculate your credit.
What Is The Electric Vehicle Tax Credit For Businesses?
If your business invested in hybrid or electric vehicles, the federal government will reward your business with a tax credit via the Commercial Clean Vehicle Credit. Qualifying for this credit means that your business’ federal taxes due will be reduced. On the other hand, tax deductions that you your business may claim will reduce your taxable income.
Whether new or used, if you purchased one of the eligible models for business use, you can receive a tax credit. However, the credit amount is based on the size and type of vehicle purchased.
Qualifying For The Commercial Clean Vehicle Credit
1. Keep detailed records. Although the form for the credit is not available yet, you can make sure you have the required documents in the meantime. You will need specifications from the dealership or seller you purchased the vehicle from, and your vehicle’s VIN in order to qualify. Make sure you have your title, documentation of the sales transaction, and any other relevant paperwork from the seller.
2. Research eligible vehicles. The FuelEconomy.gov site has a list of eligible vehicles purchased in 2023 or after, as well as vehicles purchased in 2022.
3. Explore state electric vehicle tax credits. Additional green vehicle rebates and incentives may also be offered by some local and state governments. Therefore, it will be worth the effort to consult with a tax advisor to make sure you’re taking advantage of any that apply to you.
Which Vehicles Are Eligible For The Clean Vehicle Tax Credit?
Not all manufactured electric vehicles will be eligible for the federal tax credit for businesses. In fact, a vehicle must meet certain qualifications in order to be eligible for the tax credit. As such, qualifications have to do with how much of the assembly and manufacture of the car was in the U.S. Specifically, critical mineral components and the battery.
The FuelEconomy.gov website has a list of eligible vehicles for the commercial clean vehicle tax credit.
Get help with lowering your tax bill by taking a step toward sustainability.
It’s tax season, so stay informed and consult a tax professional for the most current and personalized advice for your situation.
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