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Navigating the New 45W Credit: A Breakdown of Incentives for Commercial Clean Vehicles

Fall 2023

The Inflation Reduction Act of 2022 significantly changed electric vehicle (EV) credits, aiming to boost clean vehicle adoption. Among them, the 45W Credit for Qualified Commercial Clean Vehicles garnered attention and raised numerous questions.

The commercial credit offers up to $40,000 for qualified vehicles weighing >14,000 pounds and $7,500 for those under that limit. You can determine the credit amount by calculating the following:

  • The lesser of 15% of the basis of the vehicle for hybrids, 30% for fully EVs, or the incremental cost of these vehicles compared to a solely powered gas or diesel vehicle

To qualify, the vehicle must be manufactured by a qualified maker and be:

  • Used in a trade/business or income production (not for resale)
  • Considered a motor vehicle for Clean Air Act’s Title II purposes, primarily for public road use, or “mobile machinery” for federal excise tax on heavy trucks
  • Mainly powered by an electric motor drawing electricity from a battery with a capacity of at least 15-kilowatt hours (or 7-kilowatt hours for <14,000-pound vehicles), rechargeable from an external source, or propelled by power from certain fuel cells or meet specific EPA emission standards.

The 45W Credit Frequently Asked Questions

Q: Can loaner fleet EVs qualify for the credit?
A: If they meet all criteria, including being manufactured by a qualified maker, meeting road use standards and electric motor requirements, they are eligible.

Q: How is the credit calculated?
A: It equals the lesser of the vehicle basis multiplied by 15% or 30% or the incremental cost. According to the 2023 Department of Energy (DOE) analysis, the incremental cost for most street vehicles (excluding compact cars) is $7,500. DOE defines compacts as having an interior volume of <110 cubic feet; for compacts, use the DOE’s analysis to determine the incremental cost.

Q: Is there a limit on the credits we can claim?
A: There is no limit on the number of credits a business can claim.

Q: Can we claim the Used Clean Vehicle Credit if a loaner vehicle is later sold to an affiliate dealer to be used as a service shuttle?
A: No, the purchaser cannot be the original user. For affiliate pass-through entities, the new credit—tracked by VIN—would flow through to the same individual.

Q: Can a retail customer who buys our loaner claim a clean vehicle credit?
A: It depends. Remember, it is the original use of the vehicle that allows it to qualify. If sold, the used clean vehicle credit requires a selling price of $25,000 or less and a model year at least 2 years older than the current year.

Bottom Line

The 45W Credit has ignited interest in EVs. However, uncertainties persist due to the pending regulations. Monitoring updates and consulting qualified tax professionals remain crucial to ensure compliance, and Boyer & Ritter is ready to assist should you take advantage of this new credit. 

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