Maximizing Tax Savings with the Commercial Clean Vehicle Credit

The rise of electric vehicles (EVs) presents a significant opportunity for businesses looking to reduce their carbon footprint while maximizing tax benefits. One of the most powerful incentives available is the Commercial Clean Vehicle Credit (Section 45W), which provides substantial tax savings when purchasing EVs for business use. When combined with depreciation deductions, businesses can leverage these incentives to lower their taxable income while modernizing their fleet.

Why Businesses Should Purchase EVs Under Their Entity

Unlike personal EV purchases, which are subject to strict income and MSRP limits under the Clean Vehicle Credit (Section 30D), business purchases under Section 45W offer:

• No MSRP cap – Vehicles exceeding $80,000 (such as the Tesla Cybertruck) can still qualify.
• Higher credit potential – Up to $40,000 per vehicle for those weighing over 14,000 lbs.
• Stackable benefits – The ability to combine the commercial clean vehicle credit with depreciation deductions for maximum savings.

Understanding the Commercial Clean Vehicle Credit

The Commercial Clean Vehicle Credit allows businesses to claim a tax credit based on:

• 15% of the vehicle’s purchase price (or 30% for vehicles not powered by a gasoline/diesel engine).
• A maximum of $7,500 for vehicles under 14,000 lbs GVWR and $40,000 for heavier vehicles.

Additionally, businesses can deduct the vehicle’s full cost using Section 179 depreciation or apply Bonus Depreciation, significantly reducing taxable income in the first year.

Comparing Business vs. Personal EV Purchase

Depreciation & Tax Credit: A Powerful Combination

Businesses can double-dip by using both depreciation and the commercial clean vehicle credit:

• Section 179 Deduction – Immediate write-off of up to $1,220,000 (for 2024) on eligible vehicles.
• Bonus Depreciation – Allows for 100% depreciation in the first year if Section 179 is not fully utilized.
• Standard MACRS Depreciation – Five-year write-off for remaining value.

Example of Tax Savings on a Tesla Cybertruck Purchase

Let’s assume a business purchases a Tesla Cybertruck for $100,000:

• Commercial Clean Vehicle Credit: $7,500 (since it’s under 14,000 lbs GVWR).
• Section 179 Deduction: $31,300 (maximum SUV deduction for 2025).
• Bonus Depreciation: Remainder of basis eligible for 100% deduction.
• Total Tax Savings: Over $40,000+ in year one, depending on the tax bracket.

Need Help Maximizing Your Tax Savings?

If your business is considering an EV purchase, structuring it under Section 45W provides unmatched benefits. The combination of the Commercial Clean Vehicle Credit and depreciation deductions can substantially lower the net cost of ownership, making the transition to EVs both a financially and environmentally sound decision.

At G&S Accountancy, we specialize in helping businesses leverage tax credits like the Commercial Clean Vehicle Credit while ensuring compliance with IRS regulations. Contact us today to optimize your tax strategy and take full advantage of available incentives!

Frequently Asked Questions 

1. Who qualifies for the Commercial Clean Vehicle Credit?
   Businesses and tax-exempt organizations purchasing new electric or clean vehicles for business use qualify for the credit under Section 45W.
2. Can I claim the Commercial Clean Vehicle Credit on a leased vehicle?
   No, the credit applies only to purchased vehicles. However, some leasing companies may pass along equivalent savings through lease agreements.
3. Can I combine the Commercial Clean Vehicle Credit with state incentives?
   Yes! In addition to the federal tax credit, many states offer rebates and grants for commercial EV purchases, further reducing costs.
4. Is there a limit to how many vehicles my business can claim the credit for?
   No, businesses can claim the credit for multiple qualified vehicles as long as they meet the eligibility criteria.
5. How do I claim the Commercial Clean Vehicle Credit on my taxes?
   The credit is claimed on Form 8936, filed with your federal tax return. Work with a tax professional to ensure compliance and accurate filing.