If you purchased or you are considering the acquisition of a qualified commercial vehicle, or if such a purchase is in your future plans, this article is for you. In case you own a business or a tax exempt organization and you are looking for a way to save money on your taxes, you may want to consider the qualified commercial vehicle credit, a tax credit of up to $40,000. A qualified commercial vehicle is a vehicle that meets certain criteria and is used for business purposes.
Amount Of The Credit
The credit is calculated as the lesser of:
- 15% of you basis (or 30% if the vehicle doesn’t run on gas or diesel),
- the incremental cost of the vehicle.
However, there’s a limit to how much credit you can get. If the vehicle’s gross weight is less than 14,000 pounds, the maximum credit is $7,500. For all other vehicles, the maximum credit is $40,000.
What Is A Qualified Commercial Vehicle?
A qualified commercial vehicle is a vehicle that:
- it is subject to depreciation allowance, with the exception of tax-exempt organizations and it is not subject to a lease,
- it is acquired for use in your trade or business, not for resale,
- it is primarily used in US,
- it must be manufactured by a company that is recognized as a qualified manufacturer according to IRC 30D(d)(1)(C),
- the vehicle should not have been previously allowed a credit under sections 30D (the new clean vehicle credit) or 45W (the commercial clean vehicle credit),
- it is considered a motor vehicle under title II of the Clean Air Act and is mainly used on public roads (excluding vehicles that only operate on rails),
- it is mobile machinery as defined in IRC 4053(8), including vehicles not designed to transport a load over a public highway,
- finally, the vehicle or machinery must be one of the following:
- a plug-in electric vehicle that gets significant power 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.
- a plug-in electric vehicle that gets significant power from an electric motor with a battery capacity of at least:
- a fuel cell motor vehicle that meets the requirements of IRC 30B(b)(3)(A) and (B).
For example qualified commercial vehicles include vans, pickups, SUVs and trucks.
How to Claim The Credit On Your Tax Return?
For businesses the credit is nonrefundable, which means that if the credit exceeds your tax liability, you can not get the excess amount as a refund. On the other hand, there is no limit on the number of credits your business can claim and you can carry over the credit as a general business credit.
To claim the credit, you need to file Form 8936-A, Qualified Commercial Clean Vehicle Credit, with your tax return. For each vehicle that qualifies for the credit, you should use a separate Schedule 1 (Form 8936-A) to determine the credit amount.
Meanwhile, you can find more information and instructions on the IRS website.
Depreciable Basis
When you set up your asset for depreciation, make sure that you reduce the vehicle depreciable basis by the amount of the commercial clean vehicle credit you receive.
Qualified Commercial Vehicle Credit VS Clean Vehicle Credit
These credits are both tax incentives offered by the IRS to promote the use of environmentally friendly vehicles. However, they have different requirements.
The Qualified Commercial Vehicle Credit is for businesses and tax-exempt organizations that purchase qualified commercial clean vehicles. On the other hand, the Clean Vehicle Credit is available to individuals and businesses that purchase new, qualified plug-in electric vehicles or fuel cell vehicles. To find out more about the Clean Vehicle Credit, you can read our article here.
We advise you to consult with a tax professional for more specific information about these credits and how they may apply to your situation.
Conclusion
In conclusion, purchasing a qualified commercial vehicle can be a smart move for your business and your taxes. You can save money on your tax bill by claiming a credit. If you are interested in buying a qualified commercial vehicle, make sure to consult with your tax professional and check the IRS website for the latest updates and requirements.
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This material is for informational purposes only. It does not constitute tax, legal or accounting advice.