• Commercial Clean Vehicle Credit | July 12, 2023
From the Tax Blog

IRC Sec. 45W

The Inflation Reduction Act of 2022, which was signed by the President on August 17,2022, changed the Plug-In Vehicle Tax Credit to the Clean Vehicle Credit. In addition, this new legislation created Internal Revenue Code Section 45W to address the Commercial Clean Vehicle Credit.

In order to qualify for a Tax Credit, Individuals buying an EV for personal use, must have a Modified Adjusted Gross Income (MAGI) less than $150,000 if Single or Married Filing Separately, $300,000 for Married Couples filing jointly and $225,000 for Taxpayers with a filing status of Head of Household. These income thresholds DO NOT APPLY to EV's purchased for business use.

Greg's Tesla

Another very important distinguishing factor between business (45W) use versus personal (30D) use of the Clean Vehicle, is the fact that a 45W Credit can be carried over as a general business credit! A personal credit under 30D cannot be carried over.

My Personal Experience

My nine-year-old granddaughter talked me into buying a Tesla. It has been one of the best experiences ever! Here's the Tesla at home between my Harley and Porsche.

Tesla at home between Harley and Porsche

As an Alabama Resident, I quickly learned that I would have to go out-of-state to buy a Tesla. The reason is, Alabama has an antiquainted law that says it is illegal for an automobile manufacturer to sell their cars directly to the public. The law says that there must be a middle-man (Dealer) between the manufacturer and the buying public. Supposedly, this law is in place to protect the public.

Those mean automobile manufacturers would certainly take advantage of the car-buying public if the State allowed them to sell directly to us. Right? This law needs to be done away with. So the wife, daughter and granddaughter all loaded up to cross the state line with me in order to buy the Tesla in Franklin, Tennessee where they have no such law.

After the Trip Back to Alabama, I filled up Pam's Porsche $87.22

To be fair, I think the Porsche had only a half tank of fuel when we departed for Tennessee. So the trip in the ICE (Internal Cumbustion Engine) vehicle had a fuel cost of approximately $40. While, I believe the full charge of the Tesla after the trip cost about $4.

Porsche gas cost $87.22

The IRS Mileage Rate for 2023 is 65.5 cents per business use mile. This rate is the same for gas, diesel or electric automobiles.

Claiming the mileage rate can be beneficial generally, if you put more than 15,000 miles per year on a gas or diesel car. In the case of an All Electric Vehicle like my Tesla, claiming that mileage rate is likely better than actual expense at a much lower threshold.

Basically, there are no maintenance costs associated with this car! Replacing windshield washer fluid, tires and the 12v battery. Brakes last forever. I rarely touch the brake pedal. The car has Regenerative Braking, which takes the energy resulting from the process of slowing down the vehicle and uses it to recharge the vehicle’s batteries.

So hypothetically, if you can operate this car for about 4 cents per mile and take a tax deduction for 65.5 cents per mile, you can recoup your cost quickly and actually make money! I've ran the numbers, and it seems that once you exceed 54,000 business miles, you will begin to make money.

Tesla connected to wall mount charger

Charging Equipment and Installation Costs

As part of the Inflation Reduction Act, a nonrefundable tax credit is also available that is equal to 30% of the equipment and installation of an EV Home Charging System, up to $1,000 (Personal Use) and $100,000 (Business Use). The business must reduce the basis in the EV charging station by the credit amount. Note that in this case, the amount of unused credit cannot be carried forward.

Tesla Wall Charger

My son-in-law happens to be a professional electrician, so I had a very good experience installing the 240 electrical wiring required for the wall charger. One issue that Alec had to address, was the fact that I have a whole-house natural gas generator that will kick-in during power outages.

A load-shed device was installed between my wall charger and the breaker box. This device will prevent my generator from sending power to the charger during a power outage, as doing so could void the car battery warranty (a big deal).

Tesla Charging at a public charger in Cullman

When I bought the Tesla, I simultaneously ordered the wall charger and the mobile charger. However, it was about a week after getting the car before I received the chargers. So for that first week, I had to rely on public chargers. We do not have a public charger in Arab. The nearest chargers are Cullman and Guntersville.

Tip: If you plan a purchase of an all electric vehicle, order and install your charging system first.

Getting a Tax Credit of $7,500 for buying the car, coupled with getting a Tax Credit of 30% of the charging system, plus getting to write-off the balance of the charging system, and getting to claim a mileage rate of 65.5 cents per mile is almost too good to be true!

Greg Cook discussing his experience buying a Tesla

Final Word

The limits on the Commercial Clean Vehicle Credit under IRC Sec. 45W are nothing like the Clean Vehicle Credit for individuals under IRC Sec. 30D.

Buying a Clean Vehicle doesn't have to be about saving the planet, saving money or even just because your nine-year-old granddaughter has you wrapped around her finger.

I've been a car enthusiast my entire adult life. At age 63, I can look back at owning 5 different Porsches, 2 Jaguars, 2 BMWs and a Corvette. Oh there has been a string of other automobiles in my life, some I've forgotten I'm sure. This Tesla is as fun as any of them. It is very fast.

Greg Cook, EA, CPA Accredited Tax Advisor desk plate

Tax Credits for New Clean Vehicles

If you place in service a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or after, you may qualify for a clean vehicle tax credit.