The Treasury Department issued proposed regulations on the §45W commercial clean vehicle credit. The §45W credit provides a tax credit of up to $40,000 for electric or hybrid vehicles of a character subject to the allowance for depreciation.

The IRS provided useful guidance on the §45W credit in Fact Sheet 2024-26. 

Concerned about how these proposed regulations might affect your business? Call Frost Law today at (410) 497-5947 for a consultation to discuss your specific situation and ensure you’re taking full advantage of available tax credits.

The proposed regulations contain three provisions of interest not indicated in prior guidance:

• A taxpayer may be able to claim a §45W credit for a vehicle previously placed in service if they maintain evidence in their books and records sufficient to establish that no credit under §30D or §45W has been allowed previously with respect to the vehicle.
• If a taxpayer’s trade or business use of a qualified commercial clean vehicle is less than 100% of the taxpayer’s total use of that vehicle (except for incidental personal use, such as a stop for lunch on the way between two job sites) for the tax year the vehicle is placed in service, then the vehicle is ineligible for the §45W credit. This rule also applies to a qualified commercial clean vehicle placed in service by a tax-exempt entity, except that 100% trade or business use means the tax-exempt entity’s use that is related to an exempt purpose or an unrelated trade or business purpose.
• If a taxpayer no longer has 100% trade or business use of the vehicle during the 18-month period beginning on the date the vehicle is placed in service, including because the vehicle is sold or otherwise disposed of, then the taxpayer may not claim the §45W credit with respect to the vehicle. If the taxpayer has already claimed the credit, the §45W credit must be recaptured by the taxpayer.

Ready to discuss how the commercial clean vehicle credit can benefit your business? Contact Frost Law today at (410) 497-5947 or fill out our contact form for assistance with these regulations and maximizing your tax savings.