Policy Update

Summary of IRA section 45W for Commercial Clean Vehicles

Commercial Clean Vehicle Credit published by the U.S. Internal Revenue Service

Reference: “Commercial Clean Vehicle Credit” 

Background

Section 45W of the US Inflation Reduction Act (IRA) provides an income tax credit for the purchase of qualified clean commercial vehicles produced from Jan 2023 to end of year 2032.

How much is the tax credit?

Lesser of

  • 15% of vehicle cost for plug-in electric or 30% for non-ICE vehicle
  • Incremental cost of vehicle compared to an ICE-powered vehicle of similar size and use
    • Incremental cost for a used vehicle is calculated by multiplying the cost of the new vehicle with a residual value factor
    • There are provisions to ensure that the cost comparison is made only with respect to propulsion technologies
    • Auxiliary power units (APUs) are excluded from the cost comparison calculations

Credit is capped at:

$7,500 for vehicles with GVWR < 14,000 lbs, $40,000 for vehicles with GVWR ≥ 14,000 lbs

What is a “Qualified Commercial Clean Vehicle”?

  • Must be made by a qualified manufacturer (see list)
  • Vehicle must be used for business, not for resale, and must be used in the US
  • Vehicle can be either a motor vehicle or a mobile machinery
  • EV with battery > 7 kWh for vehicle with GVWR < 14,000 lbs or > 15 kWh for GVWR ≥ 14,000 lbs
  • Fuel cell vehicle

Related reading:

Summary of section 45V of the IRA for clean hydrogen

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