Navigating Tax Credits for Your EV Fleet

Electric vehicles (EVs) represent a breakthrough for the automotive industry not seen since the release of the Model T Ford. According to McKinsey, they project EV demand worldwide will grow sixfold from 2021 to 2030.

However, barriers to adoption remain, with only 38% of Americans saying they are very or somewhat likely to consider choosing an EV as their next vehicle. The lack of charging infrastructure, range anxiety, limited charger operability, and cost all contribute to Americans' reluctance to go electric. 

However, the government is making progress in encouraging Americans to purchase an EV, with a range of tax credits for individuals and businesses. Here are the tax incentives available to business fleets in 2024.

Federal EV Tax Incentives

Federal tax credits enable individuals and businesses to claim tax credits on both new and used EVs. Launched by the Inflation Reduction Act (IRA), these credits have provided several avenues for EV buyers to claim back some of the cost of EVs.

Commercial Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit

Since January 1, 2023, businesses and tax-exempt organizations have been able to claim a tax credit for new EVs and FCEVs. 

Under the rules, EVs with a Gross Vehicle Weight Rating (GVWR) under 14,000 lbs and a battery capacity of seven kilowatt-hours could claim up to $7,500 per vehicle. Vehicles over 14,000 lbs must possess a battery capacity of at least 15 kilowatt-hours. The maximum tax credit amount on these vehicles is $40,000. 

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The tax credit is calculated using the lesser of the following amounts:

·  30% of the purchase price for an EV or FCEV.

·  15% of the purchase price for plug-in EV hybrids.

·  Incremental EV cost compared to an equivalent internal combustion engine (ICE) vehicle.

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Note that businesses claiming this tax credit may not double-dip using the Clean Vehicle Tax Credit – which is designed for individuals, not businesses.

Alternative Fuel Vehicle Refueling Property Credit 

EV-powered business fleets often choose to install their own charging infrastructure. Doing so also entitles them to a tax credit. The Alternative Fuel Vehicle Refueling Property Credit is worth 6% up to a maximum of $100,000 per item.

Some businesses, such as those meeting prevailing wage or apprenticeship criteria, may qualify for a 30% tax credit up to $100,000. Qualifying property with no depreciation can earn a 30% tax credit up to $1,000 per item.

Most refueling properties will qualify if they are used for storing and dispensing clean-burning fuel or charging EVs.

State EV Tax Incentives

Individual states also offer tax incentives for businesses and individuals willing to invest in an EV. Naturally, the value of these credits will depend on the state. Furthermore, businesses can combine state and federal credits to reduce tax liability. 

States differ in their approach to EVs. Some actively penalize EVs with higher registration fees to offset predicted losses in gas revenues. Others provide both tax credits and penalties. Currently, nineteen states offer additional tax incentives on EVs. The amounts range from $1,000 in Alaska and Delaware, whereas California, Connecticut, and Maine businesses can enjoy a tax credit worth up to $7,500 per vehicle. 

Each state has its own qualifying requirements. For example, Colorado offers the most generous tax credit for residents looking to buy an EV. They offer a tax credit of up to $7,500 on new EVs with a purchase price of under $35,000. EVs between $35,00 and $80,000 qualify for a $5,000 credit.

Businesses should visit their state’s tax website for more information on available tax credits, eligibility requirements, and how to claim.

Local EV Tax Incentives 

Stacking federal and state tax incentives enables businesses to save big on EVs. However, many local governments and utility companies also offer incentives for electric vehicles.

For example, Arizona’s Tucson Electric Power offers technical support and rebates for businesses that install charging ports. In Oregon, Portland General Electric provides grants to organizations willing to install EV charging options.

The best way to learn about these additional local incentives is to use the U.S. Department of Energy website search function.

Conclusion: Reducing EV Fleet Costs with Tax Credits 

The initial cost of EVs can be substantial, but the total cost of ownership is considerably lower than an ICE over a lifetime. Making this green investment guarantees businesses save money on their fleet operations.

Businesses can reduce costs and carbon footprints by claiming various tax credits and benefiting from local investments. And proper planning and self-education are all it takes to make these benefits a reality.

If you’re ready to electrify your fleet, then connect with fleet@thebluedot.co to learn how Bluedot can help you navigate your EV transition. Bluedot streamlines public and at-home charging for fleets, giving fleet managers the tools and insights necessary to inform their pilot decision-making.

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