Here’s why a new $40,000 electric vehicle tax credit for business owners may be relatively easy to get

Business owners will be able to avail themselves of a new tax credit for electric vehicles starting next year — and it should be easier to get than a similar tax break for consumer households buying “new clean” passenger cars, according to tax and auto experts.

The Inflation Reduction Act, which President Joe Biden signed into law Aug. 16, created or amended a few tax breaks to incentivize Americans to buy electric cars, trucks and other vehicles. The provisions essentially make the vehicles less expensive for recipients to buy.

One of those tax breaks — for “new clean vehicles” — comes with consumer-specific requirements tied to annual income and car-specific requirements around manufacturing, battery-mineral sourcing and retail price.

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Some experts think it may be difficult to claim the tax break at first, since many cars may not meet those requirements right away.

But a second tax break — the “credit for qualified commercial clean vehicles,” for businesses that buy an electric vehicle for commercial purposes — doesn’t carry those requirements.

That means business owners and the vehicles they buy may qualify for the tax break more easily, experts said. Plus, the tax credit for bigger trucks is worth more money — up to $40,000 in contrast to the $7,500 maximum for passenger cars and smaller commercial electrics .

“I think it’s going to be a lot more straightforward and easy to take advantage of than the light-duty-vehicle tax credit,” Ingrid Malmgren, policy director at Plug In America, said of the tax credit for commercial EVs. “It’s really a great opportunity for business owners to reduce emissions in a cost-effective way.”

Business owners can get the tax credit for new vehicles purchased on or after Jan. 1, 2023. It’s available for 10 years, through the end of 2032.

How and why of the commercial-vehicle tax credit Here are the basics of the credit for commercial vehicles.

The tax break is available to business owners who buy an electric vehicle or electric “mobile machinery,” including for construction, manufacturing, processing, farming, mining, drilling or timbering.

The vehicle must be subject to a depreciation allowance — meaning it’s for business use, according to the Congressional Research Service.

“If you had a flower shop, for example, and you want to get flower-delivery vehicles, you buy a bunch of vans, you’d be the one claiming the tax credit,” Malmgren said.

There are two thresholds for the commercial tax credit: Vehicles that weigh less than 14,000 pounds qualify for up to $7,500; those that weigh more than that qualify for up to $40,000.

The 14,000-pound demarcation line includes commercial vehicles that are Class 4 and above, or largely medium- and heavy-duty trucks and buses.

Arsalan Fazal