What clean energy credits apply to business vehicles or property?

by | Jun 27, 2025 | Business Taxes, Credits & Incentives

Here’s what HIVE AI had to say about “What clean energy credits apply to business vehicles or property?”:

There are several significant clean energy tax credits available for business vehicles and property in 2024 and beyond. These credits are designed to incentivize businesses to adopt cleaner technologies and reduce their environmental impact.

Commercial Clean Vehicle Credit (Section 45W)

The Commercial Clean Vehicle Credit is one of the most substantial incentives available for businesses purchasing clean vehicles. The maximum credit amount is $7,500 or $40,000, with the credit limited to the lesser of 15% of the vehicle’s cost (30% for vehicles not gasoline or diesel powered) or the incremental cost of the vehicle as compared to vehicles powered with a gasoline or diesel internal combustion engine IRS – Publication 5724-H: Commercial Clean Vehicle Reference Chart . This credit is available to both businesses and tax-exempt entities.

Eligibility Requirements

Qualifying vehicles include clean vehicles and mobile machinery; larger electric vehicles are required to have a battery with 15 kWh of capacity; vehicles must be subject to a depreciation allowance (i.e., for business use) except in the case of vehicles used by tax-exempt entities IRS – Publication 5724-H: Commercial Clean Vehicle Reference Chart . The vehicle manufacturer must be a qualified manufacturer, and there are no price limits on the vehicles, making this credit particularly attractive for commercial fleet operators.

Business Use Requirements

For businesses to claim this credit, there are strict business use requirements. If a taxpayer ceases to use a qualified commercial clean vehicle for 100 percent trade or business use (other than incidental personal use) 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 section 45W credit with respect to the vehicle. If the taxpayer has already claimed the section 45W credit, the credit is recaptured as a tax .

Tax-Exempt Entity Considerations

In the case of a tax-exempt entity described in clause (i), (ii), or (iv) of section 168(h)(2)(A), the credit for qualified commercial vehicles determined under section 45W IRC § 6417(b) is available through the elective pay provisions. For a qualified commercial clean vehicle placed in service by a tax-exempt entity, the 100 percent trade or business use rule applies, except that 100 percent 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 .

Alternative Fuel Vehicle Refueling Property Credit (Section 30C)

The Alternative Fuel Vehicle Refueling Property Credit provides significant incentives for businesses to install charging and refueling infrastructure. In general, the credit is 6% of the cost including labor, up to a maximum of $100,000 per item of property; or 30% of the cost including labor if prevailing wage and apprenticeship (PWA) requirements are met, up to a maximum of $100,000 per item of property IRS – Publication 6028: Businesses and the Alternative Fuel Vehicle Refueling Property Credit .

Qualifying Property and Geographic Requirements

To qualify, your business must install property used to (1) recharge electric motor vehicles (including certain electrical energy storage technology) or (2) store or dispense clean-burning fuel (such as hydrogen fuel for fuel cell vehicles) IRS – Publication 6028: Businesses and the Alternative Fuel Vehicle Refueling Property Credit . The property must be located in eligible census tracts, and businesses can determine eligibility by using the Census Bureau mapping tool and checking against IRS-provided lists.

Qualified Fuels

Los combustibles calificados incluyen electricidad, etanol, gas natural, hidrógeno y biodiesel IRS – Publication 5886-A (sp): Clean Energy Tax Incentives for Individuals (Spanish Version) (Qualified fuels include electricity, ethanol, natural gas, hydrogen, and biodiesel).

Energy Credit (Section 48)

The Energy Credit under Section 48 is a foundational credit for various types of energy property. Section 48 allows an “energy credit” equal to 30% of the taxpayer’s basis in certain “energy property,” defined to include “equipment which uses solar energy to generate electricity” Dawson U.S. Tax Court Opinions: Preston Olsen & Elizabeth Olsen . However, property qualifies as “energy property” only if (among other things) it is property “with respect to which depreciation (or amortization in lieu of depreciation) is allowable.” If no depreciation is allowable during the year in question, the property cannot constitute “energy property” Dawson U.S. Tax Court Opinions: Preston Olsen & Elizabeth Olsen .

Placed in Service Requirements

The energy credit is likewise available only with respect to “energy property placed in service during such taxable year” Dawson U.S. Tax Court Opinions: Preston Olsen & Elizabeth Olsen . This means that businesses must actually begin using the property in their operations to claim the credit.

Clean Fuel Production Credit (Section 45Z)

The Clean Fuel Production Credit is available for businesses involved in producing clean transportation fuels. The term “transportation fuel” means a fuel which is suitable for use as a fuel in a highway vehicle or aircraft, has an emissions rate which is not greater than 50 kilograms of CO2e per mmBTU IRC § 45Z(d) . This credit is particularly relevant for businesses in the fuel production industry or those with significant transportation operations.

Clean Electricity Production and Investment Credits

Several new credits are available for clean electricity generation and investment:

  • The clean electricity production credit determined under section 45Y(a) IRC § 6417(b)
  • The clean electricity investment credit determined under section 48E IRC § 6417(b)
  • The credit for advanced manufacturing production under section 45X(a) IRC § 6417(b)

These credits support businesses investing in clean electricity generation and advanced manufacturing of clean energy components.

Filing Requirements and Documentation

For the Commercial Clean Vehicle Credit, to claim a qualified commercial clean vehicle credit, the taxpayer must provide a completed Form 8936, Clean Vehicle Credits, and a Schedule A (Form 8936) for each qualifying vehicle claimed on their tax return. All claims for clean vehicle credits must include the VIN on Schedule A (Form 8936) IRS IRM 21.7.4 Income Taxes/Information Returns .

If the only source of this credit is derived from affiliation with a partnership or S corporation, entities can report this credit directly in Part III of Form 3800, General Business Credit. Partnerships and S corporations must file Form 8936 to claim the credit IRS IRM 21.7.4 Income Taxes/Information Returns .

Elective Pay and Transferability Options

Many of these credits are eligible for elective pay (direct payment from the IRS) or can be transferred to other taxpayers. The credits eligible for transfer include the section 30C credit, renewable electricity production credit, carbon oxide sequestration credit, zero-emission nuclear power production credit, clean hydrogen production credit, advanced manufacturing production credit, clean electricity production credit, clean fuel production credit, energy credit, qualifying advanced energy project credit, and clean electricity investment credit .

Business Use Considerations

For vehicle-related credits, the business use percentage is critical. Multiply that percentage by the number of months you use the property in your business or for the production of income and divide the result by 12. For example, if you converted a vehicle to 50% business use for the last 6 months of the year, you would enter 25% on line 10 (50% multiplied by 6 divided by 12) IRS – Instruction 8936: Instructions for Form 8936, Clean Vehicle Credits (and Schedule A (Form 8936), Clean Vehicle Credit Amount) .

Coordination with Other Credits

It’s important to note that these credits may interact with other tax benefits. So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) that is attributable to property of a character subject to an allowance for depreciation shall be treated as a credit listed in section 38(b) for such taxable year IRC § 30D(c) .

These clean energy credits represent substantial opportunities for businesses to reduce their tax liability while investing in environmentally beneficial technologies. The credits are particularly generous for businesses that can meet prevailing wage and apprenticeship requirements, often doubling or significantly increasing the credit percentage. Given the complexity of these provisions and the substantial amounts involved, businesses should work with qualified tax professionals to ensure they maximize their benefits while maintaining compliance with all requirements.

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