Electric Vehicle Tax Credit for Dealerships: Common Questions, Answered

The Inflation Reduction Act amplified the federal tax break for establishing electric vehicle (EV) charging stations, giving taxpayers a one-time tax credit of up to 30% of the cost of hardware and installation.

Individuals can claim up to a $1,000 maximum credit through 2032, while business owners can claim up to $100,000 in tax credits per charging station if they meet certain requirements — and with state incentives, that number could be higher.

Here are a few of the common questions we’ve received from our dealership clients about the electric vehicle charging station credits.

Section 30C

What property is eligible for the Section 30C alternative fuel vehicle refueling property credit?

Location

As a threshold issue, the property must be placed in service in an eligible census tract to qualify for the credit. An eligible census is a low-income community as defined under Section 45D(e) (NMTC Public Viewer - InVision (cdfifund.gov), 2015 NMTC tract) or a non-urban area. An urban area means a census tract (as defined by the Bureau of the Census) which, according to the most recent decennial census, has been designated as an urban area by the Secretary of Commerce.

Type of property

Qualified alternative fuel vehicle refueling property must be subject to depreciation and its original use must begin with the taxpayer. The property must be for the storage or dispensing of clean-burning fuel or for the charging of motor vehicles propelled by electricity.

How much is the credit?

The credit amount for depreciable property has a base credit amount of 6% of the cost of the qualified property placed in service.

The credit increases to 30% of the cost of the qualified property placed in service if the prevailing wage and apprenticeship requirements are met.

The credit allowed with respect to any single item of qualified property placed in service during the taxable year is limited to $100,000 in the case of property subject to depreciation.

How is the credit treated for tax purposes and are there any basis reductions for the credit?

The credit is treated as a general business credit under Section 38(b). The basis of the property is reduced by the amount of the credit.

Can a tax-exempt entity claim a credit under Section 30C?

Under Section 6417, if a tax-exempt entity follows the registration requirements, they could be eligible for the credit.

Section 30D – Credit for Clean Vehicles

What is the amount of the Section 30D credit?

The Section 30D EV tax credit for dealerships is up to $7,500.

What is a clean vehicle eligible for the Section 30D credit?

Here are the criteria for clean electric vehicle credits as defined under Section 30D:

1. Original use must begin with the taxpayer.
2. The motor vehicle must be acquired for use or lease.
3. To qualify for the electric vehicle tax credits, the motor vehicle must be made by a qualified manufacturer.
4. The motor vehicle must be treated as a motor vehicle under title II of the Clean Air Act.
5. The motor vehicle must have a gross vehicle weight lower than 14,000 pounds.
6. The motor vehicle must be propelled by an electric motor drawing electricity from a battery that has a capacity of 7 or more kilowatt hours and is capable of being recharged.
7. The motor vehicle must have its final assembly work occur within North America.
8. The motor vehicle must have certain required information about the vehicle reported to the IRS.

Who can claim the Section 30D federal EV tax credit?

A taxpayer using the clean vehicle primarily within the U.S. can claim the Section 30D EV federal tax credit.

However, the taxpayer’s adjusted gross income cannot exceed the applicable threshold to be eligible for the EV tax credit for dealerships. The thresholds are:

• $300,000 for married couples filing jointly
• $225,000 for heads of households
• $150,000 for all other filers

The taxpayer may use its modified AGI from the year it takes delivery of the vehicle or the year before, whichever is less. If the taxpayer’s modified AGI is below the threshold in one of the two years, then the taxpayer can claim the credit.

How can a taxpayer claim the Section 30D?

Generally, a taxpayer may claim the Section 30D credit on its annual tax return. For purchases occurring after December 31, 2023, a taxpayer may also elect to transfer the credit to an eligible entity for either a cash payment or as a partial payment or down payment for the purchase of the vehicle.

What is an eligible entity for purposes of the transferability of the Section 30D credit?

An eligible entity under the Section 30D rules is a dealer that sold an allowable clean vehicle and which satisfies the following:

• The dealer must be registered here pursuant to Rev. Proc. 2023-33.
• The dealer must disclose to the taxpayer the manufacturer’s suggested retail price and the value of the Section 30D credit, the value of any other incentive available for the purchase of the vehicle, and the amount provided by the dealer to such taxpayer as a condition of the transfer election.
• The dealer must pay the taxpayer the amount of the Section 30D credit allowable to the taxpayer by the time of sale to qualify for the EV tax credit for dealerships.
• The dealer must ensure that any other incentive otherwise available for the purchase of the clean vehicle does not limit the ability of a taxpayer to make the transfer election and that the election does not limit the value or use of the incentive.

Section 45W – Commercial Credit for Clean Vehicles

What is the amount of the Section 45W credit?

For vehicles under 14,000 pounds, the credit is up to $7,500. For vehicles 14,000 pounds or greater, the credit is up to $40,000.

What is a qualified clean vehicle eligible for the Section 45W credit?

1. The motor vehicle must be made by a qualified manufacturer.
2. The motor vehicle must be acquired for use or lease.
3. The motor vehicle must either be treated as a motor vehicle under title II of the Clean Air Act and manufactured primarily for use on public streets, roads, and highways, or be a mobile machinery.
4. The motor vehicle must be propelled significantly by an electric motor which draws electricity from a battery that has a capacity of not less than 15 kilowatt hours (for 14,000 pounds plus vehicles) or 7 kilowatt hours (for vehicles with a rating of less than 14,000 pounds) or which is a qualified fuel cell motor vehicle.
5. The motor vehicle must be subject to depreciation in order to qualify for the used EV tax credit.

Can a tax-exempt entity claim a credit under Section 45W?

Under Section 6417, if a tax-exempt entity follows the registration requirements, they could be eligible for the credit.

Can the commercial credit for clean vehicles under Section 45W and the clean vehicle credit under Section 30D be claimed for the same vehicle?

No. There is a denial of double benefit provision preventing the use of both credits on the same vehicle.

Is a dealership that leases or uses vehicles in a fleet eligible for the credit if it later sells the vehicles as used?

Section 45W provides for a recapture provision similar to Section 30D(f)(5). We are still awaiting regulations to explain the recapture rule. In prior iterations of the electric vehicle credit, recapture rules have only existed to prevent the taxpayer from modifying the vehicle into a nonelectric vehicle. In the meantime, it is recommended that dealerships thoroughly document their intention to acquire the vehicle for lease or use.