Business Tax Incentives

Commercial (Heavy-Duty) Vehicles

Note: This credit expired at the end of 2009. Several legislative proposals exist to extend it or to create a comparable new credit in 2012, but the credit described below is not presently available for vehicles purchased in 2010-2011. Purchasers of vehicles in 2009, however, may still claim the credit on their 2009 taxes.

Businesses are also eligible for passenger vehicle incentives.

What are the incentives for heavy-duty hybrid vehicles?

Buyers of heavy-duty hybrid vehicles can receive credits based on the weight class of the vehicle, its fuel economy relative to a comparable conventional vehicle, and the incremental cost. The vehicle must also meet a threshold value of "maximum available power," a measure of the percentage of total vehicle power available from the rechargeable energy storage system of the vehicle.

Credits are available for heavy-duty vehicles placed in service from January 1, 2006, through December 31, 2009.

Read an IRS summary of the credit here.

Who is eligible for the tax credits?

Buyers and lessors of qualifying vehicles. For purchases by tax-exempt entities, however, it is the seller who is eligible for the tax credit.

What are the incentives and how do they work?

The credit is defined as a percentage of the vehicle's incremental cost, where that percentage is determined by the fuel economy improvement of the hybrid relative to a comparable conventional vehicle. The incremental cost, in turn, is defined to be the cost of the vehicle above the cost of the conventional vehicle, except that the amount of the increment is capped for each weight class. The maximum credit available is: $3,000 for a vehicle weighing 8,501 to 14,000 pounds; $6,000 for a vehicle from 14,001-26,000 pounds, and $12,000 for a vehicle over 26,000 pounds. For more detail, visit the Tax Credits for Heavy-Duty Hybrids document on the American Council for an Energy-Efficient Economy website.

In 2007, the IRS issued guidance (Notice 2007-46, http://www.irs.gov/irb/2007-23_IRB/ar08.html), which sets out procedures for manufacturers to certify a vehicle as an eligible heavy-duty hybrid and the amount of the credit for that vehicle. While the credit depends upon the hybrid’s fuel economy relative to that of a comparable conventional vehicle, there is no standard fuel economy test procedure in place yet for heavy-duty vehicles. Therefore, manufacturers need to assign fuel economies to their vehicles, using an approach “substantially similar” to one used by the federal government or the State of California to measure fuel economy or emissions for some class of vehicles. Once IRS  acknowledges a vehicle credit, the manufacturer can certify it to purchasers.

Where can I learn more about qualifying vehicles?

As of March 2009, nine manufacturers had certified tax credits for at least one truck or bus model; credits thus far range from $3,000 to $12,000. See www.irs.gov/businesses/article/0,,id=175456,00.html for specifics on which models qualify.

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