A Fleet Manager’s Guide: Electric Vehicle Tax Credits

What is an electric vehicle tax credit? 

An electric vehicle (EV) tax credit is a rebate on your federal or state income taxes funded by the state or federal government. The goal of EV tax credits is to incentivize consumers and businesses to purchase electric vehicles by lowering the cost via tax rebates. 

For more than ten years, the U.S. federal government has provided tax incentives to incentivize consumers and fleets to purchase electric vehicles. 

What is the tax credit amount for electric vehicles? 

Before you consider adding EVs to your fleet, you may be wondering: what is the tax credit amount for electric vehicles? In the United States, all-electric vehicles and plug-in hybrid electric vehicles purchased during or after 2010 are eligible for a federal tax credit of up to $7,500, depending on the battery capacity of the vehicle. 

Although federal tax credits have begun to phase out in recent years, there are still several state tax incentives for new vehicles that are available to consumers and fleets. 

States like California, New York, and Colorado offer electric vehicle tax credit programs, allowing electric vehicle owners to claim tax credits of $5,000 per battery electric vehicle and plug-in hybrid electric vehicle. To find more information about your state’s tax credit incentives, you can search by zip code here. 

How do business EV tax credits work? 

When the electric vehicle tax credit program was created, auto manufacturers were given a finite number of tax credits to incentivize the sales of electric cars. The credits begin to phase out when a qualified automaker sells at least 200,000 qualified electric cars in the United States, starting on December 31, 2009.

In the calendar year that an automaker surpasses the 200,000 new vehicle sale limit, the federal  electric vehicle tax credit will drop from $7,500 to $3,500 for six months, followed by another drop to $1,875 for the following six months. 

In 2020, exactly 10 years after the tax credits were introduced, several automakers began to exhaust their credits as electric vehicles have become more mainstream. In 2018 and 2019 respectively, automakers Tesla and General Motors surpassed the 200,000 vehicle sales mark and saw their tax credits begin to phase out. 

Despite the tax credit phase out, both Tesla and General Motors are optimistic that state incentives will continue to encourage EV sales. 

For businesses and tax-exempt organizations that own electric-powered commercial vehicles, they can apply for a Commercial Clean Vehicle Credit of up to $40,000.

To ensure eligibility for this business EV tax credit for the Clean Vehicle tax credit program, here’s what you need to know:

First, to calculate your credit, start with the vehicle’s gross vehicle weight rating (GVWR): up to $7,500 for vehicles under 14,000 pounds, or up to $40,000 for heavier vehicles. Then, apply 30% of the vehicle's cost if it’s electric or fuel cell-powered, or 15% if it’s a plug-in hybrid. Compare this with the incremental cost ($7,000, $7,500, or $40,000 depending on the purchase price of your vehicle). Your credit is the smallest of these amounts.

Businesses and tax-exempt organizations can claim this credit, with no limit on claims. The vehicle must be used for business in the U.S., be made by a qualified manufacturer, and meet specific criteria for electric or fuel cell vehicles.

What are eligible vehicles for electric vehicle tax credits?

How do you claim an electric vehicle tax credit? 

In order to receive your business EV tax credit, you must purchase one of the eligible vehicles listed in the chart above. To claim the credit on your tax bill, you must fill out IRS form 8936 along with your tax return for the fiscal year you purchased the new vehicle. One thing to note is that the business EV tax credit is a non-refundable income tax credit, meaning the amount applies to money you still owe in a given year. This means that if you receive more credits than you owe in taxes, you will not receive a check to cover the difference.   

One other thing to keep in mind is that you can only claim the business EV tax credit if you own the vehicle—not if you lease it from a dealership or leasing company.

What are the benefits to adding electric vehicles to your fleet? 

Aside from the tax credit benefits you can receive from purchasing new EVs, there have been big advances in EV battery technology in the last decade making them a more affordable alternative to traditional vehicles. 

For those considering EV fleets, there’s another benefit to add to your checklist. A new generation of fleet management software brings unprecedented visibility into battery charge levels and charging resources. In short, electric and hybrid fleets can now be managed using real-time data, GPS, and other technologies to significantly finetune fleet operations and help increase return on investment.

Despite the challenges and occasional drawbacks of owning electric vehicles such as limited range and charging infrastructure, there are several benefits that can have a big impact on your fleet’s bottom line. By investing in electric vehicles, your fleet can: 

• Lower operational costs: By eliminating or reducing your fleet’s dependency on fossil fuels, you can save on the cost of gasoline. According to the US Department of Energy, all-electric vehicles and plug-in hybrid electric vehicles have a typical energy cost of $50-80/month, compared to the ICE gasoline cost of $160-200/month. This means you could save up to $200 per month on fueling alone by switching from a gas-powered car to an electric car.

• Lower upfront costs: Thanks to electric vehicle tax credits and other federal government and state incentives, fleet managers looking to add EVs to their fleets can lower the upfront costs of their investments. 

• Fewer maintenance issues: With fewer moving parts to maintain, electric vehicle owners save thousands of dollars per year on maintenance costs. In fact, electric car owners report spending one third of the cost to maintain their EVs than traditional ICE vehicles. 

• Environmental benefits: With zero tailpipe emissions, electric cars are better for the environment and can help improve air quality in cities and municipalities.  

• Vehicle safety: Electric vehicles have shown to be safer than internal combustion engine vehicles for a few reasons: lithium-ion batteries are less flammable than gasoline, and the vehicles are less likely to roll over in a collision due to their heavier weight. Electric car automakers have begun to strategically place the vehicles’ batteries further away from the vehicles’ “crumple zones”—or areas that are susceptible to getting smashed in a crash— in order to mitigate risk of fire in the case of a collision. 

Why fleets should use telematics to track electric vehicles

For fleets looking to make the most of their hybrid vehicle investment, implementing a telematics system is the next critical step. 

For many fleets with electric cars, not having sufficient battery to complete a round-trip or not being able to find a charging station in time is a major concern. Since hybrid vehicles can take over eight hours to fully charge, electric vehicle fleets require a major shift in driver behavior. Those unaccustomed to electric cars might forget to stop and charge in time, putting themselves at risk of being unable to complete their job. 

Because of this, planning is even more essential for a hybrid vehicle fleet. Access to data points such as state of charge, nearby chargers, or driver HOS status are essential to ensure every hybrid vehicle in your fleet can make it to a charging station.

4 reasons to choose Samsara to monitor your electric vehicle fleet 

1. Remote visibility into your hybrid vehicles’ real-time state of charge: With Charging Reports, you can view current and historical vehicle state of charge to help inform fleet dispatching and operational decisions. You can also easily monitor charging status to determine if your electric or plug-in hybrid vehicles are plugged in and charging. 

2. Get the most from your investment by viewing fuel and energy usage: Use the Samsara Fuel and Energy Use Report to see the percentage of time vehicles use electric power versus gasoline to make the most of your investment. 

3. Find nearby charging stations fast: With the Samsara EV Charge Stations Map Overlay, you can see nearby charging station information including open hours, available charging types, and more so you can find the closest station available and plan routes accordingly.

4. One unified platform for all of your vehicles: Electric or not, Samsara allows fleet managers to monitor all of their vehicles in one, easy to view dashboard. With features to assess the suitability of electrifying your fleet, Samsara provides customers with the tools they need to reach their sustainability goals and reduce costs. 

To learn more about managing your electric vehicle fleet with Samsara, request a free trial here, or learn how to build your future EV fleet with Samsara.