Inflation Reduction Act Creates Tax Credit of Up to $40,000 for Zero-Emission Trucks
In August 2022, President Biden signed the Inflation Reduction Act, which included a commercial clean vehicle credit for electric and fuel cell trucks bought starting in 2023.
On August 16, 2022, President Joe Biden signed the Inflation Reduction Act. The climate and tax law included new incentives aimed at getting more zero-emission commercial trucks on the road. The House had passed the bill 220-207 on August 12, a week after Senate passage, according to FreightWaves.
The commercial truck credit
The law added a qualified commercial clean vehicle credit to the tax code as Section 45W. For vehicles with a gross vehicle weight rating of 14,000 pounds or more, the credit was capped at $40,000 per vehicle. It applied to vehicles acquired after December 31, 2022.
The credit was the lesser of two amounts. One was the vehicle's incremental cost, meaning the extra cost over a comparable diesel or gasoline vehicle. The other was a percentage of its cost basis: 30% for vehicles not powered by a gasoline or diesel engine, such as battery-electric and fuel cell trucks, and 15% for vehicles that are partly powered by one, such as plug-in hybrids.
The law also included a credit for charging and fueling infrastructure. FreightWaves and Transport Topics reported it could be worth up to $100,000 per charger.
Would it move the needle?
Some observers questioned how far $40,000 would go on a heavy truck. Beia Spiller of Resources for the Future told FreightWaves that new heavy-duty electric trucks can cost $300,000 and up, and that the credit seemed geared more toward smaller vehicles such as cargo vans and box trucks.
Sheri Call, president and CEO of the Washington Trucking Associations, told FreightWaves the industry preferred tax incentives over mandates. She also questioned whether $40,000 would be enough for a Class 7 or 8 electric truck that can cost three times as much as a diesel.
Others were more optimistic. "I think this will definitely hurry up and get people off the sidelines, and even help scale," Mike Roeth, executive director of the North American Council for Freight Efficiency, told Transport Topics. Truck makers including Daimler Truck North America, Navistar, Volvo Trucks North America and Mack welcomed the law. Transport Topics reported that stakeholders said its success would depend on how it was implemented.
What it means for drivers and fleets
The credit was a tax credit for businesses, not a point-of-sale rebate. Fleets would need enough federal tax liability to use it, although unused amounts could carry over as a general business credit.
Because it applied only to vehicles acquired after the end of 2022, fleets considering electric trucks had a reason to time purchases for 2023 or later. Carriers weighing electric trucks for short-haul, drayage or local delivery had reason to review the credit along with state incentives and charging costs. Analysts quoted by FreightWaves suggested the credit would go furthest on smaller and shorter-range vehicles.