Expert Insights

Maximize Your Business Savings in 2024 with Electric Cars

Chase Drum
February 1, 2024
Electric vehicles aren't just good for the environment. They can be great for business, too. EVs offer lower running costs, and business owners also have access to numerous financial incentives. Here's a primer on how EVs can help your bottom line.
Woman standing by office building on her phone as her car charges

Electric Cars: Save Money On Company Vehicles

As a business owner, you are always looking for cost savings in your expenses – like how to save the most money on your company’s cars. Most consumers have heard about the financial perks of buying an electric vehicle (EV) – like no oil changes or paying less to charge with electricity versus gas – but that doesn’t even include the actual discounts you can get before driving off a dealership lot.

Most people are now aware of the federal $7,500 credit for EVs and certain plug-in hybrids (PHEVs). However, starting in 2024 the number of cars that qualify has dramatically decreased, largely due to new rules about cars only qualifying if certain components are made in the U.S. The good news is that most rules limiting tax credits only apply to vehicles for personal use; If you are a business looking to buy new vehicles, a lot of them don’t apply.

In this article, we’ll focus on what businesses should consider when buying an EV, especially small businesses (along with a few tips for the average consumer to be aware of). Next week, we’ll look at how the operational costs of EV fleets can have a positive impact on businesses, particularly for large corporations.

Two men overlooking their tablet

2024 Tax Breaks for EVs

The $7,500 tax credit has been offered for EVs for quite some time, and is probably the best known financial incentive to purchase an EV. 2024 is the first year that new parts of The Inflation Reduction Act (IRA) bill take effect around which EVs qualify, due to component sourcing rules. However, like most bills, there are loopholes.

The first one is to lease the car as a consumer. All electric cars qualify for the $7,500 incentive, when you lease the vehicle instead of buying it from a certified dealer.

However, for a business purchasing an EV, it’s actually a lot more straightforward than that – and many of the sourcing rules don’t apply. Lease an EV, and get $7,500 back. It’s called the Commercial Clean Vehicle Credit.

One thing to note is that at this time, the incentive is still a tax credit for businesses – and is not paid out at the time of purchase (unless it is a tax exempt entity). And because it’s a credit, you can't get back more on the credit than you owe in taxes.

The other perk of buying an EV or a plug-in hybrid as a business purchase is that the income caps under the more common clean vehicle credit do not apply.

The Hummer Tax Credit

Haven’t you heard that the new Hummer is actually an EV? Well, the infamous "Hummer tax credit" has also gone electric.

The “Hummer tax credit” – more boringly known as Section 179 – was originally designed for businesses to purchase heavy equipment, or vehicles over 6,000 pounds. But, as vehicles increased in weight for many reasons (including additional safety equipment along with overall size), more SUVs and trucks began to qualify for this tax break. Whether it's for hauling equipment, delivering products, or transporting staff, larger, heavier EVs can be more financially viable thanks to this tax incentive.

While the credit has been around since the 1980’s, using it to buy large EVs has two modern advantages. First, it lowers the cost barrier for acquiring larger, more versatile EVs. Second, it allows businesses to operate these vehicles more economically, thanks to the inherent efficiencies of electric powertrains (fewer greenhouse gases, more clean electrons).

A money-saving tip for the “Hummer tax credit.” Remember that you will want to check with a tax professional first, but it’s best to assume that when used in conjunction with the Commercial Clean Vehicle credit, “the depreciable basis of the vehicle is reduced by the amount of the commercial clean vehicle credit you receive.”

Car being charged at a charging station

Incentives for Charging Infrastructure

Your electric car isn’t the only thing that has incentives available for it. Before your business takes delivery of a new EV, having a plan of how to charge it is also important. The federal government, along with many state governments and even some utilities, offers incentives to reduce the financial burden of installing chargers at your place of business.

Charging infrastructure is vital to having an EV fleet at your business. Check with your state or utility for grants or deductions for installing EV charging infrastructure. These incentives often include not only the chargers themselves, but the associated installation costs as well!

Incentives Galore - State, Federal, and Utility Rebates

We’ve discussed the incentives for your car and the charging infrastructure, but there’s still so much more!

Incentives can vary widely by location but often include additional tax credits, reduced registration fees, and even cash rebates. For small businesses, this layered approach to incentives means that the cost of owning an EV can be significantly lower than traditional vehicles. Location is probably the largest determining factor for what incentives you’ll have access to (along with tax liability and budget), but look to see if there are perks offered for the industry you work in.

electric cars being charged in a station

Going EV Can Save Your Business Money

These are just some of the ways that your business can go electric and save money before you even get behind the wheel. With substantial tax credits and incentives for charging infrastructure, EVs can be more affordable over the long run for your business than traditional vehicles. Small businesses that embrace EVs will find themselves well-positioned for success in an ever-evolving marketplace. Next week, we’ll discuss some of the operational and long term benefits of your electric fleet.