Tax Credits & Deductions for Transportation and Logistics Companies

Navigating the world of taxes can be challenging for any business, but transportation and logistics companies face a unique set of opportunities. A variety of incentives, from fuel tax credits to deductions for vehicle depreciation and maintenance, are available to help significantly reduce a company’s tax liability. 

While tax deductions lower taxable income, tax credits lower the amount of taxes owed. Understanding and leveraging these credits and deductions is not just about compliance; it is a strategic move that can directly impact a company’s bottom line.

Fuel Tax Credit

Fuel Tax Credits can significantly benefit transportation companies especially those that consume fuel in off road, nontaxable or special use scenarios. The credit allows businesses to claim back excise taxes paid on fuel that was used in ways not subject to highway fuel taxes. These credits generally apply when you use fuel in one of the following ways:

• Off highway business use (e.g. farming, construction, railroads, etc.)
• Vehicles with exempt or partial road usage (e.g. refrigeration units or auxiliary power units)
• Tax-exempt vehicles (buses for schools, non-profits or governments
• Other non-transport uses (forklifts, generators or stationary engines)

Alternative Fuel Vehicle Refueling Property Tax Credit

The Alternative Fuel Vehicle Refueling Property Tax Credit is available to transportation and logistics companies that install qualified refueling or recharging property, including electric vehicle (EV) charging equipment. This credit applies to qualified property placed in service between January 1, 2023, and June 30, 2026. To qualify, the property must meet the following requirements:

• Be used to store or dispense clean-burning fuel to recharge electric motor vehicles
• Be used for business or investment use and is considered depreciable property
• Be placed in service during the applicable tax year
• Be in its original use, which began with the taxpayer
• Be located in an eligible census tract as of January 1, 2023

The refueling or recharging equipment must be installed in a low-income community census tract or a non-urban census tract. Businesses can determine eligibility by locating their 11-digit census tract geographic identifier using the 2015 Census Tract Identifier.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) may be utilized by companies that hire individuals from specific target groups, such as Supplemental Nutrition Assistance Program (SNAP) recipients, supplemental security income recipients, long-term unemployed, veterans and designated community residents. The credit is equal to 40% of up to $6,000 in wages paid to, or incurred on behalf of, a qualified individual and is nonrefundable. The WOTC typically offers a maximum credit of $2,400, with a 25% rate for employees who work between 120 and 400 hours. For certain veterans, up to $24,000 in wages may be eligible for the credit.

The WOTC cannot be claimed for rehired employees. Unused credits can generally be carried back one year and carried forward up to 20 years. Transportation and logistics companies can only claim this credit through December 31, 2025.

R&D Tax Credit

The Research and Development (R&D) Tax Credit is an incentive for transportation and logistics companies that invest in qualified research and development activities. To qualify, the research must meet the following four criteria:

1. Qualified purpose – the activity must be intended to improve performance, function, reliability or quality.
2. Technological in nature – the work must be based on hard sciences, such as engineering and computer science.
3. Elimination of uncertainty – the research must aim to resolve uncertainty about capability, method or design.
4. Process of experimentation – the activity must involve testing, modeling, simulation or a systematic process of trial and error.

Eligible companies can claim the credit retroactively by filing amended returns for any open tax years. With new changes to R&D tax legislation, companies should review the benefits of the credit and assess their eligibility.

Qualified Business Income Tax Deduction

The Qualified Business Income (QBI) deduction allows eligible taxpayers to deduct up to 20% of their QBI, as well as income from real estate investment trusts and qualified publicly traded partnerships. Qualified businesses that have pass-through income, such as sole proprietorships, partnerships, S corporations and Limited Liability Companies (LLCs), are eligible for the deduction. Income earned through a C corporation is not eligible, as C corporations are separate taxable entities.

Under H.R. 1, the QBI deduction is now permanent. It excludes capital gains or losses, dividends, interest income, income earned outside of the U.S. and certain payments made to partners and shareholders. Starting in 2026, H.R. 1 introduces a minimum $400 deduction, provided the business has at least $1,000 of QBI from one or more active trades or businesses in which the taxpayer participates.

Bonus Depreciation

Bonus depreciation allows transportation and logistics companies to immediately deduct the full cost of qualified assets rather than depreciating them over time. Under H.R. 1, 100% bonus depreciation is made permanent for qualified personal property, including vehicles with a useful life of 20 years or less.

For new and used vehicles, businesses may deduct up to $10,200 in the first year, plus an additional $8,000 in bonus depreciation. There are no income limits or phaseouts, and any unused depreciation can be carried forward.

Vehicle and Travel Tax Deduction

Transportation and logistics companies may deduct vehicle expenses by using one of two Internal Revenue Service (IRS)-approved methods:

• Standard Mileage Rate – For 2025, the standard mileage rate for the use of a car (including vans, pickups or panel trucks) for business use is 70 cents per mile. This method must be used in the first year the vehicle is available for business use and is subject to requirements of the IRS.
• Actual Car-Related Expenses – This method allows businesses to deduct the portion of actuals vehicle costs, including gas, maintenance, insurance, registration and depreciation or lease payments. Business use is determined by calculating the percentage of total miles driven for business purposes during the year.

Maximizing tax credits and deductions can make a significant difference for transportation and logistics companies looking to reduce costs and reinvest in growth. If you have any questions regarding tax credits and deductions, please reach out to the Brown Plus team today!

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