Starting in 2023, if you begin using a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV), you could be eligible for a clean vehicle tax credit.
At the point of sale, sellers must provide details about whether your vehicle qualifies. They are also required to register online and submit the same information to the IRS. Failure to do so will render your vehicle ineligible for the credit.
For information on credits available for used clean vehicles, qualified commercial clean vehicles, and new plug-in EVs purchased before 2023, please refer to the relevant guidelines.
Who is Eligible
Under Internal Revenue Code Section 30D, you could qualify for a credit of up to $7,500 if you purchase a new, eligible plug-in EV or FCV. Changes made by the Inflation Reduction Act of 2022 govern credits for vehicles purchased from 2023 through 2032.
This credit is accessible to individuals and businesses, provided:
- The vehicle is purchased for personal use, not for resale
- It is primarily used within the United States
Additionally, your modified adjusted gross income (AGI) must not exceed:
- $300,000 for married couples filing jointly
- $225,000 for heads of households
- $150,000 for all other filers
You can use your modified AGI from either the year of vehicle delivery or the preceding year, whichever is lower. If your modified AGI falls below the threshold in at least one of these years, you are eligible to claim the credit.
The credit is nonrefundable, meaning it can reduce your tax liability but cannot exceed the amount you owe in taxes. Any excess credit cannot be carried forward to future tax years.
Credit Amount
The amount of the credit depends on when the vehicle was placed in service (delivered), regardless of the purchase date.
For vehicles placed in service from January 1 to April 17, 2023:
- Base amount: $2,500
- Plus $417 for each kilowatt hour of battery capacity beyond 5 kilowatt hours
- Up to $7,500 in total
In general, the minimum credit will be $3,751 ($2,500 + 3 times $417), applicable to vehicles with a minimum battery capacity of 7 kilowatt hours.
For vehicles placed in service on April 18, 2023, and thereafter:
These vehicles must meet the aforementioned criteria and also adhere to new requirements concerning critical minerals and battery components to qualify for a credit up to:
- $3,750 if the vehicle meets only the critical minerals requirement
- $3,750 if the vehicle meets only the battery components requirement
- $7,500 if the vehicle meets both requirements
Vehicles that fail to meet these requirements will not qualify for any credit.
Qualified Vehicles
To qualify for the credit, a vehicle must:
- Have a battery capacity of at least 7 kilowatt hours
- Have a gross vehicle weight rating of less than 14,000 pounds
- Be manufactured by an eligible manufacturer (except for FCVs, which have different requirements)
- Undergo final assembly in North America
- Meet critical mineral and battery component requirements starting from April 18, 2023
The sale qualifies only if:
- The vehicle is purchased new
- The seller provides required information to you at the time of sale and reports it to the IRS
Furthermore, the manufacturer’s suggested retail price (MSRP) cannot exceed:
- $80,000 for vans, SUVs, and pickup trucks
- $55,000 for other vehicle types
MSRP includes the retail price suggested by the manufacturer, encompassing installed options, accessories, and trim, but excludes destination fees. It may not necessarily reflect the actual purchase price.
You can find details such as vehicle weight, battery capacity, final assembly location, and VIN on the vehicle’s window sticker.
Visit www.fueleconomy.gov [1] to see if a vehicle is eligible for the new clean vehicle credit. If you’d like more information about tax credit eligibility, contact your ShindelRock tax professional. [2]