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2023 Clean Vehicle Tax Credit

(Plug-in Electric Vehicle (EV) or Fuel Cell Vehicle (FCV))

 

The Inflation Reduction Act of 2022 extended and modified the "Qualified Plug-In Electric Drive Motor Vehicle Credit" with a Clean Vehicle Tax Credit up to $7,500.

The refundable $7,500 credit has two components of $3,750. Vehicles meeting one but not both of the components will be limited to a $3,750 credit. Here are the two components:

1. The first component is met when a certain percentage of the critical minerals in the battery are extracted or processed in the United States, a country with a United States free trade agreement or recycled in North America.

2. The second component is met when a certain percentage of the battery is manufactured or assembled in North America.

To verify if a vehicle meets any of the components above, the IRS recommends using the Vehicle Identification Number (VIN) Tool available on the U.S. Department of Energy website.

Other Changes to the Clean Vehicle Credit

• The modified credit eliminates the current statutory limit of 200,000 vehicles per manufacturer,

• The credit is allowed only if the Manufacturer's Suggested Retail Price (MSRP) is less than $55,000 ($80,000 for vans and SUVs),

• Income Limitations - The taxpayer's modified adjusted gross income (MAGI) must be less than $300,000 if married filing jointly, $225,000 if head of household and $150,000 if single,

• The credit applies to vehicles placed in service between January 1, 2023 and December 31, 2032,

• Beginning in year 2024, a mechanism will allow car buyers to transfer the credit to the dealer at the point of sale so it can directly reduce the purchase price rather than claiming the tax credit on your annual federal income tax return.

To see if a vehicle qualifies for the NEW clean vehicle tax credit, go to:

FuelEconomy.gov

 

New Credit for Previously Owned Electric Vehicles (IRC Section 25E)

Beginning January 1, 2023, the new law allows a vehicle tax credit equal to the LESSER of $4,000 or 30 percent of the sale price for qualifying used electric vehicles that have been in service for at least two years and sold through a licensed dealer. The credit is only valid for the first time a vehicle is being resold from new.

The sale price of the vehicle cannot be greater than $25,000. There are also income limitations to qualify for the credit. A taxpayer's modified adjusted gross income (MAGI) must be less than $150,000 if married filing jointly, $112,500 if head of household and $75,000 if single.

A person who is claimed as a dependent on another person's tax return cannot claim this credit.

The credit will applies to vehicles purchased between January 1, 2023 and December 31, 2032.

For information on the USED clean vehicle tax credit, click here.

To see if a vehicle qualifies for the USED clean vehicle tax credit, go to:

FuelEconomy.gov