According to Forbes, transportation is the country’s largest source of greenhouse gas missions. With the recent passage of the Inflation Reduction Act (IRA), several electric vehicle (EV) tax credits are renewed or added, paving the way for clean transportation.
EV Tax Credits in IRA (IRD 30D)
EV Tax Credit Overview:
- The EV tax credit of up to $7,500 per vehicle has been extended through 2032
- The current 200,000 vehicle cap per manufacturer is lifted starting in 2023
- The revised EV credit requires the final assembly of the vehicle in North America (takes place immediately with legislation enactment)
- New MSRP and income caps will apply starting in 2023
New Tax Credit Applies to EVs Purchased in 2023
For any EV purchased after Dec. 31, 2022, the new credit requirements apply. This this credit remains non-refundable, and there is no carryover to future years.
EV Tax Credit MRSP Limits
The new EV tax credit creates a new maximum price limit on the vehicle:
- $55,000 for a sedan
- $80,000 for SUVs/pickup trucks/vans
After 2024, tax payers will have income limits to qualify for the credit (maximum AGI) of:
- $300,000 for joint filers
- $225,000 for the head of household
- $150,000 for all others
EV Manufacturer Sales Caps Removed
Tesla, GMC and others will be eligible again as of Jan. 1. 2023.
Restrictions on EV Tax Credit Eligibility
The credit will now also be impacted by what percentage of battery materials and components are processed, extracted or made in North America or a country in which the U.S. has a free trade agreement.
New Used EV Tax Credit
Now, there’s a tax credit of up to $4,000 for purchasing used EVs. This is also subject to income limits of:
- $150,000 for joint filers
- $112,500 for the head of household
- $75,000 for others
In addition, the sales price of a qualified used EV cannot exceed $25,000, and the vehicle must be at least two years old.
Leasing an EV
If you’re leasing an EV car, there’s no tax credit. When you lease, the dealership is entitled to the credit.
Transfer the EV Tax Credit to the Dealer
Starting in 2024, you can transfer the credit to the dealership instead of waiting to file tax returns. This will enable buyers to receive the credit as a rebate at the point of sale and both new and used vehicles are eligible.
New Tax Credit for Commercial EVs
The IRA establishes a new credit specifically for business vehicles purchased after Dec. 31, 2022, with no income limits, no caps on the purchase price, and no manufacturer sales cap. The tax credit will be:
- $7,500 for vehicles less than 14,000 pounds
- $40,000 for all other vehicles
EVs Purchased in 2022
EV Purchased Before Aug. 16, 2022
For any EV purchased (entered into a written binding contract) before Aug. 16, 2022, the existing rules remain in place: you may be eligible for a non-refundable tax credit of up to $7,500, regardless of our income.
Certain manufacturers, such as Tesla and GMC, are no longer eligible because they exceed the sales cap.
For EVs purchased and delivered after between Aug. 16 – Dec. 31, 2022
The same rules apply, with one major exception: it only applies to EVs with final assembly in North America.
For more information, see the EV Tax Credit fact sheet by the Electrification Coalition and SAFE.
View the Electric Vehicles with Final Assembly in North America listing by the U.S. Department of Energy Alternative Fuels Data Center to see which models may qualify.
If you have questions, contact us to discuss your situation.
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