If you are planning to buy a new or used electric vehicle or a fuel cell vehicle in 2023 or later, you may be eligible for some generous tax credits that can save you thousands of dollars. The Inflation Reduction Act of 2022 (IRA) made some major changes to the existing tax credits for clean vehicles, including adding new requirements and limitations.

I will explain how the new tax credits work, who qualifies for them, and how to claim them on your tax return.

What are the new tax credits for clean vehicles?

The IRA created three new tax credits for clean vehicles:

• The new clean vehicle credit for individuals and businesses who buy a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) that meets certain criteria. The credit can be up to $7,500, depending on the battery capacity and price of the vehicle.
• The previously owned clean vehicle credit for individuals who buy a used EV or FCV that meets certain criteria. The credit can be up to $2,500, depending on the age and mileage of the vehicle.
• The qualified commercial clean vehicle credit for businesses who buy a new EV or FCV that meets certain criteria and is used primarily for business purposes. The credit can be up to $7,500, depending on the gross vehicle weight rating and battery capacity of the vehicle.

Who qualifies for the new tax credits for clean vehicles?

To qualify for any of the new tax credits for clean vehicles, you must meet some general and specific requirements.

General requirements:

• You must buy the vehicle for your own use, not for resale.
• You must use the vehicle primarily in the U.S.
• You must have a modified adjusted gross income (AGI) below a certain threshold. For 2023, the threshold is $300,000 for married couples filing jointly, $225,000 for heads of households, and $150,000 for all other filers. You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less.

Specific requirements:

For the new clean vehicle credit, you must buy a new EV or FCV that has a battery capacity of at least 7 kilowatt hours (kWh), has a gross vehicle weight rating of less than 14,000 pounds, is made by a qualified manufacturer, and meets certain critical mineral and battery component requirements. The credit is phased out for vehicles that have a manufacturer’s suggested retail price (MSRP) of more than $55,000 for sedans, $64,000 for vans, $69,000 for SUVs, and $74,000 for pickup trucks. The credit is also phased out for manufacturers that sell more than 600,000 qualified vehicles in the U.S.

For the previously owned clean vehicle credit, you must buy a used EV or FCV that has been previously registered in any state or jurisdiction in the U.S., has not been modified to affect its battery capacity or emissions standards, has an odometer reading of less than 75,000 miles at the time of purchase

Sources:

(1) Check the vehicle eligibility for credits: https://www.fueleconomy.gov/feg/tax2023.shtml

(2) Credits and Deductions Under the Inflation Reduction Act of 2022: https://www.irs.gov/credits-and-deductions-under-the-inflation-reduction-act-of-2022

(3) Credits for New Electric Vehicles Purchased in 2022 or Before – IRS. https://www.irs.gov/credits-deductions/credits-for-new-electric-vehicles-purchased-in-2022-or-before.

(4) Credits for New Clean Vehicles Purchased in 2023 or After – IRS. https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after.

(5) Filing Tax Form 8936: Qualified Plug-in Electric Drive Motor Vehicle https://turbotax.intuit.com/tax-tips/going-green/filing-tax-form-8936-qualified-plug-in-electric-drive-motor-vehicle-credit/L5cQfP3Kg

(6) IRS updates frequently asked questions related to new, previously owned: https://www.irs.gov/pub/taxpros/fs-2023-08.pdf.

(7) Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit: https://afdc.energy.gov/laws/409

The post How to Maximize Your Electric Vehicle Tax Credits for 2023 and Beyond first appeared on Artha.

Form 8938 goes with your tax return to the IRS, while FBAR goes to a different agency called FinCEN and you have to file it online.

• Form 8938 is for certain people and businesses that have money or assets in foreign countries that are worth more than a certain amount. The amount depends on whether you are single or married and whether you live in the U.S. or abroad.
• FBAR is for anyone who has access to or control over foreign bank accounts or other accounts that are worth more than $10,000 in total at any point during the year.
• The kinds of money or assets that you have to report on Form 8938 include foreign bank accounts, stocks, trusts, pensions, and contracts or instruments. The kinds of accounts that you have to report on FBAR include bank accounts, brokerage accounts, mutual funds, and other types of accounts with a foreign financial institution.
• You may have to fill out both Form 8938 and FBAR if you have enough money or assets in foreign countries to meet both limits. Filling out one form doesn’t mean you don’t have to fill out the other one.
• There are some exceptions and exclusions for both forms. For example, you don’t have to report an account on Form 8938 if your spouse already reported it on a joint FBAR.
• The deadline for Form 8938 is the same as your tax return deadline (including extensions), while the deadline for FBAR is April 15 (but you can get an automatic extension to October 15).
• The penalties for not filling out Form 8938 or FBAR can be very harsh, from $10,000 to $100,000 or more per mistake for Form 8938 and $10,000 to $50,000 or more per mistake for FBAR.

References

BSA E-Filing System (treas.gov) – File FBAR

Form 8938 (irs.gov), Statement of Specified Foreign Financial Assets

The post Form 8938 vs FBAR: Reporting Your Foreign Assets first appeared on Artha.

Reporting Foreign Financial Accounts and Assets

A U.S. person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report a financial interest in or signature or other authority over at least one financial account located outside the United States if the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

Certain U.S. taxpayers holding foreign financial assets with an aggregate value of more than the reporting threshold (at least $50,000) must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The reporting threshold is higher for certain individuals, including married taxpayers filing a joint annual income tax return and certain taxpayers living in a foreign country.

Those who don’t file an FBAR / Form 8938 when required may be subject to significant civil and criminal penalties that can result in a fine and/or prison.

References

File an extension using Form 4868 (IRS Link)

BSA E-Filing System (treas.gov) – File FBAR

Form 8938 (irs.gov), Statement of Specified Foreign Financial Assets

IRS Tax Withholding Estimator

The post Avoid Tax Filing Mistakes! first appeared on Artha.