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.